The value of the revolving door: Political appointees and the stock market • VoxEU/CEPR #Halliburton #Cheney

Originally Published on September 27, 2012

Source: VoxEU/CEPR

The presidential election campaign is in full swing in the US. Whoever wins the presidential race will face the challenge of filling top positions in the federal administration. Since some political appointees traditionally come from the private sector, allegations of conflicts of interest will emerge. But are connected firms really expected to profit? This column sheds light on this issue.

The presidential election campaign is in full swing in the US. Whoever wins the presidential race in November will face the challenge of filling top positions in the federal administration with political appointees. Inevitably, he will tap the reservoir of private-sector experts. And with that, allegations of conflicts of interest will emerge since some appointees come from firms that fall under the regulatory jurisdiction of the respective agency or from firms that may hope to win procurement contract awards. For example, on the very same day that President Obama tightened anti-lobbyist rules, he nominated Raytheon executive William J Lynn III as Deputy Secretary of Defense. The revolving door between industry and government is an old phenomenon but evidence on its consequences is surprisingly scarce. Whether and to what extent firms benefit from the political appointment of one its members largely remains a matter of speculations and anecdotes. This column sheds light on this issue.Preferential treatment against all (institutional) odds?

Political appointees can treat their former employers preferentially in procurement, regulatory and oversight, or merger and acquisition decisions. Indirectly they can favour their former employers through long-term strategic planning or through better access to decision makers and information. At the same time, there are various institutional safeguards against conflicts of interests, ranging from specific provisions embodied in ethic codes to congressional committees and a vigilant free press. However, it is unclear how effective these safeguards are. Often, political appointees get waivers or simply fail to adhere to the rules. Time and again, political appointees were involved in decisions with immediate consequences for their former employer. For example, Senator Al Gore complained that Gerald Cann was responsible at the Navy for selecting a weapon system that he developed at his former employer General Dynamics: “It is a little wrong to be involved with a weapon system [in industry] and then be put in charge of deciding [at the Department of Defense] what system will replace the one that’s performing the mission now” (cited in Aerospace Daily 1991). Therefore, it is ultimately an empirical question, if firms benefit from political connections.Assessing the value of the revolving door

How can we assess the benefits of the revolving door for affected firms? The benefits of political connections may come in many forms and materialise slowly. Further, political connections are but one among a myriad of factors of firm performance. Finally, successful firms are likely to attract the brightest people who also make attractive nominees for government service. Thus, analysing the effect of political connections is fraught with all sorts of endogeneity and measurement issues. One approach to avoid these problems is to look at stock market reactions to announcements of political appointments. Stock-market reactions are immediate, which makes it easier to relate cause and effect and abstract from confounding factors. Further, stock market reactions are a comprehensive measure of potential benefits. In this vein, Fisman et al. (2006) investigated stock market reactions to news about Cheney and his health of firms with either Cheney or other Halliburton directors on the board of directors. They find no evidence for connections to matter. In contrast, Acemoglu et al. (2010) find large stock market reactions to the nomination of Treasury Secretary Geithner for firms connected to Geithner through his positions as the head of the New York Fed or for firms with personal ties to Geithner. Thus, the previous evidence on the value of political connections in the US is conflicting. More importantly, the two studies are not primarily concerned with the revolving door phenomenon, and mainly analyse other forms of connections.New evidence

In a recent study (Luechinger and Moser 2012), we explicitly look at the value of the revolving door by using unique data on corporate affiliations and announcements of all Senate-confirmed US Defense Department appointees of six administrations. According to the results, investors clearly expect firms to profit from their political connections. The one- and two-day average cumulative abnormal returns amount to 0.82% and 0.84%. These estimates are not driven by important observations, volatile stocks, or industry-wide developments, and placebo events yield no effects. Effects are larger for top government positions and less anticipated announcements, i.e., announcements for which the actual nominee was not rumoured to be the main candidate. Figure 1 below displays the baseline results and the results for the less anticipated events together with the temporal pattern of average cumulative abnormal returns for the four trading weeks prior to and after the announcement day.

Figure 1. Cumulative abnormal returns around announcements of political appointments

Conclusions

Overall, our results suggest that concerns over conflicts of interest voiced by politicians, the press, and government watchdogs are not unfounded. However, our results do not imply that recruiting political appointees from the private sector is necessarily a bad thing. Our results highlight one important cost of doing so but they are silent about potential benefits. Neither do our results suggest that tightening ethics regulations is worthwhile. Already now, they entail substantial compliance costs. But this is unlikely to happen anyway. Whoever wins the presidential race this time, neither of the candidates campaigned on the promise of closing the revolving door.References

Acemoglu, Daron, Simon Johnson, Amir Kermani, James Kwak, and Todd Mitton (2010), “The Value of Political Connections in the US,” mimeo, Harvard University.

Aerospace Daily (1991), “Navy Official Denies Conflict of Interest with Tomahawk Variant,” June 10.

Fisman, David, Ray Fisman, Julia Galef, and Rakesh Khurana (2006), “Estimating the Value of Connections to Vice-president Cheney,” mimeo, Columbia University.

Luechinger, Simon and Christoph Moser (2012), “The Value of the Revolving Door: Political Appointees and the Stock Market,” KOF Working Papers No. 310 and CESifo Working Paper No. 3921.

The Poisonous Spread of “Democracy” in the age of the newly defangled NEW WORLD ORDER – and the rising from the ashes of a New World Order once again.

The NWO as seen in 1990 died in 2020. The idea of a New World Order we lost alot, and worse here in America complete loss of trust in any government/media/bullshit narrative:

• The sensational attack on Iraq (which had legitimate beef with Kuwait). This was done under the guise of liberating Kuwait – when in fact this was done to entrench US Military assets permanently in Saudi Arabia, Kuwait, Qatar, Jordan and Israel….at the behest of the wishes of the Zionist agenda for a Greater Israel Project.

• Waco – documented on the film “Waco – A New Revelation” , this is the most powerful expose of what really happened at the beginning of the standoff with a 4 hour gun battle raging between Waco compound Christians vs. ATF, DEA, FBI, State Police agents armed to the teeth for a blood bath. And how the fuckery intertwines with Texas State Government, the Clinton Administration…and how Delta Force (a shadow black ops force) officially ended the standoff providing military grade ammunition rounds, flame accelerants and tactical and logistical support. If you watch the documentary, there are dozens of former ATF, DEA, FBI, CIA, local Waco police, Texas State Police members (mostly former members) testify to the truth – Waco was a GAY-OP.

•Y2K… this was such a scam. Look at the power vacuum quickly usurped by this explosion in “security software” which actually created bloatware/spyware/adware/viruses/worms/trojan horses etc to make their bullshit software seem effective. Anyone that understands TCP/IP protocols and FTP/SSH/SSL and a bulk of these network telecommunications standards know that a PHYSICAL FIREWALL that manages layers of administrative access is the best way to reduce “h4XX0rz” ….

•The tech “dot com” stock bubble and Lead Zeppelin like crash. Financial analysts, advisors and planners as well as brokers etc had violated their FIDUCIARY DUTY to the PUBLIC TRUST by pushing fictious asset bubbles that were stocks trading at 247 times earnings – because they weren’t earning anything. Pets.com at one point was trading at like $400 share. All it was – was a domain. In the realms of private equity and venture capital this type of scenario is commonplace. That is, a business entity lacking actual business operations as well as any type of Immediate plan to launch an operation….pure SPECULATION AND MOMENTUM KILLED THE INVESTMENT MARKETS. Now 82 yo retired truckers in Nevada as well as 22 yo college students in Boston could electronically place stock trades – purely riding speculation and momentum. Very few people understood “day trading” The value of a capital investment – in financial/economic fundamental terms proper means “the net present value of future discounted cash flows.” These principals of the markets died with momentum and speculation based trading and hence the big tech dot com bubble crash in March 2000. With people having $500 in the bank yet they have leveraged 4x the amount of shares in Lucent Technologies, never realized any of the unrealized gains they had for they figured the boom times would last forever…and ended up in bankruptcy.

•Enron accounting fraud in collusion with their auditors Arthur Anderson CPA. Enron was bigger than Exxon Mobil – on paper. But their auditor (the auditor acts as a detective of the reasonableness and completeness of stated balance sheet account items as well as the yearly statement of operations aka income statement. It was quite obvious that AA, CPA was breaking their duty to the public trust and were entangled in the greatest financial conflict of interest of the new millennium as they were AIDING AND ABETTING the financial scheme which allowed Enron to bury losses through off balance sheet “variable interest entities”. These entities however would obtain millions even billions in funding. And Enron had tens of thousands of them. And they would take the monies that technically, in accounting terms, were loans or the fancy term “corporate debentures”. Therefore these monies should have been reported as LIABILITIES/DEBT. Instead the influx of the cash was recorded as REVENUE. Enron was the largest entity in market cap of all the energy companies circa 2000, battling with rivals Exxon Mobil and Gazprol. Enron even tricked their entire workforce to sink 100% of all of their retirement assets into Enron ESOP and Preferred Stock and Common Stock acquisitions. This was malicious in intent, made two years before the Enron collapse, which was a decade in the making. And those tens of thousands of ordinary working class people were left penniless in terms of retirement funds and had no where to turn. And the SEC, the regulatory body that is supposed to monitor such related party and offshore and off balance sheet events and transactions – dropped the fucking ball! Who got punished? A small handful of Enron executives , some of which took their own lives prior to facing the judgement of the court of law. This was the biggest erasure of net worth revolving around a SINGLE FUCKING BUSINESS. EVER. The impact on the prudence and viability and reliability and the skeptics new eye of the actual financial health and reality of publicly traded companies entered a new phase for fear. Let’s couple this with similar schemes at Tyco, WorldCom, there are many others.

• Then the planes hit the buildings. Men like Alex Jones who were laughed off as koooks and fear mongering desperados trying to make a buck saw this coming for years. Infact, there were multiple streams and live call in shows Alex Jones and Infowars (pre-Super Male Vitality horseshit days) from May 2001- August 2001 where Jones stated as clear as the night is day that “an attack is going to happen on the United States soil, a terrorist attack, to help usher in a police and welfare state as part of the NWO’s master plan for power over the people of the free world. Yeah, there were “radicalized Islamic Jihadists” that boarded those planes convinced they were on a holy mission. And for them, it very well was. However, the state’s official narrative that 19 men circled the globe and circumvented investigation and then successfully hijacked 4 large jumbo jets and crashed them into targets – this is only the Jihadists version. Perhaps aware, perhaps not, this was allowed to happen. The Israeli mossad agents dancing and lighting lighters and taking pictures admitted on a November nightly TV show in Israel that they were there to “document the event”. Ryan Dawson has done absolutely amazing work laying out in mind-blowing, explicit details and I highly suggest checking out his work for you to see the inner workings of the powers behind the 9/11 attack. Another thing, a man named Lyndon Larouche, a politician (Third Positionist) wanted to enter the Senate and begin to point out the major fuckery of our wages/prices disparity, over-aggressive appreciation in property values in record minimum time, he spoke about the Secret Police state, how no citizen is safe and how a Zionist cabal of international central banks was working to ultimately destroy the freedoms of the constitution. In January of 2001 – HE PREDICTED THE ATTACKS, THE NARRATIVE, THE RETALIATION AGAINST AFGANISTAN TALIBAN FOR HOUSING AL QAUDA – and finally how this would be the carrying out of Bill Kristol’s PNAC white paper – written in 1998. And Larouche got thrown into an investigation of filing inaccurate tax returns that landed him in federal felony territory. I myself have been a CPA since 2006 and I know the severity of the charges he faced – where to destroy his political career – for any ordinary tax payer may have made the same mistakes – it’s a 95% chance they would simply be mandated by the IRS to amend their returns. The fuckery of FREEDOM!




• AFGANISTAN war. Very ironic. For in 1979, THE US CIA, STATE DEPARTMENT, the Israeli Mossad, the British MI-6 and other glow in the dark CIA ninjas created the Mujahideen – Islamic Jihadists, mostly mercenaries that were not from Afganistan – they were armed to fight “Capitalism’s proxy war” against the USSR.

They were supplied with liquidity, weapons, training, logistics, food, medical supplies, tactical training. And one of the main assets of the Mujahideen was one Tim Osman. Aka Osama Bin-Laden. The book House of Bush, House of Saud does an excellent job of illustrating in detail the emergence of an alliance between the Bush family and it’s consortium of close ties, with both the Royal Saudi Family as well as the Bin-Laden dynasty – a very large electricity and commercial hardware powerhouse in the Middle East and surrounding areas (think General Electric, Honeywell sized – also think monopoly).

As the Afganistani native forces with heavy support from this Mujahideen apparatus never allowed the Soviets to take control of Afganistan and after a decades long campaign of guerilla warfare, the Mujahideen prevailed. Soon there after , with 2 years, the USSR fell.

The remnants of the Mujahideen were not that. No remnants. This was now a unique Pro-Islamic, Pro-protect vital resources, Anti-privatization, Anti-deregulation, Anti-Western value system, Anti-foreign intervention league of HOLY WARRIORS. And a generation went by (1989-1998) when the Mujahideen morphed and created new alliances, Sunni and Shiite alike, with Hamas, Hezbollah, Al-Nusra…there are many thousands of small factions over history the Mujahideen – renamed “Al-Queda” upon the day of the planes hitting the buildings in NYC and DC. Al-Queda simply means “the base” in Arabic.

What transpired was these Holy Warriors had a new enemy of oppression, new enemies and ideals intertwined with DEMOCRACY. 1. The aggressive actions of the Zionist ethnostate against Palestinian people, land and rights. 2. Companies like the now defunct Enron, also Chevron, Exxon Mobil, BP, etc absolutely ignoring the sovereignty of these Arabic nations and frankly coercing Arabic governments into taking loans from the International Monetary Fund that were destined to default. And default they did. And from Morocco to Libya to Tunisia to Lebanon to Afganistan – mega fossil fuel conglomerates were pillaging fossil fuels from the region. Amongst many more human atrocities never discussed under the banner of American Exceptionalism.

And US military assets became the police of the world for one key reason – to enforce the viability of the Petrodollar. Plainly stated, say the UN recognized 200 sovereign nations. Some 175 of them were REQUIRED to be in PHYSICAL POSSESSION of the DOLLAR to purchase Brent and Crude market oil.

The Afganistan war was tied into this. Also, the opportunity to seize control of 90% of the world’s poppy supply (used for oxycodone, heroin, etc). 20 years since 2001 we are still there…and for what? For the struggle of the precious resources – poppy – and pipelines.

• 2003, the Iraq war, marked the official downfall of America as the “do no wrong” world superpower. They wanted this war against Saddam Hussein and this had nothing to do with “SPREADING DEMOCRACY”.

  • Opiate crisis
  • 2000 election/supreme Court
  • Housing, food, transport costs rise
  • Tech, toys, distractions , porn free
  • Sexual revolution in the 20 yrs
  • Hope and change – Obama
  • Financial crisis 2007-08
  • APPLE, GOOGLE, MICROSOFT, FACEBOOK, AMAZON – monopolies that stifle innovation, crush ordinary people, run on tax funded telegram taxes, public utility, public square, censorship
  • Trump – the candidate vs the president
  • COVID -19 – the end and the beginning.