Dingell Loses to Waxman and Auto Stocks Dive
Call It What It Is: Corruption
By Joshua Holland, AlterNet
Posted on November 21, 2008
In a functional democracy -- one where lawmakers pursue
the public interest -- the stock prices of politically
connected companies or industries shouldn't be impacted
by the changing fortunes of politicans with whom they're cozy.
But yesterday, Representative Henry Waxman (D-CA)
wrested control of the influential House Energy and
Commerce Committee from fellow Democrat John Dingell
(MI), and auto stocks tanked on the news. It's an aspect
of the story that will likely get little attention --
taken, with some justification, as just so much business as usual in
Dingell, who is quite progressive in some areas, is also
firmly in Big Auto's pockets, and has clashed with
Waxman on a number of issues over the years -- issues
like beefing up regulation of vehicle emission
standards. Over the course of his career, three of
Dingell's top four contributors were GM, Ford and
Daimler-Chrysler; his wife, Debbie, was an industry
lobbyist until their marriage in the early 1980s and
continues to work for GM today. According to disclosure
forms, the couple owned more than a million bucks worth
of Big Auto stocks and options as of 2006. After the
last election, Dingell hired a Daimler-Chrysler lobbyist
whose previous job had been keeping Congress from
increasing vehicle efficiency standards to serve as the
committee's Chief of Staff.
Waxman is one of the most liberal lawmakers on the Hill,
and has fought tenaciously against the Corporate Right
on issues ranging from oversight of the "security
contractors" that have run amok in
There will no doubt be plenty of analysis about what the
hugely significant change in leadership on the committee
will portend for the next president's agenda. Energy and
Commerce plays a key role in crafting a huge variety of
legislation -- from consumer protection, food and drug
safety and public health and environmental policies to
the supply and delivery of energy and international trade.
But that's not the only interesting aspect to this
story. Consider this opening to a piece on the
Waxman Gains House Energy Committee, Auto Stocks Drop
friend in Rep. John Dingell (D-Mich.), who will hand
over the Energy and Commerce committee gavel to Rep.
Henry Waxman (D-Calif.), The Post's Paul Kane is reporting.
Waxman is a strong backer of President-elect Obama
and his tougher stance on environmental issues.
As chair of the Energy committee, Waxman will have a
key role in implementing Obama's policies, which
could include higher fuel-efficiency standards for
GM, Ford and Chrysler vehicles.
In response, shares of GM and Ford fell following
the news of Waxman's ascension.
Ford is threatening to punch through the $1-per-
share floor. GM is trading at its lowest leels in 70 years.
Most people wouldn't give that headline a second
thought. Why wouldn't auto stocks take a hit soon after
the industry "had lost a loyal friend" on a key
It's business as usual, of course, but it's also
evidence of a corrupt government. That's according to
forensic economists -- the CSIs of the "dismal science."
Corruption is difficult to measure. Organizations like
Transparency International rank countries according to
people's -- especially business-people's -- perceptions
of government corruption. But perceptions can be a
tricky thing -- people doing business in a country can
have all sorts of motivations for under- or over-
reporting the degree of corruption they encounter. And
critics have claimed that the rankings are highly
politicized, with business-friendly countries getting a
pass even if their customs inspectors and highway cops
shake down everyone passing before them.
But, as Raymond Fishman and Edward Miguel, two
professors who penned the book Corruption, Violence, and
the Poverty of Nations, wrote recently in Foreign Policy
($$), forensic economists are pursuing a more
methodologically sound way of rooting out government
corruption: watching how the ups and downs in the
careers of government officials impact the stock prices
of firms to which they're connected in one way or another.
Fishman and Miguel laid out the rationale behind the approach:
Whether through hefty campaign contributions or
cushy jobs for former politicians, corporations are
constantly accused of trying to profit through
political ties. (Just think Halliburton or
Gazprom). But what's the real value of these
companies' connections? If you ask politicians or
investors, you're likely to hear a lot of denials.
To get the truth, we could ask insiders to put some
money where their mouths are, making them bet some
of their own cash on whether particular companies
are making back-alley deals with politicians to
increase their profits. In this political betting
pool, raw financial self-interest would lead bettors
in the know to reveal their true beliefs about corruption.
That betting pool is, of course, the stock markets. The
scholars wrote: "If connections buy tax breaks, valuable
licenses, and advantages in bidding for government
contracts, then strengthening political ties should
boost profits. These higher profits translate directly
into higher stock prices, and conversely, removing those
ties should send profits -- and stock prices -- tumbling."
ties in every country that had a functional stock
market. Not surprisingly, Faccio found strong
connections between business and government across the
board, but she also noted that the value of those
connections in terms of stock prices varied greatly.
when a firm's political ties wax or wane. When Rolls-
Royce Chairman John Moore was appointed to the House of
Lords, it didn't touch Rolls-Royce's stock price. But in
Giovanni Agnelli was appointed to the Italian Senate,
Fiat's stock soared by 3.4 percent, adding millions of
dollars in value to the company in a single day.
Now consider that headline once more -- "Waxman Gains
House Energy Committee, Auto Stocks Drop." It says that
we're a lot closer to
corruption than we are to that of our British cousins.
One could argue that the Big Three's tanking share
prices are simply a product of a Rep. from
knocking a local
chairmanship. But in order for that argument to hold
water, one would have to further claim that Dingell's
five decades spent fiercely opposing beefed up
emissions and fuel efficiency standards served not only
the short-term interests of the Big Three's bottom-
lines, but also the long-term interests of the rest of
his constituents. That's a tough argument to make,
especially at this moment in time.
It's also the case that Congress didn't give the Big
Three the $25 billion in "bridge loans" they'd begged
for, which no doubt hurt their share prices as well.
But, as Fishman and Miguel noted, the pattern is well-established:
Numerous studies have found that the economic
fortunes of well-connected
political fortunes of their connections. When
Sen. Jim Jeffords defected from the Republican Party
and handed Senate Democrats a slim majority in 2001,
Democratically connected companies benefited in the
immediate aftermath. Similarly, the stock value of
companies with former Republican lawmakers on their
boards increased an average of 4 percent when the
Supreme Court handed the 2000 election to George W.
Bush, while companies with former Democratic
politicians on their boards declined.
The take-away from all this is that while there's reason
to celebrate progressives like Waxman increasing their
influence at the beginning of the Obama era, we also
need to keep in mind that the system in which they
operate is rotten, and that there's still a lot of work
to be done in order to bring responsible governance in
the public interest to
enormous amount of centralized power in DC, and Congress
still has an incumbancy protection racket and seniority
system that allows industries to keep a loyal foot
soldier like Dingell in a place of power for decades (in
1955, Dingell took the seat his father had held until his death).
What's more, we shouldn't dismiss public corruption as
just so much "business as usual" when it's right there,
staring us in the face.
Joshua Holland is an AlterNet staff writer.
© 2008 Independent Media Institute. All rights reserved.