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A Case against Keith Elison's Reelection

(Posting from the Minnesota e-democracy forum in November 1, 2008)

In my view, political decisions should come from discussions of issues at election
time. This year, there have been few relevant discussions. Someone will be elected,
of course, but there will be little sense of direction given by the voters. We are
citizens and voters with a stake in elections on several levels of government.

Let me suggest that the most important fact in this election season is the record
of the Bush administration - a terrible record, in my view. Equally important is
the amazing candidacy of Barack Obama. He is, of course, the first black man with
a serious chance of being elected president. He is also a candidate who is changing
the dynamics of race relations. It is less adversarial and more affirming of personal
dignity among all racial groups. Obama has also run a campaign that sets records
in small-scale fundraising and ability to attract newcomers to the political process.

All this makes the presidential race this year a topic that ought to elicit many
comments. The fact that it does not, on this forum, is because this e-democracy
forum is defined as a Minneapolis-specific forum. Presidential politics is beyond
its scope. The same is true of the interesting campaign for U.S. Senate. A Minnesota-specific
forum is available to discuss that race.

That leaves the race for the U.S. House of Representatives in the fifth Congressional
district. It is appropriate to discuss the Congressional race here because the 5th
district includes Minneapolis. But, in fact, there have been few comments regarding
that race - almost none in the last month or so. And that is why I am posting this
message. Posters are obsessed with one or another aspect of the school-board race,
or with proposed amendments to the state constitution, and or assorted minutiae,
but show little interest in the far larger and more important questions facing the
national government.

The same is true of the print media. The Star Tribune has been openly sympathetic
to Keith Ellison and openly scornful of my Independence Party candidacy and of the
Republican candidacy of Barb Davis White, although it did publish a fact-filled
Voters Guide. Neither City Pages nor any of the leading community newspapers in
this city have mentioned the 5th District Congressional race. The only media to
provide fair and balanced coverage of this race are electronic: Minnesota Public
Radio, KSTP-TV, KARE-TV, and WCCO-TV. I would also credit the League of Women Voters
with upholding our democratic traditions in bringing pertinent information about
this year’s election to the attention of voters.

But back to this forum. The lack of interest in the Congressional race reflects
the real attitudes and thoughts of the 1,000 or more persons who subscribe to this
forum. Anyone is free to post on nearly any Minneapolis-specific subject at any
time. I’m sure that, as with the newspaper editors and reporters, there is a feeling
that Keith Ellison is an inevitable winner unless someone can point to something
in Ellison’s record or personal conduct that would dictate voting against him.
Rep. Ellison has generally gone along with policies set by his party’s leadership,
as have most Democrats in Congress. So there is little to criticize in his record,
many observers suppose.

Let me give my assessment.

Acknowledging that Keith Ellison is a first-termer whose abilities to set policy
may be limited, I think it is fair game to look at his position with respect to
major promises made as a candidate two years ago and also at major questions coming
before House committees of which he is a member. I will limit myself to three questions.

First, some have pointed out that candidate Ellison two years ago made specific
promises not to support the Iraq war. He reneged on those promises when he voted
to extend funding for the war as did other Democrats in Congress. Should we forgive
a politician who break promises or should we consider this a reason to vote against
his reelection? Let me say that I tend to be forgiving because of the pressures
exerted upon Ellison by the Democratic Party leadership and others to go with the
program of gradual withdrawal. So long as we are, in fact, withdrawing from Iraq,
I turn my attention to other questions. What this tells us about Ellison, though,
is that he is no knight in shining armor to defend certain ideals but a politician focused
on self-preservation.

Second is the matter of impeaching President Bush and Vice President Cheney. Keith
Ellison sits on the House Judiciary Committee that has jurisdiction over this question.
That makes Ellison’s responsibility here all the greater. Yes, I believe that Bush
and Cheney committed impeachable offenses. However, the Democratic Party leadership
made a tactical decision not to seek impeachment because the Bush administration
would soon be coming to an end and it did not wish to muddy the waters and jeopardize
Obama’s election. I think that decision is justifiable. In fact, I agree with
it.

Third is the $850 billion bailout legislation. Keith Ellison sits on the House
Financial Services committee. That committee has direct responsibility for legislation
affecting the financial-services industry - i.e., the people who benefited from
the bailout legislation. Here I am less inclined to let Ellison off the hook.
The “October surprise” initiated by Secretary of Treasure Paulson will be a great
burden on future generations of taxpayers. Its “necessity” (to save our credit
market) is much in doubt, I believe.

Preliminary reports indicate that, contrary to the purpose of the bailout, banks
are still withholding loans from creditworthy clients. It is unclear whether the
taxpayer funds have made much difference. Billions of dollars of bailout money
have been spent on dividends to shareholders of the failed financial companies and
on bonuses to executives. Yes, the legislation restricted golden parachutes and
payouts to some executives but there were many loopholes that Congress failed to
plug. All in all, a former assistant secretary of treasury in the Reagan Administration
has described the bailout as a “looting” of the U.S. Treasury by Wall Street interests.
Lacking confidence, the stock market plummeted after this legislation passed.

When asked about the bailout legislation in a debate, Ellison pointed to a letter
from an administrator of Minnesota’s private colleges who believed that failure
to pass the bailout legislation would adversely affect college students’ ability
to obtain student loans. In my opinion, that was not a good enough reason to vote
for the legislation. Granted that the nation’s financial problems were highly complex
and members of Congress were given a short time to make a decision, I hold Keith
Ellison to a higher standard of information and knowledge because he sits on the
Financial Services committee. He had two years to inform himself on issues related
to the industry while being given better information than what we the public receive.

In hindsight, information has come forth to contradict what we were told at the
time. The collapse of the housing bubble in itself did not cause the financial
crisis. It was the market for derivatives, or “credit default swaps”, that caused
the financial crisis. Congress should have been aware of the risk. After all,
Warren Buffet said in 2002 that derivatives were “financial weapons of mass destruction”.
There are between $50 trillion and $60 trillion worth of derivatives floating around
the global economy - 4 to 5 times the size of the U.S. national debt. These are
little financial land mines waiting to explode.

In this case, numerous institutional investors - banks, equity funds, pension funds
- had placed bets with major Wall Street firms calling for a payoff if certain mortgage-backed
securities became worthless. The payouts were generally 30 to 50 times that amount
of the bet. Think of it as a kind of insurance policy - relatively small premiums
in relation to the contractual payout - except that, unlike insurance companies,
the Wall Street “insurers” were not required to set aside reserves for the claims. Worse yet,
you did not need to own the debt to place a bet on its repayment. Anyone could
bet on the future of the housing market or on anything else in the Citigroup/ Bear
Sterns/ Merrill Lynch/ Lehman Brothers/ AIG casino while the sales reps for these
destructive instruments pocketed tens of millions of dollars annually in commissions.

The reason that the Wall Street banks faced a liquidity crisis was that they had
to pay cash to meet the terms of the derivative contracts. They then went to the U.S. taxpayer
to replenish the cash. In effect, we were being asked to cover Wall Street’s gambling
debts. Meanwhile, there were numerous unidentified investors who became fabulously
rich in collecting on those debts. A logical question might have been: Why not
place a “windfall profits tax” on their ill-gotten gains? Why not, in fact, declare
those bets illegal and ask them to refund the money? Instead, innocent taxpayers
were asked to bear the cost.

That is why I hold Keith Ellison and others on the Financial Services committee
responsible for what happened. Until 2000, this type of Wall Street gambling was
illegal. It is still illegal under most state laws. Any fourth grader would be
worried about buying an insurance policy if the insurance company had no reserves
to pay its claims. Yes, Congress ought to have known the risk, especially those
on the House Financial Services committee. But the committee did nothing. Even
after the collapse, the crucial role of derivatives in the collapse was not explained.
Such a disclosure might have pointed the way to other solutions than the one Henry
Paulson pushed.

When I brought up this matter in a debate on Minnesota Public Radio last week, Keith Ellison blamed the situation on Republican Senator Phil Gramm. It was he who inserted the provision
in the Commodities Futures Modernization Act of 2000 bringing back Wall Street casinos.
Yes, but we had eight years for a crisis to build as Wall Street gambling raged
out of control. Why? May I suggest that contributions to members of Congress from
the financial services industries and other interested parties may have had something
to do with this? Ellison conceded that Congress needed to look at derivatives.
Yes, but where are the proposals? What discussion have we had of this matter in
the current election cycle? We still have what Warren Buffet called “financial
weapons of mass destruction” out there waiting to explode.

Keith Ellison has received $1.4 million in campaign contributions this year, presumably
to beat back the challenge from Barb Davis White and me. I have noticed that some
of the larger contributions came from Texas. I don’t know anyone in Texas who would
hate me. I doubt if Barb Davis White has any enemies there either. What do these
people want from Ellison? What subsequent favors are implied? My campaign contributions,
small as they are, come mainly from Golden Valley. But because they are small,
the Star Tribune doesn’t think I’m a significant candidate and refuses to cover
my campaign. That’s the story anyhow.

A final point: The Star Tribune is owned by Avista Capital Partners, a large New
York investment fund. The Star Tribune took an extremely aggressive stand in favor
of the bailout legislation. Star Tribune editors and reporters have also done all
they could to squelch the 5th district Congressional candidacies of Barb Davis White
and myself. Keith Ellison voted for the bailout legislation. He also sits on the
Financial Services committee which is in a position to reward financial-services
firms. Is there any connection between these facts?

As reported in a posting five days ago, I sent the Star Tribune a letter to the
editor asking for disclosure of Avista Capital Partners’ investment in derivatives
or otherwise its interest in the bailout legislation. I also wanted to know whether
Star Tribune editorials and news reporting could be influenced by its owner’s financial
interests. To date, the letter has not been published. Is that any surprise?
Evidently, the managers of corporate news organizations are unwilling to let their
hick subscribers know what games are being played behind closed doors.


Bill McGaughey, Independence Party candidate for Congress in Fifth District

William McGaughey
Harrison, Minneapolis
.

 

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