In an earlier post on Arthur Samberg and Pequot Capital, I wrote, "What is active, arbitrary government regulation good for? Helping politicians to extract campaign contributions from the individuals subject to regulation." The latest case in point is CIT Group.
An article today on the Bloomberg wire reports that the "new strategy" of CIT's chief executive, Jeffrey Peek, is "trying to convince the government of the company's importance to the U.S. economy." Now there's a business strategy for our times. The Bloomberg article quotes Rep. Carolyn Maloney, a Democrat who is chairwoman of the congressional Joint Economic Committee, as essentially supporting the idea that CIT should get government backing over and above the $2.33 billion it has already received. She is quoted as saying, "CIT has been an especially important source of funding for small businesses, which we know is the engine of job growth in our economy…If they could no longer lend, it would cause disruption across the country to countless small businesses." Ms. Maloney is the only member of Congress quoted in the article.
What the Bloomberg article does not disclose is that, according to Federal Election Commission records, Mr. Peek made a $2,300 campaign contribution to Ms. Maloney on January 31, 2009.
Now, it's entirely possible that Mr. Peek had a reason to donate to Ms. Maloney's campaign entirely unrelated to his company's need for federal assistance. And it's entirely possible that Ms. Maloney's support for federal assistance to CIT is entirely unrelated to Mr. Peek's campaign contribution. I don't here want to come out on one side or another in the debate over federal aid to CIT. The point I do want to make, though, is that once the government starts picking the winners and losers in the private economy, it becomes a lot more important for businessmen to try to ingratiate themselves with politicians. That can be done legally, through campaign contributions, or in what the New York Times this morning, in a report unrelated to CIT, calls the "legal gray area" of "payments to intermediaries" such as the payments apparently made by the Quadrangle Group when it was led by Steven Rattner to win business managing money for the New York state pension fund.
Disclosure: Mr. Peek's wife used to work for me at the New York Sun.