The town is all about people saying — what do you know that I don't know? This is the currency of Washington D.C. And it's that kind of informational currency that translates into real currency.
With the release of a new book, ongoing protests and recent reports about Congressional insider trading and stimulus corruption, the phrase "crony capitalism" is getting noticed.
When Occupy Memphis members met with tea party members on Nov. 17, the Associated Press reported they found common ground in their opposition to crony capitalism, where ties between lobbyists, businesses and other interests influence government and hurt free-market capitalism.
"We all want the same form of government, which is one that listens to its constituents," protester Tristan Tran told tea party members.
"It sounds to me that you all ought to be joining us," tea party member Jerry Rain said. "You have a lot of the same goals we have."
Crony capitalism is the dark side of American politics and economics, Jeffrey Sachs writes at The Huffington Post.
"The level of corruption in Washington is staggering, growing, and rife in both parties," Sachs says. "The White House and Congress dispense billions of dollars of favors to political supporters like a non-stop vending machine."
Peter Schweizer, author of the New York Times bestselling book "Do As I Say (Not As I Do)", which also inspired a documentary film, recently released a new book, "Throw Them All Out." The book focuses on crony capitalism and insider trading in Washington — trading that Schweizer says is not illegal, but is "highly unethical," "offensive" and "wrong."
"If you are a member of Congress and you sit on the defense committee, you are free to trade defense stock as much as you want to," Schweizer said in a 60 Minutes interview. "If you're on the Senate banking committee you can trade bank stock as much as you want, and that regularly goes on in all these committees."
Brian Baird, a former congressman, told 60 Minutes that one line in a bill in Congress can be worth millions and millions of dollars.
"The town is all about people saying — what do you know that I don't know? This is the currency of Washington D.C. And it's that kind of informational currency that translates into real currency," Baird said. "It's a pretty great system. You feel like an idiot to not take advantage of it."
According to some researchers like business professor Alan Ziobrowski, evidence suggests that members of the House of Representatives see returns that outperform the market by more than 6 percent annually. Members of the Senate beat the market by 10 percent.
"It's fair to suggest that, by and large, members of Congress focus on three things: regulation, taxes and the federal budget," Ziobrowski told the Financial Times. "All three of those things can have a tremendous impact on corporate profitability and if you are the first one to know that the law is about to change, you can make an awful lot of money."
"That Congress has fewer ethical restrictions than either journalists or bankers — neither of whom are held in high public esteem, judging from polls — says something about just how ethically challenged Congress actually is, Zachary Karabell writes at The Daily Beast.
Nasdaq.com published a list of the top favorite stock holdings of Congress. The list includes General Electric, Procter & Gamble, Bank of America, Microsoft, Cisco Systems, Pfizer, Intel, Wells Fargo, AT&T and Exxon Mobil.
In the 60 Minutes show, the trading practices of House Speaker John Boehner, R-Ohio, Minority Leader Nancy Pelosi, D-Calif., House Financial Services Committee Chairman Spencer Bachus, R-Ala., former Speaker Dennis Hastert, R-Ill., and former Sen. Judd Gregg, R-N.H., were discussed.
According to the Washington Post, Schweizer's book also reports that Rep. Shelley Capito, R-W.V., and Jim Moran, D-Va., as well as at least 10 senators including John Kerry, D-Mass., Sheldon Whitehouse, D-R.I., and Dick Durbin, D-Ill., traded stock or mutual funds related to the financial industry after receiving briefings.
Bachus pushed back against claims that he engaged in insider trading, writing in a letter to the book's publisher that the claims against him were "absolutely false and incorrect." He also said he has a "personal policy" of not investing in financial companies because of his committee position, The Hill reports.
Pelosi spokesman Drew Hammill told The Daily Beast that the controversy is a "preposterous idea" cooked up by a "right-wing hack." Boehner told 60 Minutes that he has not made decisions on day-to-day trading activities in his account, and that he hasn't for years.
Sen. Scott Brown, R-Mass., has filed a bill called the Stop Trading on Congressional Knowledge (STOCK) Act, which would make it illegal for Congressional officials and their staffs to use private information about pending bills to make investment decisions. Brown's bill currently has six cosponsors, including Sens. Roy Blunt, R-Mo., Saxby Chambliss, R-Ga., Susan Collins, R-Maine, Dean Heller, R-Nev., Marco Rubio, R-Fla., and Olympia Snow, R-Maine.
In the House, Rep. Timothy Walz introduced a STOCK Act in March, which gained little attention until the 60 Minutes special aired. Within a week of the report, it gained more than 80 cosponsors. Rep. Jim Matheson, D-Utah, is a cosponsor. According to Thomas.gov, Reps. Jason Chaffetz and Rep. Rob Bishop are not currently cosponsors.
In addition to discussing possible Congressional insider trading, Schweizer's book also examines Obama campaign backers and bundlers. In the Department of Energy 1705 government-backed-loan program, which focused on alternative-energy projects, Schweizer writes that $16.4 billion of the $20.5 billion in loans granted as of Sept. 15 went to companies either run by or primarily owned by Obama financial backers. The Department of Energy's inspector general testified that the contracts were steered to "friends and family."
The most well known of the 1705 loans went to Solyndra, the solar panel company that went bankrupt after being awarded a $535 million U.S. loan guarantee. Prior to going bankrupt, Solyndra's loan was restructured to allow private investors to be repaid before U.S. taxpayers. Argonaut Ventures, an investor, has ties to George Kaiser, an Obama campaign contribute. However, Energy Secretary Steven Chu said Kaiser did not influence him in giving or restructuring the loan.
"These programs might be the greatest — and most expensive — example of crony capitalism in American history," Schweizer writes at The Daily Beast. "Tens of billions of dollars went to firms controlled or owned by fundraisers, bundlers and political allies, many of whom — surprise! — are now raising money for Obama again."
The Richmond Times-Dispatch lists a number of companies with ties to the Obama administration — companies that received loan guarantees and government grants — and writes that "principled conservatives" should have spoken up against crony capitalism during the Bush administration, and "principled liberals" should speak up now.8 comments on this story
The Energy Department's inspector general has also launched more than 100 criminal investigations related to the 2009 stimulus, Politico reports. The investigations have purportedly involved the submission of false information, claims for unallowable or unauthorized expenses and other improper uses of stimulus funds.
"The whole idea of the federal government investing in these companies, particularly when there's such a connection with Democratic fund-raisers, leaves a very bad taste in people's minds and suggests a pattern of crony capitalism," Mitt Romney said during an interview with Fox's Neil Cavuto. "That's something which American simply can't stand for."