.... First, we have the case of a big Democratic donor who invested a lot of money in a short sell position on Herbalife, which means he will profit if the stock falls in value. Nothing wrong with that, at least in theory. Short selling can be a very economically beneficial way of correcting markets when something is over-valued. Heck, we would all be much better off today if there had been some short selling to pop the housing bubble before it got so big. But as Tim Carney explains in a column for the Washington Examiner, this short-selling insider isn’t relying on market forces. Instead, he is asking his buddies in the Obama Administration to use coercive government to hurt the company and lower its value. Here are some excerpts. Politically connected hedge-funder Bill Ackman…shorted the nutritional supplement company Herbalife in late 2012… After Ackman’s announcement, Herbalife shares fell from $46 to $27. Ackman kept hammering away, taking his compelling slide show on the road to convince the investing public that Herbalife was a house of cards. But after the initial drop, Herbalife stock rebounded… But Ackman had another weapon in his arsenal. Namely: Big Government. Ackman lobbied congresswoman Linda Sánchez, D-Calif., to sic the Federal Trade Commission on Herbalife.Sanchez complied. Ackman also…“paid civil rights organizations at least $130,000 to join his effort by helping him collect the names of people who claimed they were victimized by Herbalife in order to send the leads to regulators…” Ackman’s firm, Pershing Square Capital Management, hired an army of K Street lobbyists — paying a combined $14,000 a month to three firms that disclose lobbying for him — to turn the government against Herbalife. What reprehensible behavior on the part of Ackman. I have no idea whether Herbalife is a good company or a bad company. And I have no idea whether its stock is over-valued or under-valued. But I do know that Ackman shouldn’t be getting his political buddies to intervene. As Tim points out, this is a recipe for rampant cronyism. This is different from ordinary lobbying. Typically, companies lobby to protect or subsidize their business. When hedge funds play Ackman’s game, helping or hurting some other company is theentiretyof that business — and so lobbying can become the core of their business plan. We’ve seen it before. Investor Steve Eisman took a short position on for-profit colleges and lobbied Congress and the Department of Education to crack down on them. The Obama administration this monthannounced new proposed regulationson these colleges. Now let’s look at another example. Only this time it involves a big-donor Republican who wants favors from big government. As the Washington Post reports, Sheldon Adelson doesn’t want his casinos to face competition from the Internet. Given the more than $100 million that Sheldon Adelson has donated lately to Republican causes, the billionaire casino tycoon is well-positioned to get what he wants from a GOP-dominated Congress. But it turns out that the item on top of Adelson’s wish list — a ban on Internet gambling — is encountering resistance. And it’s not Democrats who stand in his way but a small group of fellow conservatives. …Online betting has been embraced by a number of Adelson’s industry rivals and several states eager for the additional tax revenue it provides….Yet the move to the Internet has also been seen as a threat that could deplete the customer base for Adelson’s brick-and-mortar casino resorts. …Half of the 22 Republican members of the House Judiciary Committee have co-sponsored the Adelson-backed legislation. So what’s the status of the battle? …conservative opposition began to emerge. …leaders of the other groups, including the American Conservative Union, did not mention Adelson by name. But their letter follows the publication this week of a fiery online column by former congressman Ron Paul (R-Tex.), the libertarian hero and father of potential presidential candidate Sen. Rand Paul (R-Ky.). He called the bill an example of “crony capitalism” written “for the benefit of one powerful billionaire.” …Adelson called the 2011 Justice Department legal opinion a mistake and has taken steps to rein in online gambling,fighting state-level proposalsto authorize it and pushing for the federal ban. A company lawyer penned an initial draft of theRestoration of America’s Wire Act— later refined and introduced last year by Sen. Lindsey O. Graham (R-S.C.) and Rep. Jason Chaffetz (R-Utah) — which would effectively prevent states from authorizing online betting. Ugh, how nauseating. Though I’m glad to see that there is opposition inside the GOP to Adelson’s self-serving proposal. I realize we can’t say for sure whether opponents are motivated solely by good principles of non-intervention and federalism. Perhaps they’ve received money from interest groups on the other side, but at least there is resistance and presumably some of that opposition is for the right reasons. By contrast, I’m not aware of any Democrats who are opposed to Ackman’s cronyist attack on Herbalife. The moral of the story is that big government enables insider corruption. https://youtube/watch?v=SovALlOhSg8#t=85 The Odious Corruption Enabled by Big Government - By Daniel J. Mitchell | Nov 24, 2014 finance.townhall/columnists/danieljmitchell/2014/11/24/the-odious-corruption-enabled-by-big-government-n1923003/page/2
Posted on: Mon, 24 Nov 2014 18:40:08 +0000
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