Politics and Football and Money

When it comes to either politics or football, we are all playing the same game.  There may be different leagues, different teams, and a wide variance of expertise among the players, but the objectives should be the same.  The rulebook has been written but we have all seen different interpretations of the same event even when we view the replay.  In the NFL, on-field referee calls may be reviewed by the stadium replay booth officials or even by the Art McNally GameDay Central in New York.  In politics, we have the courts who are supposed to be unbiased but such “unbiased” opinions are rarely devoid of political leanings.

Political Football

In politics, our two major leagues are the Republicans and the Democrats.  While both play the same political game, their strategies and objectives differ.  In both parties, however, we can better understand motivations using the tried and true investigative tome, “follow the money.”  This phrase was popularized in the docudrama All the President’s Men examining the Watergate scandal.  In Latin, there is the phrase Cui bono meaning “to whose benefit.”

Scene from the Great Depression

The Great Depression brought about a “rule change” in the banking industry known as the Glass-Steagall Act which separated commercial banking from investment banking and created the FDIC to insure our bank savings.  This was passed in June of 1933.  That act separated traditional banks that offered savings and checking accounts from those banks that backed riskier investments, insurance, swaps dealing, hedge funds, and private equity activities.

Bank Panic Great Depression

While Ronald Reagan, and later Donald Trump, are seen as the champions of deregulation, it was Bill Clinton who, in 1999, signed the Gramm-Leach-Bliley Act that repealed sections of Glass-Steagall that separated commercial and investment activities.  This made banks bigger, raised the bar for allowable risks, and was a catalyst for the subprime mortgage financial crisis of 2008. 

This 2008 financial crisis dropped GDP by 4.3% which was the deepest recession since WWII.  While many banks went into a downward spiral, John Alfred Paulson made a bundle.  Mr. Paulson created one investment vehicle at Goldman Sachs that bundled risky home loans in Arizona, California, Florida, and Nevada while secretly betting against those assets.  He made $4 billion on one trade during the collapse.  He made major donations to Republican candidates Mitt Romney and Donald Trump.  He was a top economic advisor to Trump in his 2016 campaign.

When the Obama presidential team had the ball in 2010, they passed the Dodd-Frank regulations that put rules in place for large banks (over $50 billion in assets) which might place the financial system in jeopardy if they were to fail.  This “too big to fail” concept was coined during the Continental Illinois bank failure of 1984, which was the largest in US history at the time.  It held this distinction until the failure of Washington Mutual in 2008, which was over seven times larger than Continental Illinois.

Trump rolls back Dodd-Frank

It was President Donald Trump who rolled back Dodd-Frank that enabled Silicon Valley Bank (SVB) to make risky investments without maintaining levels of capital to absorb potential losses.  Trump raised the bar from $50 billion to $250 billion in assets before guardrails would be in place.  SVB had $40 billion in assets when it argued before Congress to raise the limit and $209 billion by the end of 2022. It should be noted that the CEO of Silicon Valley Bank saw the collapse coming and sold $3 Million in shares of bank stock before the FDIC takeover. This is typical of executives who risk shareholders' money with highly speculative "play-calling" and are able to make themselves whole when their 70-yard field goal attempt hits the crossbar.

While the Trump rollback of Dodd-Frank had some bipartisan support it was mostly a Republican-backed change with 50 Republican senators and only 17 Democrats voting in favor.  The House passed the bill with a 258 to 159 split with only one Republican voting no.

In all fairness to Republicans, the Trump rollback of Dodd-Frank may or may not have had an impact on SVB’s failure as the regulators could still have instructed SVB to change its ways.  Ultimately, SVB had a high percentage of uninsured depositors and was heavily concentrated in the local tech industry.  As we all know, industry regulators are often loathed to enforce rules that affect profits within an industry.

Sen. Burton Wheeler of Montana
The basis for Jimmy Stewart's role in Mr. Smith Goes to Washington

The game of politics was forever changed by the Citizens United v. Federal Election Commission decision.  Campaign finance laws were changed under the guise of free speech.  Unlimited secret spending by special interests now makes integrity in politics scarcer than a drag queen at a DeSantis rally.  The likes of Sen. Burton K. Wheeler of Montana will be unheard of.  Mr. Wheeler was the politician upon which the Jimmy Stewart role in Mr. Smith Goes to Washington was loosely based.  Wheeler in real life attacked the bribery scandal known as the Teapot Dome scandal during the Harding administration.  It was the biggest scandal in American politics before Watergate.

Albert B. Fall , Sen. from New Mexico, was the first
U.S. cabinet official sentenced to prison.
He was the only one jailed in the Teapot Dome Scandal

Yes, politics is a brutal sport and not one for the timid or weak.  It is also now one where the advantage goes to the unscrupulous as they "follow the money."  We will all have our opinions as to which “team” plays dirtier than the other, but neither team is without tarnish.  It will however be difficult to imagine that someone like Donald Trump will survive history as the GOAT (Greatest Of All Time) of the Republican Party.  I think even Fox News would agree at this point, just not in front of a television audience.