Wednesday, May 5, 2010

Will Deficit Commission Declare Conflicts of Interest?

Obama's Deficit Commission has been named. My take on each member is below. It's different from the White House spin:

Erskine Bowles-Co-chair

Erskine Bowles founded private equity underwriter (PEU) Carousel Capital and is a board member for Morgan Stanley, Cousins Properties and North Carolina Mutual Life Insurance. Erskine served on GM's board during its financial implosion and provided governance for its carcass, Motors Liquidation Company.

Bowles' 2009 board pay was roughly $430,000 according to SEC filings. That doesn't include compensation from Carousel Capital or the University of North Carolina, where he served as President. Erskine holds over 15,000 shares of Cousins Properties and 41,000 in Morgan Stanley, roughly $1.3 million in combined holdings. How will Erskine Bowles declare, much less manage his conflicts of interest? Will the Carousel Capital Senior Advisor toe the PEU party line on carried interest taxation?

Mr. Bowles' wife, Crandall Close Bowles, has sat on the board of JP Morgan since 2006. Her board pay was $255,000 in 2009 and she controls 34,394 shares of JP Morgan stock, valued at nearly $1.5 million. Mrs. Bowles served on the board when Jamie Dimon was paid $30 million in executive compensation in 2007, the year before Wall Street imploded.

Crandall Bowles serves as Chairman of Springs International and sits on the board of Deere ($209,998 in 2009 board pay and 27,558 Deere shares worth roughly $1.6 million) and Sara Lee ($130,008 in board pay and 47,995 Sara Lee shares worth approximately $672,000). Her compensation from Springs Industries, Inc. (home furnishings) or The Springs Company (real estate, investments) was not available. However, the SEC showed Crandall holding nearly 2.8 million shares of Springs Industries in 2001.

Mrs. Erskine Bowles served on the Board Compensation Committee at Deere and Sara Lee, while her husband serves on Morgan Stanley's Compensation Committee. How might Erskine's Deficit Commission decisions impact executive and board pay?

Andy Stern

Andy Stern is head of the SEIU and a frequent White House visitor. His bio states:

SEIU was widely credited for helping elect President Barack Obama in 2008 and the union has been called the most engaged and influential on healthcare reform, helping secure the historic passage of the 2010 Health Care Reform Act.

Stern stated employer sponsored health insurance was "dead and not coming back" in summer 2006. While he makes his prediction come true as an Obama close adviser, what happens to government support for health insurance entitlement programs, Medicare and Medicaid, under deficit reduction? Can a tapped out Uncle Sam keep recently made reform promises?  (Stern is now a private equity underwriter (PEU) board member)

Alice Rivlin

Alice Rivlin sat on the board of NYSE/Euronext. Her 2009 board compensation was $167,590 and she controls 6,696 shares of stock, along with an equal number of reserve stock units. She stepped down from the board this year, turning her RSU's into real shares, worth roughly $410,000. The NYSE seeks lower corporate taxes to attract new members to their exchange.

David Cote

David Cote is the CEO of Honeywell and served on the board of JP Morgan since 2007. Cote's JP Morgan board pay was $245,000 in 2009 and he controls 36,224 shares of stock. Cote served on the board when Jamie Dimon was paid $30 million in executive compensation in 2007, the year before financial dice rolling imploded Wall Street. JP Morgan spread the wealth in the 2008 elections.

Cote holds over 6.2 million shares of Honeywell (valued at $280 million). His 2009 executive compensation was $12.5 million, down 56% from 2008.

Ann Fudge

Ann Fudge sits on the boards of General Electric (GE), Novartis and Unilever. She is a trustee of the Rockefeller Foundation and chairs the U.S. Program Advisory panel of the Gates Foundation. Her GE board pay was $292, 274 in 2009. She holds 134,808 shares in stock based holdings, roughly valued at $2.4 million.

JP Morgan handled Norvartis' latest shelf registration in the U.S., which Ann Fudge signed as board member. Novartis has a Cayman subsidiary that Ms. Fudge seems to be aware of. She earned roughly 250,000 franks for her Novartis board service and 80,000 pounds for Unilever.

Democratic Representatives

Kent Conrad, Senator (D-ND)

Senator Conrad said "current taxation hampered America's ability to compete in a global economy." Conrad worked with his Montana counterpart to keep the public option out of health reform. The health care bill greatly reduces employer sponsored health insurance coverage (relative to historic levels). Conrad and Baucus teamed up to make Andy Stern's prediction come true. The shifting of health insurance to the employee is one plum for corporations "competing in a global economy." Conrad wants to reduce corporate tax liability as well.

Mrs. Kent Conrad (Lucy Calautti) is a lobbyist for Baker & Hostetler.

Senator Conrad's top four lifetime campaign contributors are law firms ($1 million), insurance ($850,000) , health professionals ($640,000) and securities & investment ($620,000). Conrad's DAKPAK received $5,000 from JP Morgan in 2008 and $5,000 in 2010. Kent Conrad received $38,000 in donations from JP Morgan over his career.

Max Baucus, Senator (D-MT)

Senator Baucus' top three lifetime campaign contributors are law firms ($1.6 million), securities & investment ($1.5 million) and insurance ($1.2 million). The Senator caters to for-profit health care firms with no facilities in his state. Baucus worked hand in hand with White House Health Czar Nancy-Ann DeParle to shape health reform to the benefit of For-Profiteers. Baucus received $4,000 in campaign contributions from JP Morgan in 2008. His Glacier PAC received $10,000 in 2008 and $5,000 in 2010 from JP Morgan. In his career, Max Baucus received $77,000 in donations from JP Morgan.

Dick Durbin, Senator (D-IL)

Senator Durbin's top three lifetime campaign contributors are law firms ($3.6 million), securities & investment ($1.1 million) and pro Israel groups ($850,000). Senator Durbin has an insider trading history, having dumped stock after learning of Wall Street's implosion. Durbin received $5,000 in campaign contributions from JP Morgan in 2008. Thus far in 2010 JP Morgan donated $15,750 to Durbin's reelection.

Representative John Spratt

Rep. Spratt emphasized the need to find common ground to put the country back on solid fiscal footing. His #1 career donor is Bank of America at over $215,000.

Representative Xavier Beccera

Rep. Beccera said it will be necessary to make tough choices "to build a prosperous, debt-free future for our children." While Becerra's donor list has numerous unions, it's also heavily populated with for-profit health care companies. Goldman Sachs gave $5,000 to Becerra's Leadership of Today & Tomorrow PAC in 2008.

Representative Jan Schakowsky

Rep. Schakowsky looks to be the lone "supporter" of Uncle Sam's prior commitments. This is likely a theatrical slot, given the panel's gross slant toward tax cutters. Her donor list reveals many municipal/trade unions. If she joins with Andy Stern, it will be to give unions a more powerful role. Schakowsky was named as a compromised legislator by Sibel Edmonds, ex-FBI translator.

Republican Representatives

For the last decade, the Red Team favored tax cuts, with ever expanding deficits. This group appears to be no different.

Judd Gregg, Senator (R-NH)

Senator Gregg's top three lifetime campaign contributors are insurance ($390,000), pharmaceuticals ($355,000) and health professionals ($295,000). Gregg's 2010 campaign chest shows gifts from Goldman Sachs, Bank of America and Citigroup totaling $30,500, no funds came from JP Morgan.

Tom Coburn, Senator (R-OK)

Senator Coburn's top six lifetime campaign contributors include retired ($425,000) and securities & investment ($280,000). How might he balance these two competing interests? Coburn received $1,000 in campaign contributions from JP Morgan in 2010.

Mike Crapo, Senator (R-ID)

Senator Crapo's top three lifetime campaign contributors are securities & investment ($480,000), insurance ($475,000) and health professionals ($310,000). JP Morgan sent over $47,000 to Mike Crapo between 2005-2010, good enough for #2, behind #1 Securities Industry & Financial Market Association.

Representative Paul Ryan

Rep. Ryan proposed a long-term plan for deficit reduction that would put the United States in the black without raising taxes. Ryan received $5,000 in campaign contributions from JP Morgan in 2008 and $1,000 in 2010. More telling is private equity underwriter (PEU) KKR's $7,000 contribution to Ryan.

Representative Jeb Hensarling

Rep. Hensarling proposed capping federal spending at 20 percent of the U.S. economy every year. Hensarling received $7,500 from JP Morgan in 2008 and $2,500 in 2010. Over his career JP Morgan kicked in over $37,000 to Hensarling's campaign, less than Bank of America's $44,000 but more than UBS' $35,000.

Representative Dave Camp

Rep. Camp believes the U.S. budget should be balanced without raising taxes. Camp received $9,000 in campaign money from JP Morgan in 2008. For 2010 Bank of America, Citigroup, HSBC and UBS contributed over $45,000 combined.

Alan Simpson, Retired Senator, Co-chair

Senator Simpson was known as a strong voice for fiscal balance, voting in favor of the 1990 bipartisan deficit reduction agreement. Of Washington, Simpson said, "it's all B.S."

I have to agree with Senator Simpson. Part of that b.s. is the White House omission of potential conflicts of interest.

JP Morgan donated nearly $800,000 directly to Congressional campaigns in 2008.
They also wash campaign money through other PAC's. JP Morgan laundered nearly $2 million through other PACs in 2008. So far hundreds of thousands are migrating through PACs for 2010.

Might Alan Simpson be the closest thing to an average citizen on this list? Could he fight on their behalf? The answer turned out to be no.

Update 11-10 --The Chairman's mark is in.  It includes corporate tax cuts, from 35% to 26-28%.  It has virtually everybody paying more for health care, people on TriCare, Medicaid, Medicare, even dual eligibles.  It stresses already hurting safety net hospitals by accelerating DSH payment reductions and eliminating Medicare bad debt payments.  Erskine Bowles can read these tea leaves to another fortune, after all he mixed the brew..