Crony Capitalism and President Obama: How the System Really Works

In his book, Throw Them All Out, Peter Schweizer says: “These programs might be the greatest—and most expensive—example of crony capitalism in American history. 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.”

We understand that “crony capitalism” involves helping those who have helped you; “you scratch my back, I’ll scratch yours.” But the simple term crony capitalism belies the evil, corrupt nature associated with the actual process. Crony capitalism goes way beyond helping your friends, your cronies. It is a twisted, orchestrated plan that rewards the cronies and costs the taxpayer, while punishing the average citizen.

It may take years of Freedom of Information Act (FOIA) requests to uncover the depth of President Obama’s crony capitalism, but we can get a glimpse of how it is done and what it costs us through a new book, Governor Richardson and Crony Capitalism, which meticulously chronicles the crony capitalism of one of Obama’s cronies: former New Mexico Governor Bill Richardson—President Obama’s original pick for the Secretary of Commerce post.

Governor Richardson and Crony Capitalism is a little book. It can be read in an hour. It addresses just one aspect of Governor Richardson’s crony capitalism—but it covers it thoroughly, with nearly as many pages of footnotes and documentation as story. I didn’t write the book, but I did have a bit part. I filed a couple of the FOIA requests and picked up some of the documentation. When I read the manuscript, I knew this was a story everyone needed to read—not so much because everyone needs to know about New Mexico, but because everyone needs to understand how the system really works.

New Mexico is a poor state, on the bottom of about every list—except for drunk driving (where we are on the top). Governor Richardson and Crony Capitalism, documents just one rule—not even a law—that Richardson appointees, heads of state agencies (think EPA), inflicted on the state’s most economically important industry: oil and gas. With color photos, charts and graphs, the author, Harvey E. Yates, through Governor Richardson and Crony Capitalism demonstrates how the “pit-rule” has cost the state $6 billion in overall revenues, and the state and local governments, specifically, $1 billion. Remember New Mexico is a poor state, and the rule chronicled in the book, the pit-rule, is just one rule that favored one of Richardson’s friends. Similar actions likely played out over-and-over by a governor with higher aspirations. Similar actions likely continue to play out in the Obama White House with bigger numbers.

Johnny Cope was a long-time friend of Bill Richardson who the newly-elected Governor intended to appoint to an important position in his administration. (Note: the definition of cronyism is “Favoritism shown to old friends without regard for their qualifications, as in political appointments to office.”) Cope owned a financially troubled business: Controlled Recovery Inc. (CRI) which serviced the oil industry through oil field remediation and waste management. At the time of Richardson’s election in 2002, CRI was near worthless and struggling, yet in 2006 CRI was sold for $10 million.

CRI grew to include a fleet of trucks and round-the-clock operations in just four years. Along the way, CRI got regulatory preference, uncooperative officials were removed, CRI’s business was increased, and its competitors were eliminated through agency orders. Official filings show that, on six specific occasions, Cope made substantial donations—or raised donations—totaling hundreds of thousands of dollars to Richardson, which coincided with critical regulatory events.

Pit-rule 17 was proposed in March 2006—the same month Cope's companies donated $70,000 to Richardson's re-election campaign. This statewide rule virtually required that all drilling waste from new drill sites be transported to an approved disposal facility. But in 2004, the Richardson administration had made the CRI facility exempt from tough new regulations on oil field waste landfills and oil sludge recovery facilities, such that CRI had a huge advantage over its few remaining competitors. Effectively, the oil and gas industry had to pay CRI for the privilege of drilling new wells in New Mexico.

(On a national level, we have what could be called “crony environmentalism.” Laws and regulations, which should apply to everybody, are waived for the favored few. For example, the oil and gas industry is hauled into court if a migratory bird happens to die in an oil pit, but the thousands of birds—including protected eagles—killed by wind turbines are actually authorized.)

In the years prior to the pit-rule draft release, New Mexico’s drilling rig count closely paralleled the neighboring oil-and-gas states of Oklahoma, Texas, and Colorado. However, after March 2006, New Mexico’s rig count started trending downward and fell below Colorado’s for the first time in more than a decade—costing New Mexico lost jobs, and severance and royalty income.

Chapter 1, Overview, starts with “Environmentalists eagerly claim fatherhood of the pit-rule. However, a close examination of the evidence leads to the conclusion that, while environmentalists indeed were useful midwives in the delivery of the pit-rule, cronies of former Governor Richardson sired the rule.” Chapter 6, The Price We Paid, ends with these words: “Such is the legacy of a Crony Capitalist enterprise. The losers were the state’s public education system, state employees, the state infrastructure, and generally, the citizens of the state. If the environmental community wishes to assume part of the responsibility for the loss to the state because of its role of midwife of pit-rule 17, that is probably appropriate.”

Governor Richardson left the state with a budget deficit. Yet he was somehow able to have plenty of campaign cash to launch his presidential run. Governor Susana Martinez took on the deficit. She put different people in charge of the agencies and changed the policies. Instead of using regulations as a hammer, they are now used as a guideline. The industry with New Mexico’s single largest economic impact is coming back. Nationally the economy is still in crisis, yet in one year, the New Mexico state budget has gone from deficit to surplus.

There is an obvious parallel with the New Mexico story and the national one. Governor Richardson and President Obama seem to be cut from the same ideological cloth. They hurt the industry that has the ability to help—if not fix—economic woes while making policy decisions that help their friends at the expense of the tax-paying citizens, often under the cover of environmentalism. Yates’ Governor Richardson and Crony Capitalism shows how it was done in New Mexico through the tight, single story of the pit-rule. The reader can easily extrapolate it out to the national stage.

Additionally, Governor Richardson and Crony Capitalism offers activists a lesson in the power of FOIA. There are surely similar stories being played out in other states where winners are picked and others are punished while the person in power laughs all the way to the bank.

In New Mexico, we elected a new governor who doesn’t share Governor Richardson’s ideology, and, in one year, the state budget went from a deficit to a surplus. On a national level, the problem is bigger than that of my poor state, but the results of a change at the top—and therefore, a change in the various agency heads—could well produce similar results for America.

Besides the obvious crony capitalism, there is another crony capitalism which hides under the guise of mislabled “fair trade”.

Fair Trade is often used by high end sporting good manufacturers like Sage, Simms, Hobie and others. Apple is another prime example.

Often these so called fair trade companies are closed companies with only the family owning and controlling the stock. I have no problem with that if they didn’t restrain the real fair trade by allowing their products to be sold at what the market brings them, not a set price.

http://capitalismmagazine.com/2010/12/the-only-fair-trade-is-free-trade/

The Only “Fair” Trade is Free Trade

Michael J Hurd (2010.12.08 ) Free Trade, Politics

In a recent defense of what he calls “fair trade,” Barack Obama stated that one major purpose of trade agreements is to ensure that American products are made at home — not bought from other countries.

No such thing is true.

The purpose of any trade agreement should be to liberalize trade to the greatest degree possible. In so doing, individuals in the marketplace will make up their own minds as to what best suits their interest. Should tires be made in the United States, or somewhere else? Should shoes and coats be made in the United States, or in a country that can produce them more efficiently and cheaply — even when considering the cost of exporting them to the United States? None of this is Barack Obama’s call. No politician is smart or virtuous enough to make such one-size-fits-all decisions to apply to an entire nation (or an entire planet). As most Americans are well aware, politicians are the least qualified, intellectually and ethically speaking, to make any important determinations of any kind. More than that, no one person — even a smart and ethical one — can possibly calculate the right number of imports or exports to have in any given country at any given time. These facts must be the result of countless — thousands, even millions — of individual decisions made by individual consumers, calculating their interests, any given day.

We’re used to talking about “the economy.” But the economy is not some kind of entity that can be controlled by any other entity. Some politicians, especially socialist ones such as Barack Obama, seem to think so. They seem to think that one individual, or group of selected people, can decide what’s best for millions. This explains why he thinks it’s perfectly reasonable to nationalize banks, medical care and the American automobile industry. This also explains how he can subscribe to the notion of “fair trade.”

The only “fair” trade is free trade. Freedom of trade is the only fair arrangement mankind has ever devised, or ever will devise. This is not to imply that under free trade, everybody is happy. Of course it’s impossible to ever make everybody happy. If the corner grocer goes out of business because a big grocery store sells better quality products at cheaper prices, then the majority of grocery shoppers will still be happy. The small grocer, his family and his most loyal customers will not be happy. Does this mean the freedom of trade that allowed the big grocery store to open up down the street is unfair? Of course not. Life is not fair, at least if “fairness” is defined as making everybody happy. The same applies to imports and exports. If businesses in a foreign country can produce goods of high enough quality at a cheap enough price, better than any business can in the American homeland, then rational Americans will buy the best product at the best possible price. That’s what consumers tend to do, and a free market (which includes freedom of trade) allows them to do it.

Even socialists like Barack Obama — who are far less intelligent than they’re given credit for — grasp this basic fact. When they speak of “fair trade,” they know full well that they’re never going to create an economic context in which everybody is equally happy. What they mean by “fair,” although they won’t admit it, is to please their constituency groups at the expense of others. When a liberal Democrat socialist like Barack Obama says “let’s make trade fair,” he means: “Let’s use the law to create advantages for labor unions who give me lots of money, and disadvantages for those who compete with those unions.” The same applies to the reasoning of a socialist Republican (of which there are plenty, and don’t be fooled). The socialist (or fascist if you prefer) Republican negotiates deals that benefit his own politically favored groups at the expense of groups or individuals who compete with his supporters.

This is more or less “the economy” as we know it. Few, if any, of the politicians in high office really care about free trade or fair trade, properly defined. They just care about using government force to tilt things in their own favor.

The same applies to that stale phrase, “level playing field,” something else Barack Obama sings the praises of. The only level playing field is one in which everyone is equally free to compete and produce. If everyone has an equal right to sell his product and keep whatever he earns from it, then the field is level.

Level fields and level outcomes, of course, are not the same thing. If an outcome is more favorable for one business than another business, then it’s because the one business satisfied more customers, in a more efficient way, than did the second business. It’s at this point that the politician — the advocate of the losing business — comes in and cries, “It’s not fair! We have to level the playing field.” Now who could disagree with a level playing field? Nobody, when it’s put that way — which is why Barack Obama will get his way. To a politician like Obama, especially a deeply socialist one like he is, it’s not about competence and freedom; it’s all about outcome. That is: A favorable outcome for those he deems worthy.

Think of politicians like Obama — and most if not all of the others, in both parties — as advocates not of a free market, not of genuine capitalism, but as advocates for their cronies. Their motto is not, “Let the best man win,” or “Let the most competent and profitable businesses thrive, and leave others free to outdo them.” Their motto is, instead: “Let my crony win.”

Crony capitalism has been around a long time. Ayn Rand called it the “aristocracy of pull.” Look at these pull-peddling creatures (like Rep. Charlie Rangel and Rep. Barney Frank) who hold office for decades in Congress, and you’ll see exactly what she meant. It applies no less to the high and mighty Obama than it does to all his allegedly inferior predecessors.

As more Americans start to realize that Obama is not “change,” but simply more of the same — a lot more of the same socialism and government intervention in the economy we have endured for decades — perhaps we can start to consider actual change: Change away from crony capitalism and towards genuine free market capitalism.

America does not suffer from a lack of fairness so much as a lack of freedom. Restore freedom, and you will in the process restore fairness.

FOund the one I was looking for:

From:
http://obamaimpeachment.wordpress.com/2008/08/15/the-case-against-barack-obama-dan-shomon-obama-corruption-robert-blackwell-state-grants-killerspin-campaign-contributions-chicago-pay-for-play-david-freddoso/

One of the charges of corruption against Barack Obama on the Petition to Impeach and/or expel him from the senate is below:

Whereas: Senator Barack Obama has engaged in unscrupulous business
practices, in particular with Mr. Robert Blackwell.
............

Perhaps the most surprising story about Barack obama and money is one that no one talks about at all. It involves ping-pong. it is the story of how state Senator Obama was paid more than $100,000 for legal work, then helped his client’s company get $320,000 in taxpayer grants.
For some reason, only the Los Angeles Times has examined the story of Robert Blackwell Jr. and the government grants he received after he invested in Barack Obama.

..........

Obama writes in The Audacity of Hope that after his failed congressional run in 2000, he was “more or less broke.” His family would make $240,000 that year, but they had large debts, and he had just loaned his losing campaign $9,500 and maxed out his credit card. To keep his family afloat, he writes, he went back after the election to his law firm, Miner, Barnhill & Galland, which he had neglected throughout 2000 (he received no income from the firm that year). He planned to do some legal work to supplement his modest $58,000 salary as a state senator.

In 2001, while serving as a state senator, Obama would earn $98,158 from his law practice. Of that money, $80,000 came from a single client - Electronic Knowledge Interchange (EKI)-which had put him on a $8,000 monthly retainer
..........
The Times reports that Obama, in his required legal financial disclosures, buried his six-figure financial conflict of interest amid a list of hundreds of other clients represented by his law firm. He did not mention that the majority of his 2001 income came from EKI-nor was he required to do so under Illinois law.

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