Shut Down Investors Using Influence To Undermine Trust In Government
As recently as a few years ago, there were Democratic politicians throughout the Deep South at both the federal and statewide levels. Today, this is no longer the case. The dearth of elected Democrats coincides with increased distrust in government. Because I spent most of my adult life as an elected official, my friends and neighbors still want to talk about politics with me. Recently, these discussions have often centered on peoples’ anger at “the government” and “Washington.”
The question facing Democrats is what to do going forward. How do we combat the perception that we cannot be trusted and are more concerned with special interests than regular folks?
To try and win these voters, Democrats need to send a message that they are looking out for all Americans and will stand up against the rich and powerful.
To do this, there has been a great deal of talk about raising the minimum wage and reducing the cost of higher education. I support both of these agendas.
But one thing that has gotten very little attention, which could send a strong message that government is not for sale, would be to reduce the influence that extremely wealthy investors have over government policymaking.
For example, some short-sellers – those who make huge financial bets that the stock of a publicly traded company is overvalued and will go down – have not been content to let the financial markets determine their fate. Instead, they have taken matters into their own hands, using their considerable wealth and influence to push for government action to drive down a stock’s price.
Perhaps the most well known example of this is William Ackman’s campaign against Herbalife. Ackman, who manages a hedge fund called Pershing Square Capital Management, has bet a billion dollars that a company called Herbalife will go out of business. Herbalife is a well-known multi-level marketing company, meaning its sales force is compensated not only for the sales they generate but also for the sales made by others they have recruited to the company.
Ackman alleges that Herbalife is an illegal pyramid scheme, but Pershing Square’s allegations alone didn’t move the market enough to result in the substantial payout. Recognizing that a government investigation into Herbalife would drive down the stock price, Ackman hired politically connected lawyers and lobbyists and made donations to non-profits all to persuade the Federal Trade Commission (FTC) to investigate the company. An organization called the League of United Latin American Citizens (LULAC) echoed his call for a government inquiry, claiming Herbalife targets unsophisticated Hispanics.
Ackman has also used his connections on Capitol Hill to go after Herbalife. At his urging, prominent members of Congress wrote to the FTC calling for investigations of the company. One senator was apparently convinced to send the letter by a powerful lobbyist who used to work in his office. And a congresswoman from California had to backdate a press release regarding a letter she sent to the FTC when Ackman announced her action to a group of wealthy investors before its existence had been made public.
Problematically for Ackman, Herbalife is fairly popular and many people who sell Herbalife products make a good deal of money. In fact, LULAC had trouble finding actual Hispanic “victims” of Herbalife. When confronted by the New York Times, about accepting money from Pershing Square to go after Herbalife, LULAC returned Ackman’s contribution.
Ackman is not the only investor to leverage our government for his personal financial benefit, but this case illustrates why Americans are so cynical about Washington. Frequently, it seems like our government works for the rich and powerful instead of the rest of us.
The Obama administration should make clear it won’t tolerate investors gaming government for their own financial advantage. Alone, this won’t fix the problem, but it would send a message to voters – especially those in the Deep South – that the Democratic Party is serious about looking out for Main Street, not just Wall Street. This would be a good start for a party in shambles below the Mason-Dixon Line.
Ronnie Shows, a Democrat, represented Mississippi’s 4th Congressional District in the House of Representatives from 1999 – 2003, and served on the Financial Services Committee in his second term.