in house if you'll be so kind as to turn off cell phones as we begin, especially for those recording our events today. we will post the program within 24 hours on our web site for everyone's future reference as well. our guest today is peter schweizer, he's a research fellow at the hoover institution at stanford university from 2008 to 2009 he served as a consultant to the white house office of presidential speech writing. he is also a former consultant to nbc news. have you lived that down? [laughter] among his previous books are, "the reagans -- excuse me, the reagans, "the bushes: portraits of a dynasty." reagan's war, the epic story of his 40-year struggle and final triumph over communism, and "do as i say: profiles in liberal hypocrisy." that book, by the way, was on "the new york times" bestsellers
list for eight weeks. in fact, and i love this quote, the economist magazine pronounced do as i say the ninth biggest selling political book on the entire planet in november 2005. additionally, he was executive producer of "in the face of evil," an epic documentary based on his book, "reagan's war," which won the 2000 liberty film festival. and if you'll ask ask the writer, steve ban on, who's with i us today, it's the greatest film ever written. today we focus on his nearest book here, "throw them all out," in which he examines the way the system works on capitol hill. or perhaps more aptly, the way capitol hill works the system. please join me in welcoming my friend, peter. peter? [applause] >> thank you, old friend, for that introduction. it's great to be back at the heritage foundation and talking about this book. um, and it's nice to be back in
washington d.c. i live in florida, and i don't know how many people here that live in d.c. realize it, but you are now the wealthiest community in the united states. you passed silicon valley in terms of net income. so washington, d.c. has the highest net income. and seven of the ten wealthiest counties in the united states are counties that border washington d.c. and i think that those two statistics are indicative of the problem that we face today and the subject that i'm here to talk about today which is, i think, crony capitalism. now, what do i mean by crony capitalism, and how is it different from free market capitalism? let me sort of describe it by just giving a couple of archetype examples. free market capitalism, i would give as an example of that would be steve jobs, the late founder of apple computer. he joined what the occupy wall street crowd would call the 1% by doing what? by creating products and services that people wanted to buy. people desired to buy apple
products, he became very wealthy. that is an example, in my mind, of free market capitalism. steve jobs did not have really hardly any lobbyists, he was not active politically. it was a voluntary purchase that people made of his goods and products that made him a very wealthy man. the crony capitalists, on the other hand, is less interest inside that voluntary exchange, and they're interested in making money out of the political system. what matters to them is not creating innovative products or services, but having political connections which allows them to get government contracts, which allows them to get set asides in the tax codes, guaranteed government loans, guaranteed government grants and access to inside information that's going the help them on investment decisions. so these, i think, are the two sort of archetypes that exist in america today, and my fear and concern is that we are increasingly moving in the direction of the crony capitalists in a way -- and away from the free market capitalist as steve jobs being an example. let me talk about this
phenomenon, crony capitalism, as sort of a couple of different areas. first, the people on the inside of the system which are the politicians and how they extract their wealth through this krone think -- crony capitalism, then i want to talk about the people on the outside that are politically connected and how they are able to effectively milk the system and use their crony connections to enrich themselves at our expense. and finally, i want to talk about what are some possible solutions and does this really matter? i mean, we've always had, you know, politicians that have taken money under the table and have gotten rich, and we've always had, you know, the railroad barons of the 19th century who cut sweetheart deals with the government. should we even really care about this? i think you can probably guess given the fact i wrote a book about it that my answer is absolutely, yes. i think this is the profound issue we face in america in the 21st century. so let's talk about politicians first. america is supposed to be governed by, um,
self-governance, the notion that we send individuals to washington who are supposed to represent ourselves. and it is supposed to be in some form a citizen legislature. well, about 60, 70 years ago that sort of changed, and we have a situation now where elected officials cannot only come and perform public service, but they come and perform public service relatively middle class, and they lee very -- leave very, very wealthy. let me give you two recent examples from people, one from each party, because this is a bipartisan issue. i believe this is a problem of human nature, not of one political party of the other. the first one would be nancy pelosi, speaker of the house from san francisco. when she first came into congress in 1987, her net worth was around $3 million. in the 20 years she has served in congress after that, her net worth has gone up 876%. which means if you do it on a compounded basis, you're averaging about 24% return on your investment every year. i think george soros or warren
buffett or certainly me would kill for that kind of return on investment. so a dramatic increase in wealth. and i'm going to argue that at least part of that, a large part of that is connected to her political position. what about a republican? well, the speaker of the house immediately before her was dennis hastert from illinois. dennis hastert, when he became speaker in the late 990s, had a net worth around $300,000. when he left as speaker less than a decade later, it was in the millions, it could potential have been as high as $33 million. 11 million. he didn't win the lotto or inheritten money. those are two individuals, but there are multiple others that i talk about in the book. i name people from both political parties, and this information comes from their public financial disclosures and comparing their activities with what thai working on in term -- they're working on in terms of
legislation, what access they might have to sensitive information. so how does this work? how is it that elected officials are able to leverage their position and make money? well, the first example i would give is the ipo which i would consider simply a form of legalized bribery. and let me just give you an example of this. let's say john is in the united states senate, and i come into his office, and i need a favor. and i say, john, i need a favor. here's a shoe box with $10,000 cash. i appreciate your help. what's going to happen? well f we get caught, we're going to go to jail. that's bribery. i'm giving him cash in exchange for a good. that doesn't happen so much in washington anymore. you hear about the occasional gentleman like congressman jefferson who put $90,000 in his freezer, but that's the exception to the rule. and, frankly, that form of illegal graft is really small potatoes. you can make a lot more money if you play it right engage what i
consider legal graft. so now let's assume i go into senator john's office, but instead of bringing a shoe box of cash, i say, john, i need a favor. i'm concerned about a piece of legislation. and, you know, by the way, i'm involved with this company, and i'm going to give you access to initial public offering shares of stock. and you're going to be able to buy these at $20 a share, and then the next day when they go public, they're going to sell for at least $50 a share. and you can turn around and sell them the next day, and you can make $100,000. that's perfectly legal. and that scenario goes on quite frequently in washington washington d.c. and here's the challenging part. when congressmen and senators engage in initial public offering purchases of stock, they don't have to disclose it as such. they simply list it as another stock transaction. so when you're going through financial disclosure forms, the only way you can find out whether they received these secret ipo shares is by literally looking at the date of their purchase and seeing if
that was before it was publicly available for the rest of us. this is what happened in the case of the nancy pelosi ipo that i talk about in my book and that you may recall was the subject of a "60 minutes" episode a couple of weeks ago. literally, the pelosis, nancy pelosi and her husband, were given access to 5,000 shares of stock in visa, the credit card company. they were able to buy those at $44 a share. the next day when they went public, they immediately sold at $66 a share, and then within a matter of weeks it was over $90 a share. so literally in a matter of days there was a net gain of $100,000 in their visa ipo stock. now, was there a quid pro quo? i don't know. what's curious though is pelosi received access to those shares which are enormously difficult for anybody to get at the same time they received access to those, visa had two pieces of legislation that they were profoundly concerned about on capitol hill. the important thing to remember
with visa is visa is not a credit card issuer, they are a credit card company. they make their money from that 3% that the restaurants or the grocery store that you use the card at, it's called a merchant swipe fee, and it's about 3%. that's how visa makes their money. they don't make their money on interest rates or anything else. well, these two pieces of legislation dealt specifically with this issue of the swipe fees. one of those came out of committee with strong bipartisan support, but it never received a vote on the house floor. nancy pelosi never allowed it to. the same thing happened the following year. so for literally two years nancy pelosi took the position that she was not going to support or get behind swipe fee reform. is that related to the visa ipo? i don't know. but think about it this way for a minute. what if somebody from visa had brought her $50,000 in cash. would there be any doubt in your mind that there was a quid pro quo? i don't think so. but because it's done through
this legal mechanism l of what i call legal graft, um, this practice happens quite frequently. how widespread is it? i don't know. i do know in congressman pelosi's case that there are at least eight to ten ipos that she and her husband have participated in over the years, often times getting access to stock, seeing the value double overnight and then selling it the next day. so i've talked a little bit about the ipo method. let's talk a little bit about inside information. i think we can all recognize that after, over the last 40 years the size of government has gotten much bigger and a lot more intrusive whether it's the bailout in 2008, whether it's the growth of government in the health care sector, clearly government has become much more involved in markets and in the economy. and what that means, of course, is that you have a situation where government moves markets. and if you have access to information in the position of power, you can trade on that information and do very, very well.
let me give you just sort of a couple of examples really briefly of what i mean. again, i'll give you one example of a republican and one example of a democrat. first example is the financial crisis, the beginnings of it, in september of 2008. there were a series of meetings that were held in washington, d.c., one on september 16th and one on september 18th in which ben bernanke, the fed chairman and hank paulson, the treasury secretary, sit down with senior members of congress and discuss with them the true gravity of the situation. now, keep in mind this is mid september. the dow jones industrial average is still at 11,400. people are nervous, but panic has not set in. we know from hank paulson's memoirs that he asked and members of congress who were at that meeting had the leave their blackberries and cell phones at the door, it was highly sensitive. and we know based on paulson's account that they informed members of congress that this
was a potentially cataclysmic financial crisis, that the dow jones industrial average was going to go down at least 20% and that we were looking at potential catastrophe in terms of the economy. according to paulson, the congressmen who were at this meeting were ashen-faced and stunned -- those are his words -- at what they were hearing. after that september 18th meeting, ten people who were at that meeting, members of congress, went out and sold a bunch of stock the next day. congressman from virginia, moran, sold stock in 90 different companies. you had other members of congress who dumped shares in the financial sector and ended up buying shares in other companies that did very, very well. there was also a gentleman at that meeting named spencer bachus who's the current chairman of the house financial services committee, he left that meeting and the next morning bought something called proshares ultra short qqq. now, what on earth is that? okay, i'm not a financial guy.
that is a options trade that is a leveraged buy that you're shorting the markets. you're betting the market -- or in this case knowing -- that the market is going to go down. he literally made that trade the next morning. and he made $10,000 while putting a couple thousand dollars at risk. in baucus' case as he was having these series of meetings, as he was writing t.a.r.p. legislation, as he was the ranking republican on the house financial services committee, he literally engaged in 40 options trades that seemed to be particularly well timed, and he made a lot of money. his insistence is that he does not trade on inside information, but to my mind if this were a corporate executive rather than a member of congress, the sec would take a huge interest in this. okay, there's the republican example. we'll be bipartisan. let me give a example of a democrat. that would be senator john kerry. now, senator john kerry and his wife are very wealthy, they have investment funds worth hundreds
of millions of dollars. what's interesting about the trading in their accounts is that there is this amazing correspondence between his legislative activity and, um, the investments that his portfolio make. so, for example, during 2009 the obamacare debate. john kerry was on the health subcommittee of the senate finance committee which is where that legislation initiated in the senate. he was involved in crafting that legislation and putting it together, and he was literally buying and selling millions of dollars worth of health care stock at the same time. and those investment funds that he and his wife are the beneficiary of literal hi picked the right winners -- pharmaceutical companies, generic pharmaceutical companies -- and dumped the right losers, health insurance companies at the right time and bought medical device manufacturers who ended up doing well. this is an amazing confluence of his legislative activity and this trading activity that's going on in these funds. the same thing happened in 2003,
by the way, when he was involved in the prescription drug benefit for medicare. his investment funds and his wife's made 111 purchases of pharmaceutical stock during 2003, and they made $2 million in capital gains as he was writing and being involved in the legislation for the prescription drug benefit plan. my point is that this sort of activity goes on quite frequently, and it's literally the equivalent of allowing a basketball player on the washington wizards to bet on a game in which they are playing. now, would we ever tolerate that? would we ever allow, you know, the starting guard for the washington wizards to place bets in vegas on a game in which he's playing? of course not. he's involved in the controlling the outcome. we'd never allow that to happen. well, that's really what's going on in washington, d.c. all the time. people that sit on the armed services committee are trading defense stock, they're free to do so, but senior pentagon officials are not. so this is an example of sort of the access to this information.
let me talk about the third component of how they enrich themselves, and that's what i call the land deal. now, here everybody's probably familiar with earmarks, right? where with members of congress introduce something specific where they say i want $500,000 sent to this nonprofit organization, or i want $2 million to build this road. earmarks are a common part of washington, they've been criticized because people who are campaign contributors seem to somehow become beneficiaries of those earmarks. well, to my mind, that's not the most egregious misuse of earmarks. the most egregious use is that members of congress can and often do use earmarks to enhance the property of their own real estate, the value of their own real estate. now, how does that work and how is that possibly ethical or legal? it's pretty widespread, and let me give you an example of that. that would be dennis hastert. we talked before about how he
had this amazing increase in his net worthwhile he was speaker of the house. one way in which he did it was the land deal. in 2004 he bought a total of 333 acres in rural illinois. four months after he made that final purchase, he put in an earmark for $207 million to build something called the prairie parkway. well, what it did was make the land that he purchased not out in the middle of nowhere anymore, because the road was going to run right by the property he had purchased only three or four months later. and what was he able to do? in less than a year, he was able to sell that land at more than twice what he paid for it. his net gain was about $2 million off of that one real estate transaction. well, how can it be? this can't be ethical, this can't be legal. actually, by the standards of washington, d.c. it is. there's nothing illegal about it, and as far as the ethics committees are concerned, the ethics committees having an
amazingly low bar when it comes to earmarks. do you know what that bar is? as long as hastert or anybody else that introduces an earmark can show that at least one other person -- just one, could be the neighbor down the street, it could be your cousin next door -- benefitses from that earmark, one other person other than yourself, it's ethical, and you can do it. and there are multiple examples. i count in the book where this happens where a senator had an equities stake in a real estate development, he earmarked $66 million for it, it was run by his brother, he was a part owner. the ethics committee approved it and said it was okay because there would be other beneficiaries. so these are the methods and the techniques that the insiders use. and i really honestly believe part of the reason that we don't see a huge amount of difference in the growth of government and the size of government, whichever party is in power, is this part because all the profit centers for the personal benefit
are in seeing government grow, not to see government get smaller. well, i've talked a little bit about the insiders on the political side. let me talk now about the crony capitalists, the people on the outside. um, you know, what's happened in america is i think a lot of finance years and a lot of corporations have come to the conclusion that it is a much better business investment for them to hire a lobbyist or to make campaign contributions than it is to engage in more research and development or the expansion of the product line. and the reason is that there's so much bigger upside in how that's done. let me give you a couple of examples of people that i discuss in the book. and demonstrate exactly how this technique works. let's look at the investment community, the hedge fund and investment community. there was a study done a couple of years ago by academic, they look at 50 different hedge funds. and do you know what they found? they found that the hedge funds
who were most politically active -- they hired the most lobbyists and they made the most campaign contributions -- consistently outperformed the apolitical hedge funds by a good 10% a year. that's huge when it comes to hem funds. 10% a year. and at the conclusion of the study, they benefit there that access and having their friends in power because they learn things that government is going to do, and they're able to make their trades accordingly. a couple of examples i cite in the book, one of them involves george soros who is often discussed for his political activism and his charitable work. the other one with warren buffett who people are sometimes prized to hear because -- surprised to hear because he has the or the of impression of being kind of the grandfather from nebraska who's squeaky chien and who owns dairy queen and, you know, aw, shucks, he's got that good american spirit. both of these men are politically active in different ways, but both of these men use that political activism not just to expand their ideas, but to
help their investment decisions. so let me begin, first of all, with soros. now, we know that george soros was a close friend and supporter of barack obama. what we also know is that he had an important role to play in the, um, what the stimulus would look like, which industries would benefit and how it would be structured. what a lot of people don't realize, however, is that at the same time in late 2008, early 2009 that george soros was advising the administration on how to structure and where the stimulus would go, he was buying large stakes in companies that would be the exact beneficiaries of that stimulus. he ended up doing or very, very well. i won't go through the list of companies here, but suffice it to say we're talking about millions upon millions of shares of stock. just to give you a couple of examples to give you an idea of the timing, in the first quarter of 2009 he bought 1.5 million shares in american electric power. in june, just a few months
later, american electric power got $1 billion in taxpayer money for an energy prompt in illinois. -- project in illinois. he brought up shares in a midwest utility company, literally weeks later they got $540 million from the department of energy. he bought shares in nrg energy, more than half a million shares, couple of months later got $153 million there the energy department. and the list goes on and on and on. suffice it to say, one could say it's coincidence, but you see this curious pattern of being able to invest in companies that end up being the beneficiaries of government loans, government contracts and our money. let's talk now a little bit about warren buffett. and, again, this surprises a lot of people, but buff buffett is very much involved and engaged in this. buffett, also a strong backer of barack obama, very well connected n. the 2008 campaign he had the luxury of having both barack obama and john mccain saying that they'd like him as treasury secretary. buffett didn't prefer that, but
he liked the role of being the savior, um, of the american economy. now, if you go back to the financial crisis in 2008, warren buffett when the financial crisis begins immediately becomes involve with the the treasury department in structuring what would eventually become the bailout or the so-called public/private partnership by the treasury department. he advises, first, hank paulson, and then when timothy biter in becomes the treasury secretary, he works with geithner. and literally the public/private partnership which the treasury secretary announces in march of 2009 started and largely resembles a five-page letter that warren buffett had written describing how the bailout should be structured. well, that all sounds very good, doesn't it? i mean, here's an individual who's simply interested in helping the american public. the problem is that as he's doing that, he's literally buying millions of shares of stock in the very banks that will end up benefiting from that
public/private partnership in the bailout. he's buying shares in wells fargo, bank of america, american express. he's buying shares in m&t bank, and literally he's able to buy them cheap because nobody knows what's going to happen. they don't know what the bailout's going to look like, but warren buffett does because he's helping to design it himself. so he's able to buy these shares for pennies on the dollar, and once the bailout becomes clear, the shares surge, and he ends up doing very, very well. so you have a circumstance where warren buffett may or may not -- depending on your view -- have helped design an effective bailout, but it simply cannot be avoided the fact that while he was doing so he was actively and aggressively buying millions of shares of stock in the companies that would benefit from the bailout that he was helping to design. that's an example of crony capitalism, and it doesn't matter if you're an investor how good your analysts are, how good your numbers crunches are.
if you don't know how bailouts are structured, you're not going to be a beneficiary. let me now just talk briefly about the third part of this crony capitalist system, and that's what i call the green energy economy that barack obama has created. um, and this is another example of krone the capitalism. crony capitalism. people here are familiar with the term solyndra, the company solyndra which received the there are 535 million guaranteed government loan. the chief investor there was a bundler for the obama campaign. it had the sound of political favoritism. well, i'd actually been researching this program for more than a year, and if you look at the entire program, you find that solyndra is literally just the tip of the iceberg. of the approximately $20 billion that have been handed out in this program, you can link more than 16 billion of it to obama-connected financeiers or capitalists. and what this means in very real
numbers is that there are at least ten members of barack obama's 2008 national campaign finance committee and at least a dozen bundlers to his campaign that got solyndra-type loans or even larger. in some cases, two or three times larger. and many of these are in worse economic shape than slip that does. let me just give you sort of one example. bright source. it's a solar company out of california. largest investor is a venture fund headed by robert kennedy jr. of the famous family and the active environmentalist. they own the 25% stake in the entire company, the largest investor. this is a company that last year by it own accounting to the sec had total revenues of $13 million, it lost somewhere on the order of $78 million. by its sec filing, it spends about six times more on marketing than it does on research and development. and they confess that even if this big, massive project that they're behind works, they still may not be profitable.
so that's everything that they have disclosed. that's not my value weigh, that's their disclosure to the sec. so what happens to this company? well, of course, they get $1.4 billion loan guarantee from the taxpayer. is that going to change the circumstances of this company? no. what's interesting about this case is not only do you have robert kennedy jr. as a partner, one of the individuals who was a principal at this firm whose name is sanjay waddle was an obama fund raiser, and after the 2000 election went to work as an adviser to the department of energy green energy grants program. be so you see how cycle works. and you have a circumstance now where individuals who have worked in the department of energy, who have given money to certain entity are now moving back into the private sector and working for the very people that they had given and authored loans and grants to in the past. it's an enormous cycle of
cronyism, and this would not be tolerated in any other sector of the economy except for the fact that we're supposed to feel good and positive because this is about alternative energy. it is cronyism, and pure cronyism and nothing else. so, i don't know, i don't know if i've depressed you, i don't know if i've bored you, i'm not sure what the term is. but should we really care about this? i mean, hasn't this always been the way the american economy has been? i would say, no. i would say, yes, cronyism has always been there, there have always been politicians who have enriched themselves, but the opportunities have become so much greater than they've ever been. there's so much more money at stake, there's so much more power, there's so many more opportunities to make money and to leverage your position. i mean, i was stunned the to find that national journal report a couple of years ago that 30 u.s. senators have a family member who's a registered lobbyist. and there's nothing in the u.s. senate rule against nepotism. so we have to take their word for it that when junior is registered as a lobbyist, i'm not giving him special favor,
i'm not talking to him about it. we're going to have to take their word for it. and i hate to tell you this, but elected officials have been known to not tell the truth from time to time. so my argument is, yes, this is part of human nature, but the magnitude has become much bigger, and i do have a fear we're reaching a tipping point where it's going to become more and more about political connections and contacts and lobbying and less about product innovation and development of new technologies that spur us forward. and the problem is this: the capitalists like steve jobs wants what? he wants the entire chi to do well because when the entire economy's doing well, he can sell more of his products. the crony captain lift, he doesn't care. a rising tide doesn't lift his boat. what lifts his boat is what? connections and access to power. so we have a situation where and the financial elite is less and less interest inside the broader health of the economy and more and more concerned about access to power. ..
this goes the month paper. there was a hearing yesterday, and the head of the sec enforcement said, we can really use these disclosures because they're not electronic. we can't even search them. that is absurd theory there ought to be disclosed within two to three business days of stock transactions involving elected officials. then we can know if someone is sponsoring health care legislation and is buying and trading health care stocks at
the same time. i think the american people deserve to know that. third thing is in a we have got to get out of the business, don't care how favorable the project might be, we have to get out of the business of giving out government loans guaranteed by ellis and government grants. it is simply a politicized way to pass out favors to france. this is not done with the national institutes of health where they have a peer review and academic review of grants and proposals. these are grants decisions made by the commerce department or by the department of energy that made by political appointees. they are oftentimes not experts in these areas, so we have to get us out of that area. the final reform of a proposed is to prevent the political class in washington from, in effect, extorting money from businesses. there are businesses that are lobbying here because they want special privileges, but there are businesses lobbying here because they're frightened that congress is going to impose a new tax or a new burden on them, and so they're looking for --
working for their survival. you have a situation where things developed in a loosely called milker bills. no, that is not actually designed to pass. it is introduced by a member of com -- congress to know people of the initial contributions. i talk about this in the book a couple of years ago. harry reid introduced the idea of a special tax on hedge funds. all evidence is he was not really serious about it, but he introduced a bill and guess what, suddenly a lot of his friends and a lot of his former aides started getting hired by lobbyists by the hedge fund industry. and suddenly hedge fund industry, which at that point have largely been generally apolitical started making massive contributions to harry reid and his political party. both sides do this, and it is extortion. if a private individual did this there would go to jail. politicians do it all the time. my fourth reform is, think we need to have the rule in washington that applies in the state where i live, florida, and a bunch of other states.
that is, what congress is in session the cannot solicit and the, received campaign contributions. and what would happen if we did that? one of two things. the extortion would end, and, perhaps, number two, we might have a 12-hour session of congress to be it because it would want to be of raising money. the point is, it breaks his neck to so being able to leverage political power to enrich yourself and the richer friends. i hope to heaven ramble on for -- bramble on for too long. i would love to take questions are comments. [applause] >> as always, just with for the microphone, and if you will be so kind as to identify yourself. under last point you mentioned about the campaign and the finance and being in session. and the tennessee is one state the does that. the have any evidence that any of proposals have been done in a state? is it also listed problem real
indian? >> i want to say, 27 states that have this restriction on soliciting and receiving campaign contributions. the other reforms know, if a problem on the state level on terms of theand deals that i talk about, probably also on stock trading. probably less so. the influence of even the california legislature on the valuation of companies is going to tend to be less than it is for the u.s. congress. i mean, literally. you know, something that can happen. you can have two or three lines in the bill. give you one example, the health care bill, obamacare. two or three lines that said something very simple, biopharmaceutical company's, companies that make pharmaceuticals of biotechnology were giving a 12-year exclusive patent rather than five years, which is with other drug manufacturers do. that is a huge gain. can you imagine what that did for the biotech sector? actually a member of congress
that bought a large amount of sector funds, biotech sector funds at the same time. saw those bought 25% because once the bill passed everybody realized the boom. everybody suddenly one of the by this company. so, yes, i think it is a problem at the state level, but more so here because there is more power. yes? >> high. david has a right with the heritage foundation. excellent. i am frustrated listening to you asking myself, why have i not heard of this before? am curious to know, is this original research, or have you simply don through the press and pull these stories together? because i guess what i'm getting at is, where is the press on this? why they're not daily scandals exposing this? >> that's a great question. i have some theories on that. maybe if you could bring andrew breitbart, a friend of mine. he discusses -- let me give you my thoughts, and maybe andrew can give you his.
this is all original research, and honestly, to me -- had i say this, it is really pathetic that a guy who lives in tallahassee, florida, who is a fellow at the hoover institution out in california is the guy that had to break the story. i mean, this place is crawling with newspaper reporters. i think it's a combination of things. speculation, and that's not to say there are some good reporters out there that have covered these subjects. i was talking to our reporter, trying to remember her name right now, for the washington post to a test on the stuff. here is really what happens. here's the problem. if you are reporter covering the "herald," and you come out with a story that says, these guys are getting rich, guess what's going to happen to mecca going to lose access. a friend of mine said, it's a little bit like -- imagine if you were reporter for the baseball team and said my pitching stinks', my fielding sucks. you know, the management is
corrupt. your not going to get invited into the locker room. even if it's true. a lot of it is frankly that the press corps fears of of access. i dare say i think it's also a laziness. you know, they have other things they're doing, the things they prefer to do, and it takes a lot of work to go through financial disclosure forms and look through all the stuff. takes a lot of work. and, you know, what you find is sort of this collaboration between the two. one example that i noticed is when the book came out people were universally of rage. one of the groups that were not and pooh-poohed the 60 minutes of the soda and in particular the ipo deal, the huffington post, which took the position that this is really kind of a non story. roh, a couple of days later, done in rhumba the date, the huffington post was sponsoring a tea with nancy pelosi. if they had said this was a real story she probably would not have shown up. there is this collaboration. a lot of reporters and people
who own media outlets want to socialize with people in power. it will be accessing position. and for that reason they may go after an individual congressman, but of what i'm really talking about here is a compromise system. they don't want to touch that because that is going to undermine their source for access. >> i would say credit where credit is due that i don't think we would be in this position that we find ourselves having this discussion and having hearings on the hill on this very subject matter, but for the fact that the mainstream media in 60 minutes and tina brown newsweek worked with an avowed conservative in peter schweitzer who tried to approach this from a bipartisan level. and so all the new media often act as an insurgency and act as the stick part of the, you know, carrots and sticks
back-and-forth. there is a carrots part of this. the media has done a pretty good job up to this point, but when you were using the analogy of the major league baseball team and a reporter telling the truth about what's going on, it is happening to you right now. i mean, you are a boy scout in of people's lives. everyone knows that peter schweitzer is a good guy. you have created a firestorm on the hill that has caused them to react. there are multiple pieces of legislation that are being pushed in emergency fashion. there are hearings that are going on right now, and there is one elephant in the room, and that is the fact that peter schweitzer has not been asked to testify. and the reason why is because you are the reporter who has named names and said the reason why this team is working well is because our pitcher is juiced up
or something like that. the problem is, there is -- this is an incestuous town. they don't like that there are people down in tallahassee. they're not part of this tiny little incestuous place. robert f. kennedy said that his company spends all this money on marketing. also the marketing that comes with the kennedy brand, the marketing that comes with him having charity ski events with bob woodward of abc spending his time at an environmental charity run by robert f. kennedy jr. these people are married to each other. they do their investments together. the media is as corrupt as the political class and they are benefiting as well. >> i think that's very well said. steve, did you have a comment to make? what he said is true, by the way. i have to say, 60 minutes was
completely and totally fair and above board with me. they knew where i was coming from politically. they're retraced my research steps, and they were terrific and were put under a lot of political pressure. they did a fabulous job, and peter boyer and newsweek was just fabulous. so, yes. there are good guys out there, and in my pessimism i should have mentioned that. >> the scale of this is absolutely incomprehensible, and that is what i think is a must read for everybody. there were hearings. a house controlled by the republicans were you reach down, and why were you not allowed to testify? and think we have to get very specific. this is something that people have talked directly about. you actually went back and lay out of very compelling factual case that drove legislation. why were you not called to testify and put this in the public record? >> i was contacted by both the fed and the house committee staff who asked me for input and
for ideas. i was told early on that i was in there where it is politically toxic because i had named names. that means that on the -- setting aside, for example, there were three members of that committee who are mentioned in my book involving stock trades in the timing of the stock trades. on the house side actually congress was spencer back is to mention during the financial crisis. as i laid out in the book, he's a mass of options trading throughout his congressional career. when he was on the transportation committee he was charting united airlines' stock. the point is, he was the chairman of that committee, and that think it's pretty doubtful they would want me to show up. to my mind was so curious is so much in this town is partisan. there is bipartisan circling in the wagons of this. this is something they can agree on. this really is illegal. that is the position. this is really illegal, but then the securities and exchange
commission ever gone after a member of congress for this sort of insider trading? no. they can't think of an example. let's face it, the sec budget is set by congress. you know, like what happened when the fbi got a federal judge to give them a search warrant to search congress, william jefferson office. the fbi had on a wiretap that this guy was taking bribes. when they showed up with a search warrant and searched his congressional office, both sides of the aisle were outraged and said this was a breach of congressional authority and there were threats to cut the fbi budget. is the fbi going to do anything about this? , on. >> the conservative commanders radio show. and since i have been up, i have not been this excited since my first amelie meeting. sure, being elected to congress. how can i get in on this before it becomes illegal?
>> well, if you don't want to get elected to congress you need to kind of marry into a congressional family. that would be the best. members will have kids. you know, they get into position of power and their son, you know, will be a manager of the pizza restaurant. when they suddenly take a senior role that kid comes to washington d.c. and becomes the most popular lobbyist in the entire country. i'm sure it's because of their expertise for government. so my advice to you would be if you don't want to run for office and get on the gravy chain to marry into a. that probably will -- [inaudible] >> i don't know about that. you have to take that up with somebody else. yes. question right here. >> i'm wondering what will the staff of the congressional office, oftentimes congressional leaders don't seem to be the brightest folks. and their staff for the ones
pulling the strings, writing the legislation, ultimately controlling things, writing the rules that are passed on to committees that are then passed on the agencies. what kind of reforms can you put in place to limit their transactions? cast light on their actions and their shortcomings as well. >> that's a great question. because congressional staff as well, they are in the same position, free trade stock as aggressively as they want to. actually, the "wall street journal" has done a couple stories on this where, again, i found staffers from both parties to, you know, were involved in writing legislation for alternative energy, bought stock in the company and the value of that company, you know, when up 100 percent. the staffers will say, well, i did my research. i'm sorry. the problem that i have, the problem that i have is that that sort of excuse would never work for anybody else. i mean, could you imagine, from political officials, well, i
didn't make that trade, broker made that trait, which, okay. that's fine, but if you were a corporate executive and they saw -- sec sought pattern of trades and then knocked in the door and said, hey, mr. seo, we noticed a curious pattern of trades and you said, well, i did make those trades among broker did. is the sec going to go away? no. they're going to investigate. that's why we need to have blind trust. not perfect, not tough, but they are blind and the at least provide an added barrier, and we need to have somewhat similar reforms. i don't know have a blind trust would make sense, but perhaps the need to be very tight restrictions on congressional staff because they are free to trade as well. they get access to an enormous amount of information and details of information that, again, can dramatically move markets. in an area where from health care to finance the defense to of those huge sectors, a couple of lines in a piece of legislation can increase or decrease the value of stock by 20%. we need to be watching what
government insiders are doing, and it's interesting that there is a libertarian line of argument that says insider trading laws a stupid. that they -- insider trading reflects market efficiencies. i'm not sure i would agree with that, but what is interesting is that those who are opposed to insider-trading laws on wall street, like professor henry many at george mason, he will say i still want them on government officials because government officials don't add any value to the market. it's all about extraction influence. even the libertarian position seemed to draw the line. we can have government officials doing that. so i would agree with you. yes. right here. >> the heritage foundation. the title of your book is throw them all out with the u.s. capitalism. upside-down. could you speak to the point, are you saying that every single member of congress is involved in this? does it -- is it only -- the
capitol and the congress, or is this throughout washington? i assume it's a symbolic. >> it is. the title of the book tour of an all-out does not mean every single member of congress. what it means is -- and discuss this in the book. i firmly believe that both sides need to have an absolute zero tolerance policy. what that means is, i am a conservative. i tend to as a result of the vote republican. but i can't have the attitude anymore that, well, this guy is really good. he has a really high conservative rating, and i agree with them on all the issues. if he is enriching himself doing all the stuff i need to not support in. this notion that, well, he's our guy, so it's okay if he does it to my just don't think it works anymore. part of this whole incestuous system of the permanent political class, and a play to that. you know, democrats and republicans, when they get attacked on personal, ethical issues, charlie rangel did this. it's a witch hunt. my opponents are out to get me.
both sides do it, and if they are enriching their cells do this legal graft we need to have zero tolerance policy on both sides. as the only we will clean it up. so as the only insist that the other guy do it will make any difference, and it will continue to happen. yes, it is a widespread washington problem that involves segments of the executive branch, the lobbying community. it involves all the legislature. i guess the only thing, the supreme court. yes, sir. >> thank you. >> nighter with the david howard's freedom center. this very low bar for unethical conduct in congress is troubling not only do they do it, but it is sanctioned. >> yes. >> what concerns me, and my question to you is, with such a low bar for unethical behavior the first time with the second time that a staffer or a congressman or senator does this it really opens the door to any
other kind of behavior. and i'm wondering, behind the curtain, how much additional approved draft, if you will, of this kind goes on? one thing is that the patriot class, the new citizen that looks at this says we need a higher standard for our public officials, and whether it is term limits or other kinds of things, how much is behind the curtain? >> it's a good question. i think that there is a huge problem. i mean, the way that the government has been established and less -- and set up, and a lot of it is based on constitutional principles. congress is basically supposed to govern itself. well, they have done a great job of that, haven't they? charlie rangel is in congress. you and i done what he had done in terms of failing to disclose who probably go to jail. we would not be serving in
congress. a censure, while perhaps painful emotionally, does not have a real tangible effect on him. so i just -- i'm not convinced that congress can police itself anymore, and i think you honestly have -- on trying to think of a proper parallel. this might not be exactly right, but as a little bit like the circumstance at penn state. jerry sandusky and what was going on there. i mean, you have potentially horrible things done by an individual and other people that might or might not or someone or had a little bit were aware of it, but nobody did anything about it, and that is part of the problem. there is a club mentality, and it is also, by the way, codified in the law. we have the dodd-frank reform bill on finance that you may be familiar with kamala on a debate about that. one of the clauses was a whistle blower clause which says that if you work for the private sector, nonprofit organization, or the federal government, and you know
of somebody committing a financial crime who is your boss, insider-trading, embezzlement, taking bribes, whenever, if you report them to a law-enforcement agency your job is protected. you have a whistle-blower protection. congress is exempt from the law. so there is no whistle blower protection. if you see your boss on capitol hill doing something in the report it, great for your reporting it. he may very well, and i bet you probably will lose your job. these are the sorts of exemptions they are allowed. i am a firm believer in transparency. i don't think you have to do things in terms of making things complex. i don't think that having the police themselves makes sense because it does not been very effective. i think the greater the transparency the better, so one of the things i talk about in the book, i would have to be done in sores some -- some sort of modified pera, congress is exempt from the freedom of reformation act. so literally your chance of getting access to the cia documents is much higher than it
is to any sort of congressional private correspondence or phone records are meeting records because you can apply to the cia, and in my tonight for 20 years, but you will eventually get access to top-secret documents. congress is exempt. i think congress should not be exempt from the freedom of information act. certainly we don't want people using it in a political way to avert congressional offices, but they're needs to be greater transparency into who they're talking to. the same thing with two rights amendments. we don't know who discloses it. the florida legislature, when an amendment is introduced, you have to sign an ride out the name of the person who wrote the piece of legislation. so if it was a lobbyist and handed it to you to introduce an amendment, you know that because it's written on the amendment. i'm a big believer in transparency because i believe the republicans about self governance, and i think we can trust the american people to make wise decisions. i agree that there is a lot more there than we know about.
>> i'll ask a question this time. we talked about previously that you have -- you have not been asked to testify that you are toxic right now on the hill for naming names. you are the whistle-blower that they don't want to protect, they want to marginalize the reid and the way that it is manifesting itself is, you are not part of the hearings, they you have, in essence, been a 1-man creation therein. have any of the named names done anything in a punitive cents to try and support the promotion of your book or the publication of your boat or the -- you know, or -- to get the word out. >> yes. there was actually, when the book was about to come out a couple of weeks before '60 minutes, of course call was working on the story, talking to those people.
somewhere was getting around that this book was out here. there were efforts to stop the publication. threats of legal action, demands a retraction. senator kennedy @booktv sorry, senator kerry was literally making a call to the chairman of my publishing company and demanding to see a copy of the book for fall publication. that was not granted. he talked to people that work from a publisher making demands about retractions to which our response was, you can't retract fact. all we're doing a show you legislate behavior in a stock transaction and investment funds you benefit from. there were also, let's say, disparaging things said by nancy pelosi to me about me to various other people. so clearly this was a book and a subject that they did not want to come out. and my hope is that a out of this the book is really just the beginning in the sense that the steps that we took to research
this are time-consuming and cumbersome, but anybody can do this. this is publicly accessible information, and we did not get to research and investigate all 5305 members. i hope the people look at their elected officials where they are and look at their financial transactions and see if there is something unusual. but, yes. there was lots of pressure brought to bear. sixty minutes a newsweek were totally unaware offering, truly committed to the journalistic story, and my publisher as well was willing to face potential legal action and threats from very powerful individuals and washington. >> one more question. >> over here. >> just a lowly taxpayer. your last comment was really pertaining to my question. there are many people across this country, and i'm thinking about tea party activists in particular, who would love to research their own member of congress to feel overwhelmed.
do you have a website, perhaps? a template, this is what you do, or you get to do the research? i guarantee you there be an army of people out there to do the work. >> to think it's a great point. i do have a website to my don't have the template up yet. also commander and his website and a big government, has been running a lot of stories and there will be a template. very simply, and we will put this on the website, you can go into website called open secrets . not a website i run, so -- is run by an organization called the center for responsive politics. you can go into a person's finances and look at the pds files. i encourage you to look at the pds files, not the summations by the organization because sometimes there are slight clerical errors. let the financial disclosures. what i did was look at particularly *, something dramatic was happening, the finance a crisis in 2008 and health care reform in 2009, but
could your elected representative and look and see if they are an active stock trader and if they do a lot of land deals. if they do look at their stock transactions and see if there on the senate banking committee and are they buying and selling a lot of bank stock? is there some sort of cross over? because that is usually where you will get access to sensitive of the nation, if you have oversight over particular area. and then i would look at the -- you know, the real estate holdings, not required to list the residence, only other holdings, but then look at the real estate and you can look at the remarks issued. again, i don't run the website, but they will actually map for you where the earmarks and what therefore. would you find is they own a building in the case of and nancy pelosi. i talk about this in the book. her husband owns a commercial building, and lo and behold she secured federal money to build a light rail system that runs read by that commercial real