Thursday, February 26, 2004

Raising money, concentrating wealth

Title: New Gov Raises Funds Faster Than Davis
Source: LA Times
Date: February 15, 2004

According to the article:
    Gov. Arnold Schwarzenegger is collecting money to promote his March 2 ballot measures at a clip of $121,313 a day — far outpacing Gray Davis at the height of the former governor's fundraising. Schwarzenegger has raised $5.2 million since the start of the year, much of it in five- and six-figure chunks, to campaign for Proposition 57, a $15-billion bond issue that would allow the state to restructure its debt, and Proposition 58, to limit future debt.

    Because the contributions are not going to his reelection account, they are not subject to restrictions on the size of donations, one of several ways the fundraising illustrates gaps in the laws regulating donations and disclosure. Schwarzenegger aides are soliciting contributions of as much as $500,000 to attend a private dinner with the Republican governor later this month. The event will be held in New York City, headquarters for the bond industry, which would vie for the right to underwrite and market California's $15-billion deficit- restructuring bond. Schwarzenegger's aides say he is seeking money from donors outside the municipal finance industry.
Here we have the concentration of wealth at work in the worst possible way. We have the governor of California in New York accepting contributions in the form of $500,000-per-plate dinner tickets. By paying this money, wealthy New Yorkers are able to buy direct access to the governor.

Why would they pay that much? If the bond referendum is successful, the investment bank(s) chosen to underwrite the $15 billion in bonds will make hundreds of millions of dollars in fees. The article the underwriting spread explains all the different ways that money is extracted from bond deals like this.

The taxpayers of California will be handing hundreds of millions of dollars to extravagantly wealthy people in New York. The governor is setting himself up as the channel for that gift. The concentration of wealth continues.


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