August 22nd, 2019

Hedge Fund Cash Flows to Presidential Candidates—at Puerto Rico’s Expense

Ramon Espinosa/AP Photo

Hurricane Maria caused an estimated $31 billion in damage to housing alone. Senators Bernie Sanders and Elizabeth Warren have co-authored legislation that would cancel outstanding Puerto Rican debt.

Bernie Sanders and Elizabeth Warren have returned campaign contributions from individuals employed at hedge funds that have investments in Puerto Rican debt. An open letter from a coalition of progressive activist groups sent last week demanded that presidential candidates reject donations tied to the continuing misery on the island.

Thirteen presidential candidates received a total of $230,900 in donations from fifteen different hedge funds holding Puerto Rican debt. The other candidates, including Joe Biden, Kamala Harris, Beto O’Rourke, and Pete Buttigieg, have not committed to returning the money.

“We applaud Elizabeth Warren and Bernie Sanders in this important step and show of solidarity for the people of Puerto Rico,” said Julio López Varona, co-director of community dignity campaigns at the Center For Popular Democracy, in a statement. “No presidential candidate can call themselves a friend of Puerto Ricans while taking money from hedge funds driving austerity on the island. We marched for days to oust a corrupt governor, we will not stand idle for these abuses and will condemn anyone who builds their campaigns from them.”

For Sanders and Warren, sending back the funds was no great hardship, as they didn’t receive much money in the first place. For Warren, it was one $1,000 donation from an employee of Taconic Capital, and for Sanders, it was a single $2,700 contribution from an employee at BlueMountain Capital.

Given the two left-populist candidates’ oppositional stance against Wall Street, the scant level of funding is to be expected. Sanders and Warren have co-authored legislation that would cancel outstanding Puerto Rican debt, which would zero out what has come to be known as “vulture fund” investments, and ruin the grand plan to purchase distressed debt on the cheap and force repayment for a large payday.

Interestingly, both Kamala Harris and Kirsten Gillibrand co-authored that bill, yet neither of them renounced the $15,500 and $11,200 they’ve received, respectively, from the vulture funds. Both campaigns did not return a request for comment on the matter.

Other candidates received even more from the vulture funds. The champion recipient is actually longshot centrist Michael Bennet, who received $49,800 from seven different hedge funds. Beto O’Rourke enjoyed $28,750, most of it from Centerbridge Partners, whose founder and managing partner Mark Gallogy has endorsed and bundled donations for the former Texas congressman. Other top recipients include John Delaney ($26,300), Joe Biden ($25,350), Cory Booker ($23,300), and Pete Buttigieg ($21,350). The numbers are all as of the latest Federal Elections Commission filing on June 30.

The campaigns of Bennet, O’Rourke, Biden, Booker, and Buttigieg declined to comment.

The donations came from the likes of Centerbridge ($61,200), Oaktree Capital ($30,200), GoldenTree Asset Management ($25,300), and Baupost Group ($24,400), whose founder Seth Klarman infamously tried to hide Puerto Rican debt investments through a web of shell companies. BlackRock, the world’s largest asset management fund, which has Puerto Rican debt investments, has contributed $20,900 to presidential candidates.

The open letter was sent to presidential campaigns on August 13. Activist groups based both on the mainland and in Puerto Rico, many of whom were active in the protest movement that ended the tenure of former governor Ricardo Rosselló, tied that uprising to the need to forcefully oppose the source of many of Puerto Rico’s troubles: hedge funds whose aggressive actions have triggered massive austerity and impoverished the island’s citizens.

“During this recent uprising, we’ve heard you say on social media that you stand with the people of Puerto Rico,” the letter reads. “But unfortunately, your fundraising activities as Democratic presidential candidates don’t show real solidarity with the Puerto Rican people.”

The letter asked that all donations from hedge funds profiting from Puerto Rico be returned. “Puerto Ricans will be denied a better future if hedge funds are allowed to continue to profit from austerity and privatization on the island,” it reads. “You can either stand with the people of Puerto Rico or with the hedge funds that have harmed Puerto Rico. You can’t do both.”

The open letter was sent around the same time as a new report from the research coalition Hedge Clippers, which reports on hedge fund activities. This report shows that the vulture funds’ efforts did not end with Rosselló’s ouster. Already, over 400 public schools have been closed and charter schools approved in their place, the budget for the University of Puerto Rico was cut in half, and $150 million in appropriations to municipal governments has been implemented, with another $220 million on the way by 2024. This all freed up money to pay the vulture funds and other bondholders.

While key positions inside the Puerto Rican government and representing the island in Title III bankruptcy litigation remain unfilled, vulture funds continue to negotiate debt restructuring. The oversight board that governs much of Puerto Rico’s fiscal operations is negotiating one of these agreements, which would even pay off bondholders on debt that has been called into legal question.

The activists involved in the campaign include several Make the Road Action groups, Vamos4PR Action, New York Communities for Change, Hedge Clippers, Boricuas Unidos en la Diáspora, and many others.

“Both Bernie and Elizabeth have demonstrated that actions speak louder than words,” said Luis Ponce Ruiz, co-founder of Boricuas Unidos en la Diáspora. “We are grateful for their campaigns taking the lead in returning the donation; we demand that the rest of the Democratic presidential camp follows their lead now! If not, the Puerto Rican community will continue to press them and hold them accountable at rallies, town halls, via social media, and, of course, at the ballot."

The total vulture fund donations of $230,900 include $6,100 given to John Hickenlooper, who is no longer in the presidential race but who may run for U.S. Senate in Colorado.



The 5-Step CEO Pay Scam

Associated Press

Disney CEO Bob Iger makes over 1,000 times the median employee salary at his company. It would take the typical worker 158 years to catch up to what their CEO made in 2018 alone.

Average CEO pay at big corporations topped $14.5 million in 2018. That’s after an increase of $5.2 million per CEO over the past decade, while the average worker’s pay has increased just $7,858 over the decade.

Just to catch up to what their CEO made in 2018 alone, it would take the typical worker 158 years.

This explosion in CEO pay relative to the pay of average workers isn’t because CEOs have become so much more valuable than before. It’s not due to the so-called free market.

It’s due to CEOs gaming the stock market and playing politics.

How did CEOs pull this off? They followed these five steps:

First: They made sure their companies began paying their executives in shares of stock.

Second: They directed their companies to lobby Congress for giant corporate tax cuts and regulatory rollbacks.

Third: They used most of the savings from these tax cuts and rollbacks not to raise worker pay or to invest in the future, but to buy back the corporation’s outstanding shares of stock.

Fourth: This automatically drove up the price of the remaining shares of stock.

Fifth and finally: Since CEOs are paid mainly in shares of stock, CEO pay soared while typical workers were left in the dust.

How to stop this scandal? Five ways:

1. Ban stock buybacks. They were banned before 1982 when the Securities and Exchange Commission viewed them as vehicles for stock manipulation and fraud. Then Ronald Reagan’s SEC removed the restrictions. We should ban buybacks again.

2. Stop corporations from deducting executive pay in excess of $1 million from their taxable income—even if the pay is tied to so-called company performance. There’s no reason other taxpayers ought to be subsidizing humongous CEO pay.

3. Stop corporations from receiving any tax deduction for executive pay unless the percent raise received by top executives matches the percent raise received by average employees.

4. Increase taxes on corporations whose CEOs make more than 100 times their average employees.

5. Finally, and most basically: Stop CEOs from corrupting American politics with big money. Get big money out of our democracy. Fight for campaign finance reform.

Grossly widening inequalities of income and wealth cannot be separated from grossly widening inequalities of political power in America. This corruption must end.


Ed Markey, Joe Kennedy, and Waiting-Your-Turn Politics in Massachusetts

Steven Senne/AP Photo

Senator Ed Markey addresses a rally for immigration rights in February 2017, as Representative Joe Kennedy looks on.


The baby boomer/millennial test of wills in the House, most notably between Alexandria Ocasio-Cortez and Speaker Nancy Pelosi, has overshadowed the impatience of Generation X office seekers with the gerontocracy that presides over the Senate. The chamber’s transformation into a hornet’s nest of Trumpian enablers is emboldening younger candidates who no longer want to wait for these solons to move on.

Senate Majority Leader Mitch McConnell, 77, and his politics of legislative obstructionism will face challenges this year from Democrat Amy McGrath, 44, a retired Marine fighter pilot, and potentially 40-year-old Matt Jones, a beloved sports talk radio host who happens to be quite progressive (he’s considering a run). Maine’s Susan Collins, 66, is feeling the heat on her decision to back Brett Kavanaugh for the Supreme Court from several Democrats, including 47-year-old Sara Gideon, speaker of the Maine House of Representatives.

It is easy to cheer for youthful challengers who would upend the stale Senate status quo, but what about races where the philosophical differences are not as stark? In Massachusetts, one of the fiercest generational battles in American politics is already under way. Representative Joe Kennedy III, 38, is contemplating a run for the Senate seat currently held by Ed Markey, 73, who has served more than 40 years in Congress. Markey also has two other Democratic challengers: Steve Pemberton, a corporate human resources executive, and Shannon Liss-Riordan, a labor attorney.

Kennedy recently commissioned a poll that showed him beating Markey by a small margin. A “Jump in, Joe” grassroots drafting effort is also nudging him along. During his nearly four decades in the House, Markey has faced no serious challengers. He won his Senate seat easily in a low-turnout 2013 special election featuring a little-known Republican opponent after John Kerry became Obama’s second secretary of state.

The irony of this generational challenge is that it’s Markey who holds the advantage on issues that galvanize young voters, especially the climate crisis. Few Bay State politicians can match Markey’s climate and energy experience. His 37-year record in the House and six in the Senate includes passing a 2009 cap-and-trade plan. (It failed to pass the Senate.) He further burnished his climate and energy bona fides—and took quite a bit of heat—by co-championing ambitious Green New Deal legislation with Ocasio-Cortez, the exuberant congresswoman from New York and one of the highest-profile slayers of white-male incumbents.

The Markey/Ocasio-Cortez alliance insulates the junior Bay State senator from the charge that he is a man past his time. AOC arrived at the right moment to provide the Green New Deal with the right blend of vigor and visibility than it might otherwise not have received had Markey been flanked by a representative sample of his male colleagues.

“To say Ed Markey is not the right guy in this very narrow window for the climate is bordering on heresy,” Craig Altemose, executive director of the climate advocacy group Better Future Project, told the Boston Herald. He described Kennedy’s prospects as more about “ambition than justice.”

In Congress, Kennedy has not actively sought out the limelight, keeping his head down in his work. He has been a strong advocate on STEM education and mental-health and substance abuse issues. But he’s also been a marijuana skeptic, who only came out for federal legalization of marijuana shortly before Massachusetts opened its first recreational pot shops last year. He has been an outspoken advocate for LGBT issues. (His Boston Pride Parade Committee is responsible for the grassroots drafting effort.)

He does display the Kennedy gift for speechifying, delivering a strong rebuttal to President Trump’s 2018 State of the Union address. His powerful denunciations of the Republican attacks on the Affordable Care Act have garnered millions of views online and recall the passion of his great-uncle Ted Kennedy on health care issues. And Kennedy is often out and about in his district, where Markey has been criticized for keeping a low in-state profile.

The Massachusetts political establishment is already closing ranks around Markey. Senator Elizabeth Warren, who threw her support to Markey months ago, sealed the deal with an endorsement video—calling him “a true progressive” and “Big Oil’s worst nightmare.” Interestingly, both Kennedy and Markey have endorsed Warren for president, and both gave speeches on her behalf at her formal announcement in Lawrence, Massachusetts. Most of the Massachusetts House delegation has endorsed Markey as well, with the exception of Representatives Katherine Clark (who won a special election for Markey’s House seat when he moved to the Senate), Seth Moulton, and Ayanna Pressley (who both upset longtime incumbents).

But endorsements of politicians by politicians don’t amount to a hill of beans in this crazy world. Most Bay State establishment types got behind former Representative Mike Capuano (with the notable exceptions of Markey and Warren, who stayed neutral), and Pressley, a Boston city councilor, beat him easily.

The prospect of a Markey-Kennedy matchup has already roiled Massachusetts progressives, particularly people like Altemose, who see Markey as a climate champion on the cusp of real power if Democrats can push out Trump in 2020. Many Democrats would prefer to see Kennedy run for governor in three years, although others see a future presidential bid in the making. In a preview of possible dirty politics to come, a Markey staffer had to apologize and walk back remarks about the Kennedys after he tweeted that the congressman should stay out of the race and focus on his family’s “mental health issues.” Markey also apologized.

Kennedy seems to be signaling that he’ll be a major factor in the next Senate opening in Massachusetts, whether it’s Markey or Warren. If Warren wins the Democratic nomination and presidency, her Senate seat would open up, and Kennedy musing about a statewide campaign now could merely be a signal to other ambitious Massachusetts pols that he intends to take over what was his great-uncle Ted’s seat for nearly 47 years. That special election could even happen in November 2020, if Warren decides to bet on herself and resigns her seat after securing the nomination. That would allow a Democrat to most likely occupy that seat from the time a potential President Warren takes the nomination, instead of a temporary replacement installed by Republican Massachusetts Governor Charlie Baker. And the fact that mechanisms exist for Warren’s opening to be decided by special election in 2020 likely explains the timing of Kennedy’s whisper campaign.

The rumored Markey-Kennedy election shapes up to be as much about change versus experience as it is about the hold that the Kennedy mystique—or what some call the Kennedy privilege—still has in Massachusetts. The Kennedys continue to loom large in a place where a significant cohort of older voters revere the family’s legacy of public service—and can remember something that Joe Kennedy’s Uncle Ted did for them.

What’s important to remember is that Massachusetts is a small state that is accustomed to producing politicians who punch above their weight in national politics—and a hyper-talented bench of Bay State Generation X politicians is not going to sit around and quietly contemplate the future while waiting for a seat to open up.

Sanders Is Trying to Have It Both Ways on Union Health Care

Manuel Balce Ceneta/AP Photo

Senator Bernie Sanders introduces the Medicare for All Act of 2019, on Capitol Hill in April.

In an attempt to assuage union concerns about his Medicare for All plan, presidential candidate Bernie Sanders added a section to his new “Workplace Democracy Plan.” The problem is that it is difficult to square this new talking point with his others on health care. From the plan:

[T]he plan will ensure that union-sponsored clinics and other providers are integrated within the Medicare for All system, and kept available for members. Unions will still be able to negotiate for and provide wrap-around services and other coverage not duplicative of the benefits established under Medicare for All.

Either these are mostly meaningless promises without actual policy implications, intended to trick voters, or Sanders’s past statements about banning duplicate insurance don’t really hold up.

Sanders’s Medicare for All bill is entirely comprehensive, fully covering everything. It is also meant to aggressively focus on equality by denying everyone, except the rich who can afford concierge medicine, a way to pay for faster treatments by banning duplicate insurance. Those are big moral and practical selling points for the law, but inconsistent with these union promises.

Sanders’s bill is so comprehensive that there is no possibility for “wrap-around services and other coverage” that Medicare for All wouldn’t cover. For example, one of the only theoretical additional pieces of coverage Sanders even mentions is plastic surgery insurance, but that does not exist in the real world and won’t ever make sense. The whole point of Sanders’s argument up until now is that there would be nothing for unions to negotiate on health care, since the government would do it all.

More importantly, there is also no way to really square keeping “union-sponsored clinics” open for members with the principles behind his ban on duplicate insurance. If union-sponsored clinics need to treat everyone equally, regardless of union status, they effectively would become community health clinics, offering nothing special for union members. If, on the other hand, employers can pay for union-sponsored clinics where union members get special privileges for faster appointments, that would be for all intents and purposes duplicate insurance.

This is what duplicate insurance is in many European countries: an employer-provided perk for workers to get certain medical testing, non-emergency surgeries, or elective treatments faster at special clinics. In such countries, this duplicate insurance is often primarily for union members, covers only a limited number of faster services, and makes up a very small share of total health spending. Regardless, if Sanders insists on calling it “employer-provided, union-sponsored clinics” instead of employer-provided duplicate insurance, such an arrangement would meet the definition of duplicate insurance.

There is nothing wrong with allowing such an arrangement, and there is a reason why so many countries with single-payer health care systems have this element. Union insurance tends to have quality networks and fast appointments, an important perk that is understandably hard to give up. There is even a strong policy argument that certain high-risk/high-value professions might uniquely benefit from aggressive testing/treatment, but that is not how Sanders has been selling his bill so far.

It’s somewhat strange that Sanders even feels the need to pander to unions at all in this fashion. Since the last debate, when Sanders was challenged multiple times about “taking away good union benefits,” unions have actually rallied to his side and condemned the attackers. SEIU president Mary Kay Henry said she resented union workers “being pitted against millions of Americans struggling to get healthcare coverage.” Sara Nelson of the Association of Flight Attendants said that presumed union anger over everyone getting benefits as good as they have reflects “a great failure of understanding how unions work.” While a few union members have expressed concern about their health care benefits, over 20 unions have endorsed Medicare for All.

Moreover, unions would be in the best position after Medicare for All to ensure that savings reaped by employers from no longer providing health insurance is converted into higher wages for their members, because they already collectively bargain with employers and can ask for higher wages and better working conditions contractually.

As Sanders has sold his plan up to now, there practically can’t be any union-negotiated “wrap-around coverage,” and whether or not a clinic technically remains “union-sponsored” would have no impact on any union member. So either these promises are meaningless claims to placate confused voters, or Sanders has effectively endorsed in all but name the duplicate insurance we see in countries like Norway, Sweden, and New Zealand.

If it is the former, it is strange that Sanders doesn’t just make the simple argument that health care shouldn’t be tied to your employment at all and unions will have nothing to do with health care. If it is the latter, it makes Sanders’s rhetorical insistence that he is “banning private insurance,” while allowing duplicate insurance in all but name, a strange political decision given how poorly banning private insurance polls.

Climate Activists Win Partial Victory in Climate Debate Battle

Elaine Thompson/AP Photo

Just a day before the DNC vote, Governor Jay Inslee ended his climate change-focused 2020 presidential bid.

In a packed hotel conference room in San Francisco, climate activists clambered for space to urge the DNC resolutions committee to finally approve what they had been pushing for since early spring. When the DNC ran out of credentials, activists poured in anyway. They ranged in age from teenagers to grandparents, all with the same agenda. Organized by groups like the Sunrise Movement, Climate Hawks Vote, and, the activists sported t-shirts and waved signs.

But after more than two hours of discussion, the resolutions committee voted 17-8 against holding a DNC-sponsored climate debate. It’s possible that the climate debate could resurface as a full-floor vote on Saturday.

The activists did score one partial victory: The DNC advanced a resolution reversing the ban on candidates’ side-by-side participation in non-DNC sanctioned events discussing the climate crisis.

For months, activists had demanded a DNC-sponsored climate debate, an event with much more coverage and attention than a forum or town hall. After protests in June, the DNC agreed to put forth such a resolution. But at the last moment DNC Chair Tom Perez sponsored a different resolution, one that activists saw as a way for DNC members to avoid committing to a true debate. But after a contentious conversation, members still voted to retain the debate structures in the primary.

The meeting began nearly half an hour late, and more than a hundred activists sought entry into the room. The two resolutions that drew the most controversy were near the beginning of the list. The first was Resolution 4, submitted by Travis Robertson, chair of the South Carolina membership, that called for making climate change a central issue. It was heavily amended to allow multi-candidate forums, such as debates, on single-issue topics, albeit with no protections from DNC punishment should candidates participate. This passed. Though a small victory for the activists, such forums would not be DNC-sponsored and thus may not garner the same coverage and attention.

Resolution 5, known as the Podlodowski resolution for Tina Podlodowski, chair of the Washington State Democrats, and boasting support of more than 70 member signatories, was then heavily debated. It finally lost, to jeers of the crowd—but not before heated comments passed among the members.

One DNC member, Christine Pelosi, again called for thematic debates where candidates can debate the details of the party platform, something for which she has long advocated. This was seen as too big of a change.

Symone Sanders, a senior adviser to Joe Biden and a former adviser to Senator Bernie Sanders, argued that it is too late to change the debate structure so radically. “That is a discussion we should have had last summer,” she said. Even after Joe Biden publicly called for a climate debate, his adviser seemed to be reversing course inside the meeting.

But several DNC members thought the activists had a point. "It’s a youth-led movement and the future of the Democratic Party. Thank you for opening my eyes on how climate crisis affects every aspect of our lives,” said one member.

A DNC resolutions committee member, James Zogby, said to vocal approval from the crowd, "Are we props to be managed, or are we the deciding body of the party? We have our constituents here asking for a climate debate. Please pass this resolution.”

Tina Padlowdowski gave a barn-burner of a speech, activists said on Twitter. The Mercury News’ Casey Tolan tweeted: “This is about our own survival on the planet,” says Padlowdowski. “We don’t have to lock ourselves into debates that don’t work for us.”

But when the committee still voted against a climate debate, organizers broke out into singing the union anthem—“Which side are you on?”—after the resolution vote.

Activists started organizing for a climate debate intensely in April, when a petition circulated by CREDO and other groups garnered nearly 220,000 signatures by June.

One of the major tools activists used in advance of Thursday's vote was a call-tool for activists to reach their DNC member to ask them to vote for the resolution. Sunrise Movement reported more than 3,500 activist calls by the time of the vote, but some DNC members viewed the tactic disdainfully. One California member, Bob Mulholland, told me that he thought it was part of a Russian plot to divide and distract Democrats.

In response, another California member and founder of Climate Hawks Vote, RL Miller tweeted: I am going to have more to say, about that later, Bob Mulholland. You are accusing a fellow [California DNC] delegate and caucus chair, who has been hacked by Russians for real, of being part of that Russian plot.”

“California is at the forefront of the climate crisis,” wrote California member Michael Kapp in an email. “It is shameful that California is represented on the DNC by someone who would falsely blame ‘the Russians’ for California's existential need to combat climate change. It also assists climate deniers in spreading misinformation and downplaying the very real threat climate change poses. If Bob Mulholland, who lives near the devastation caused by the Camp Fire, cannot see the impact of the climate crisis right in front of him, he should have no place in representing California's interests on the national level.”

Just a day before the vote, Washington Governor Jay Inslee dropped out of the race. The candidate most celebrated for pushing climate change to the forefront had just passed the threshold of 130,000 donors to make the September debates. But he hadn’t received enough support in polls and fell short of the threshold for CNN’s climate town hall.

Inslee also just unrolled the last update to his now-213-page climate change policy proposal with plans for rural America. But, Inslee said in an interview with New York magazine’s David Wallace-Wells, the plan is open source so he hopes other candidates will use it as an idea template. Inslee plans to run for governor of Washington state again, but it remains to be seen if he will endure as a figurehead of sorts for climate activists pushing their agenda in the Democratic primary.

Dramatic headlines on climate change this week helped keep the issue at the forefront. The Amazon rainforest has been burning for three weeks largely unreported by American media, the sea ice in Alaska is nearly gone, a glacier in Iceland was declared dead, and a nasty heatwave in Europe helped make this July the hottest on record.