New GOP Tack: Running Against Wall Street?

That's the tack New York State Assemblyman Jim Tedisco is taking in his campaign against Democratic venture capitalist Scott Murphy to win the seat in New York's 20th Congressional District vacated by Kirsten Gillibrand, who was appointed to replace Hillary Clinton in the U.S. Senate. From Tedisco's campaign website ("Tedisco Holds Main Street Walk, Blasts Wall Street AIG Values Of Scott Murphy"):

“Today, I am listening to the people on Main Street about what their needs are and how together, we can create jobs and put our economy on the Road to Recovery. Unfortunately, Main Street is hurting because of the unchecked greed on Wall Street and incompetence in Washington that has allowed companies like AIG to receive millions of dollars in executive bonuses,” Tedisco said.

“My opponent continues to evade answering the question of whether he supported AIG handing out $165 million bonuses or just rubber-stamped a bill he didn’t read,” Tedisco said. “The choice in this race is clear between Main Street jobs and Wall Street greed.”

Even though the race is for an upstate district, New York City-area talk radio station WABC has been airing ads for Tedisco hammering that point about the AIG bonuses. According to MSNBC, RNC Chairman Michael Steele has been pouring a lot of resources into Tedisco's campaign.

The photo above comes from Tedisco's website.

Peering Under the TARP: Foul Waters

Representative Maxine Waters (pictured above), Democrat of California, was one of the members of the House Banking Committee featured in the YouTube video in a recent post ("Armando Falcon, Jr: An Enemy of the People?"). Today, she was the subject of a New York Times article ("Congresswoman, Tied to Bank, Helped Seek Funds"). From the article:

WASHINGTON — Top banking regulators were taken aback late last year when a California congresswoman helped set up a meeting in which the chief executive of a bank with financial ties to her family asked them for up to $50 million in special bailout funds, Treasury officials said.

Representative Maxine Waters, Democrat of California, requested the September meeting on behalf of executives at OneUnited, one of the nation’s largest black-owned banks. Ms. Water’s husband, Sidney Williams, had served on the bank’s board of directors until early last year and has owned at least $250,000 in stock in the institution. Treasury officials said the session with nearly a dozen senior banking regulators had been intended to allow minority-owned banks and their trade association to discuss the losses they had incurred from the federal takeover of Fannie Mae and Freddie Mac. But Kevin Cohee, OneUnited’s chief executive, instead seized the opportunity to plead for special assistance for his bank, federal officials said.

“Here you had a tiny community bank that comes in and they are not proposing a broader policy — they were asking for help for themselves,” said Steve Lineberry, a former Treasury aide who attended the meeting. “I don’t remember that ever happening before.”

[...]

While OneUnited did not get the $50 million it requested, the bank did become among the first minority-owned institutions to receive a cash infusion — $12 million — in December through the Treasury’s bank bailout effort, called the Troubled Asset Relief Program.

The aid surprised some bank analysts because the bailout was intended for healthy banks, and OneUnited was then considered to be in precarious condition. In addition, it had been harshly criticized by regulators in 2007 for failing to give a sufficient number of loans to lower income residents in Miami, while favoring wealthier customers there. And the F.D.I.C. sanctioned the institution in October 2008 for “unsafe or unsound banking practices,” including excessive compensation for Mr. Cohee. The bank had provided him with a 2008 Porsche SUV and maintained his $6.4 million beachfront compound in Santa Monica. Calif., with views of the Pacific and a spa and pool.

[...]

Ms. Waters and Mr. Cohee have been outspoken advocates for fair treatment of African-Americans and other minorities by the nation’s banks — “silver rights,” Mr. Cohee called it during an interview in his Los Angeles office, where he prominently displays a photograph of him with the congresswoman. Indeed, in Los Angeles the bank has won praise for its record of helping minority businesses and lower-income residents.

Their interests first intersected in 2002, when Mr. Cohee was involved in a bidding war for Family Savings, a small, black-owned bank in Ms. Waters’ South Los Angeles District.

As a white-owned Illinois bank initially emerged as the winner, Ms. Waters made clear through the local news media that she opposed any deal in which Family would fall out of African-American hands. She was credited when the bank abruptly changed course and gave Mr. Cohee another chance to submit a winning bid.

“It’s very helpful if you have a community-based transaction to have the real or implied support of Maxine,” said Mr. Bradshaw, who preferred the initial deal. “She’s a star in the community.”

This Mr. Bradshaw seems quite diplomatic. Back to the article:

The acquisition nearly doubled the size of Mr. Cohee’s bank, making it among the nation’s largest African-American-owned banks.

Less than two years later, Mr. Cohee named Mr. Williams, Ms. Waters’ husband, to the bank’s board. A former professional football player and ambassador to the Bahamas¹, Mr. Williams was working as a business consultant, pulling in hundreds of thousands of dollars over a several-year period working with some of Ms. Waters’s political allies, according to disclosure forms.

[...]

The federal takeover of Fannie and Freddie last fall was a near-fatal blow to One United. The bank, like many others around the United States, had invested some of its capital in preferred stock of the two mortgage companies.

After the federal intervention, the stock became nearly worthless and OneUnited lost almost $50 million. That left the bank dangerously under capitalized.

[...]

Ms. Waters had been in regular contact with Henry M. Paulson Jr., then the Treasury secretary, urging him to hire minority contractors to advise the federal government on investments and to move more aggressively to head-off a rash of forced evictions of people defaulting on their mortgages, Treasury officials said.

It was in one of those conversations that she asked Mr. Paulson to host a gathering at Treasury of representatives from minority-owned banks to discuss their losses related to Fannie Mae and Freddie Mac, the officials said.

OneUnited officials, including Mr. Cohee, had separately been pressing for such a meeting, requesting it on behalf of the National Bankers Association, a Washington-based group that represents minority-owned banks. Its incoming chairman was a OneUnited executive, Robert Cooper. But it was only after Ms. Waters intervened that the session was approved, Treasury officials said.

At the meeting were representatives from the offices of Representative Barney Frank and Senator John Kerry, both Democrats of Massachusetts, the home state of OneUnited, along with Ms. Waters’s chief of staff. As the hour-long meeting got underway, Treasury officials were surprised as Mr. Cohee and Mr. Cooper focused the discussion on their bank, not broader industry problems, participants said. Mr. Cohee made it clear that he wanted the federal government to somehow make up for their $50 million loss.

“They wanted money — cash,” said a former Treasury Department official who attended the meeting but asked not to be named, because he was not authorized to speak to reporters. “That is why they were there. It was very, very explicit.”

The photo above, of Rep. Waters, accompanied the article. It is credited to Doug Mills/The New York Times .

¹Perhaps Rep. Waters ought to recommend Wayne-Kent A. Bradshaw, the former president of Family Savings, for this post?

Are High Energy Prices Shifting Attitudes on Energy Policy?

A Conservative Newspaper's Point of View

The editors of Investor's Business Daily argue in favor of increased domestic energy production in this editorial, "Energy Myths". Excerpts:

Many in Congress seem either disconnected from reality or intentionally disingenuous about our energy crunch. They have well-honed negative responses to common-sense ideas about solving our energy crisis, particularly drilling for more oil.

These responses are based on a number of widely held myths. Sadly, they've become the backbone of the Democrats' energy policy. They include:

• "We can't drill our way out of our energy crisis."

Actually, we can. As we've noted before, conservative estimates put the total amount of recoverable oil in conventional deposits at about 39 billion barrels. Offshore, we have another 89 billion barrels or so. In ANWR, 10 billion barrels.

[snip]

ANWR alone is expected to yield 1 million barrels of oil a day. Now make the highly conservative assumption that we're able to get a like amount of oil from the other sources — for a total increase of 3 million to 4 million barrels of oil a day.

That's an enormous rise in oil output. Today, we produce just under 8 million barrels of oil a day from domestic sources. So we could, in effect, boost our energy output 50%, and thus our energy independence, by bringing an additional 4 million barrels of oil to thirsty world markets each and every day.

By the way, those calculations don't include the trillions and trillions of cubic feet of natural gas found in the same locations, which, along with nuclear power, could be used to fire our power plants.

Are more Americans coming around to the IBD's point of view?

Apparently yes, according to the results of the Pew Poll released this week. As energy prices have gone up this year, support for domestic energy exploration and production has increased:



More interestingly, support for these policies has apparently more than doubled among self-categorized liberals:



Implications of this Shift in Attitudes

The first question is whether this shift in attitudes will lead to a shift in federal energy policy, and if so, when. I imagine that if energy prices stay high long enough, and support builds among the public for increased domestic energy exploration and production, federal policy will eventually change accordingly. There are a few factors that could delay this process though:

- A cyclical correction in oil prices could reduce the political pressure and keep this issue on the back burner.
- Those who have placed their bets on alternative energy may continue to oppose expanded domestic oil & gas production. Politically-savvy alternative energy entrepreneurs such as Vinod Khosla and Al Gore likely will continue to advocate for increased federal funding for alternative energy instead, as will large companies that have been positioning themselves to benefit from an expected surge in green energy initiatives (e.g., GE).
- Affluent political donors tend to be to the left of the general public on energy issues. See, for example, the Rockefellers' recent proxy challenges against Exxon Mobil.
- The current political environment. Recent polls favor Obama to win the presidency, but even if McCain wins, his views on energy policy don't appear to be radically different than Obama's, notwithstanding McCain's recent flip-flop in favor of offshore drilling. McCain still opposes drilling in ANWR, and McCain styles himself as a 21st Century Teddy Roosevelt, the Conservationist, Progressive president who busted up Standard Oil and created scores of national parks. In either case, Congress is likely to have a stronger Democratic majority next year, and the current Democratic Congressional leadership remains opposed to expanding domestic energy production.

The second question is, assuming the political stars align, and policy changes to expand domestic energy exploration and production, what effect will that have on energy prices? The IBD editorial I excerpted above predicts that this would immediately lower energy prices, since it would raise expectations about future supply. I'm skeptical about this for a couple of reasons. First, once new federal lands and waters are opened to exploration, it might take a couple of years of mapping and exploratory drilling to get a better sense of the probably supply; second, large oil finds in recent years (e.g., the discoveries off the coast of Rio de Janeiro) haven't seemed to put much downward pressure on oil prices.

The upshot of all of this, from my perspective, is that although shifting attitudes on energy policy may bode well for increasing energy supplies in the U.S. over the long-term, it doesn't seem that they will have much impact on supplies or prices over the next five years. So I remain confident that, although we'll probably have a cyclical correction or two along the way, the secular bull market in oil will continue for the next five years.