The Vanguard mutual fund official responsible for the pre-election Vanguard blog post crediting the Obama stimulus bill passed by Congressional Democrats with averting a second Great Depression has given $11,600 in campaign contributions over the past seven years — every last cent of it to Democrats.
Vanguard distanced itself from the blog post and apologized earlier this week after a FutureOfCapitalism.com article that criticized it. The Vanguard official who wrote the article lauding the stimulus, Stephen Utkus, gave $1,000 to the Democratic Congressional Campaign Committee this year and $500 this year to the Democratic Senatorial Campaign Committee, according to Federal Election Commission records reviewed by FutureOfCapitalism.com. He donated $4,600 to Barack Obama's presidential campaign in 2008, according to FEC records.
After the original Vanguard blog post was challenged, the company defended it in part by claiming, "the focus is on certain macroeconomic principles and is not intended to endorse specific political leaders or parties." But Mr. Utkus's history of political giving raises the possibility that he was doing exactly what it looked like he was doing in the first place — using the official blog of a financial giant with about $1.4 trillion under management to help the Democrats in the election by painting a dire picture of what would have happened in the economy under Republican policies. The situation also runs counter to the common portrayal by President Obama of a financial industry donating to Republicans in an effort to avoid regulation.
If Democrats had not passed the stimulus over "mistaken" Republican opposition, the country would have faced a scenario of "unemployment of 15% or more. A Dow that would have fallen 75% off its peak—to 4,000 or less—before recovering to a level much below today's. An economic recovery that might not yet have begun. And finally a foreclosure crisis even larger than our present one," Mr. Utkus wrote.
Mr. Utkus is director of the Vanguard Center for Retirement Research. The Vanguard Web site also describes him as a "visiting scholar" at the Wharton School of the University of Pennsylvania.
Among his other political contributions, according to the FEC records, are $2,000 to Senator John Kerry's presidential campaign in 2004, $250 to Howard Dean's presidential campaign in 2003, and $2,050 in contributions to the Democratic National Committee over the 2003-2004 election cycle.
Vanguard is describing Mr. Utkus to customers who complain about the blog post by saying he is "highly respected in Washington and among industry professionals, academics and the media for his insights and expertise on retirement and financial planning issues."
As a general matter, Vanguard executives seem to do most of their political giving through a political action committee called the Vanguard Group Committee for Responsible Government. The Center for Responsive Politics reports that that PAC's giving went 57% to Democrats and 43% to Republicans in the 2008 cycle and has gone 52% to Democrats and 48% to Republicans in the 2010 cycle.
What's striking about the Vanguard PAC contributions I reviewed is how clear it is that the PAC money (unlike Mr. Utkus's) is not ideological, it's transactional. For example, the PAC gave $30,000 in this cycle to the Democratic Congressional Campaign Committee and $30,000 to the Democratic Senatorial Campaign Committee — and it also gave $30,000 this cycle to the National Republican Congressional Committee and the National Republican Senatorial Committee. The money seems designed not to help either the Republicans or the Democrats take over Congress, but to make sure that whichever side wins, Vanguard has access. The Vanguard PAC has given $3,000 this cycle to "Young Gun" Republican congressman Paul Ryan, $12,000 over the years to Mr. Ryan's fellow "Young Gun" Republican congressman Eric Cantor, $7,000 this cycle to Republican House Speaker hopeful John Boehner, and $3,000 this cycle to Democrat Rep. Barney Frank.
You won't read about any of this in either the Wall Street Journal or the New York Times: Vanguard is too large an advertiser in each paper, and the firm has helped the economics editor of the Wall Street Journal, David Wessel, sell copies of his book.
Vanguard's Senate lobbying disclosure form shows the issues the firm has on its plate in Washington:
H.R. 2551 - Municipal Market Liquidity Enhancement Act of 2009
H.R. 2549 - Municipal Bond Fairness Act
H.R. 1754 - Financial System Stabilization and Reform Act of 2009
H.R. 1349 - Federal Accounting Oversight Board Act of 2009
H.R. 1728 - Mortgage Reform and Anti-Predatory Lending Act
H.R. 1106 - Helping Families Save Their Homes Act of 2009
H.R. 3126 - Consumer Financial Protection Agency Act of 2009
S. 895 - Helping Families Save Their Homes Act of 2009
S. 896 - Helping Families Save Their Homes Act of 2009 (amendment #1019 re safe harbor
S. 664 - Financial System Stabilization and Reform Act of 2009
S. 722 - Taxpayer Certainty and Relief Act of 2009
S. 3217 - Restoring American Financial Stability Act of 2010
OTC derivatives trading
Legislation and regulations affecting the mutual fund industry
Proposals relating to money market funds
Issues relating to market structure matters
Issues relating to target date funds
Issues relating to investment advice
H.R. 2989 - 401(k) Fair Disclosure and Pension Security Act of 2009
H.R. 1984 - 401(k) Fair Disclosure and Pension Security Act of 2009
H.R. 2021 - Savings Recovery Act of 2009
H.R. 2779 - Defined Contribution Plan Fee Transparency Act of 2009
H.R. 1988 - Conflicted Investment Advice Prohibition Act of 2009
H.R. 4213 - Unemployment Compensation Extension Act of 2010
H.R. 3760 - Home Buyer Tax Credit Act of 2009
H.R. 6099 - Automatic IRA Act of 2010
H.R. 4742 - SAVE Act of 2009
H.R. 4126 - Retirement Fairness Act of 2009
S. 401 - Defined Contribution Fee Disclosure Act of 2009
Proposals to reform the defined contribution plan system
Proposals to mandate workplace savings arrangements for employees without access to employer
retirement plans, including automatic IRAs
Proposals related to expansion of SIMPLE IRAs, establishment of discretionary payroll deduction
IRAs, and creation of new qualified retirement plans for small business
Issues related to retirement target date funds
Issues related to retirement income
Issues related to delivery of advice to participants in qualified retirement plans
Issues related to investment choices in qualified retirement plans
H.R. 4191 - Let Wall Street Pay for the Restoration of Main Street Act of 2009
H.R. 4337 - Regulated Investment Company Modernization Act of 2010
General tax issues related to mutual funds and tax incentives for retirement savings
Not mentioned directly are the proposal to extend federal deposit insurance to money-market mutual funds on a permanent basis, and Vanguard's ability to refuse to disclose to its owner-shareholders how much money is paid to the top executives at the company the owner-shareholders supposedly own. There aren't too many structures in American capitalism where the manager refuses to disclose to the owner how much money the manager makes.
I don't mean to give Vanguard a hard time. I have most of my assets invested there and have been a customer for about 15 years. They are better than the alternatives I have considered. But that blog post by Mr. Utkus dismayed me. And given the size of their business, they should get more press scrutiny. Not hostile scrutiny, just skeptical, reportorial scrutiny. Somehow, Goldman Sachs, in part because it is based in New York, gets all the attention. But these Vanguard guys in Pennsylvania have more assets under management than Goldman Sachs does.
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