Tag Archive | "Politics"

An Issue of National Securities

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The following post is by Dealbreaker reader and commenter Infinite Guest.

President Obama has nothing to gain by negotiating with Republicans in Congress in order to raise the debt ceiling. The Department of Treasury doesn’t need Congressional approval to issue more debt and it will be a long time before Treasury actually needs to exceed the debt ceiling.

The analyses I’ve read on the topic are nothing if not variable, but they all assume at some level an agreement by all parties on the basic necessity of raising the debt ceiling and the general wisdom of reducing the deficit. The President knows what needs to be done, the Congress knows and so does the electorate. Based on this shared understanding, it follows that those who act in the spirit of compromise will be rewarded and those who act to obstruct
progress will be punished.

Never mind the compelling absence of evidence that any such shared understanding exists; that’s just not how things work.

The President, and this President in particular, is not answerable to Congress. The President is answerable to history, to the voting public, to our allies, to business interests including bond markets and in relatively rare cases to a 2/3 majority in the Senate. When the executive branch and the legislative branch can’t work out their differences the Supreme Court acts as referree. If Congress failed to raise the debt ceiling, history would not be kind to a President who on their advice failed to honor our debts. The bond markets would not be kind, our allies would not be kind and consequentially neither would the voting public. But a President who stood up to a hostile, inexperienced Congress and continued to honor our debts would win support from all sides. There will have been sufficient turmoil and pain following Congressional failure to raise the debt ceiling that everyone on earth will understand who the heroes and villains are.

If Congress failed to raise the debt ceiling, the President could stand up to Congress on Constitutional grounds, in which case he could count on a fairly corporatist Supreme Court to eventually rule in his favor. He could stand up to Congress on National Security grounds, in which case he might even be able to secretly issue fresh debt. He could stand up to Congress on technical grounds for a very long time without provoking a Constitutional crisis or raising the debt ceiling simply by draining the Treasurys out of trust funds and replacing them with other assets. And if he had to break the law, as President, in order to stand up to Congress, then he could break the law on moral grounds, secure in the knowledge that if he is impeached, the Senate doesn’t have enough votes to convict.

What would the electorate think of a President who defies Congress on any or all of those grounds? The Democrats would rally behind him, the Republicans would still oppose him and the independents would admire him for acting independently.

Now alternatively he can compromise to avoid a direct conflict but what’s in it for him? He could give away everything his constituents like and it still wouldn’t be enough to balance the budget. By compromising he snatches defeat from the jaws of victory. Democrats will hate him. Republicans will (rightly) say that they won. Without any drama to overcome through courageous and decisive action, independents will conclude that he’s a weak leader who stands for nothing.

Politics is not about forethought, compromise and the public good. Politics is about personalities and political narratives and the balance of power. This narrative has yet to be written, but in the politics of the debt ceiling, President Obama has all the power and his opponents in Congress have none.

Article courtesy of Dealbreaker

Write-Offs: 05.24.11

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$$$ Jim Chanos: “Lately, I have been taking a beating from some Chinese real estate developers including one very recently…These kinds of criticisms, these ad hominem criticisms are fine, but what people again don’t seem to be attacking are the facts. The property developer stocks that we’re short have been declining. This has been a good place to be short for the last 18 months…Actually, our team just got back from China…they actually came back saying we are not bearish enough.” (YouTube)

$$$ How investing tips from Ira Sohn 2010 played out: Eisman, Arbess win big; Einhorn gets crushed; Tepper is so-so (AR)

$$$ AIG Issues ‘Clarification’ on Presentation Before Share Sale (Bloomberg)

$$$ GOP Plans Vote on Debt-Limit Bill (WSJ)

$$$ Bill Gross: When Will He Be Right? Maybe Never Edition (MarketBeat)

$$$ CFTC charges traders over oil price (FT)

$$$ Finra’s Ketchum Says Structured Products Are ‘Areas of Concern’ (Bloomberg)

$$$ Tab for Lehman Collapse Tops $1.2 Billion (Deal Journal)

$$$ Report: Stimulus recipients owe more than $750 million in taxes (WaPo)

$$$ Intrade founder dies summiting Everest (DM)

$$$ J.P. Morgan Cuts GDP Forecast to 2.5% (MarketBeat)

$$$ Strauss-Kahn Report Disappears From The Pages of The Economist in France (Bloomberg)

$$$ Glencore Sinks Below Offering Price (DealBook)

$$$ Why LinkedIn Bears Say Plunge Is Inevitable (Bloomberg)

$$$ Navy SEALs canine in bin Laden raid sends demand for adopting military working dogs soaring (AP via WaPo)

$$$ Lego machine gun shoots Lego bullets (CBS)

Article courtesy of Dealbreaker

George Bush Tells Hedge Fund Community What He Was Eating When He Got The Call About Osama

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“I was eating souffle at Rise Restaurant with Laura and two buddies,” Bush said on Wednesday at the SALT Conference in Vegas, when asked what he was doing when he received the call from President Obama. “I excused myself and went home to take the call,” Bush said. “Obama simply said ‘Osama Bin Laden is dead.’” [ABC]

Article courtesy of Dealbreaker

Opening Bell: 05.13.11

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SEC Eyes Charges For Bond Players (WSJ)
Securities and Exchange Commission officials are pushing hard as part of their ongoing probe of collateralized debt obligations and other mortgage-related products developed by Wall Street to bring charges against individuals, such as executives involved in selling the deals or outsiders who managed the assets, these people said. While the situation remains fluid, the agency also could file civil charges against hedge-fund managers who helped structure certain mortgage-bond deals but then bet against them.

U.S. bank failure costs to exceed estimates by $2 billion (Reuters)
The FDIC’s 2010 loss estimate for bank failures rose to $24.18 billion at year’s end, up from initial estimates of $22.17 billion. The bank regulator increased the loss estimate for 102 out of 157 banks that failed in 2010, according to SNL Financial.

Brevan Howard, Jamison Hedge Funds Said to Advance During Commodities Rout (Bloomberg)
The Brevan Howard Commodities Strategies Master Fund Ltd., which managed $368 million as of March 31, gained 1.1 percent in the first week of May, an investor report obtained by Bloomberg showed. Jamison’s Koppenberg Macro Commodity Fund Ltd., which manages more than $600 million, advanced about 4 percent, said two people with direct knowledge of the matter, declining to be identified because the information is private.

Germany and France Surprise With Strong Growth (NYT)
The euro area’s two largest economies, Germany and France, showed surprising strength in the first quarter of the year, helping lift the entire continent’s performance despite sharp pain along the edges. As a result, the European Commission said in its spring forecast, released Friday, that prospects for 2011 looked “slightly better” than six months ago.

Greece Default Anticipated by 85% in Investor Poll (Bloomberg)
Eighty-five percent of those surveyed this week said Greece probably will default, with majorities predicting the same fate for Portugal and Ireland, which followed Greece in seeking European Union-led bailouts, a new Bloomberg Global Poll shows. The outlook for all three countries deteriorated since January.

Goldman’s O’Neill Says ‘Black Swan’ Concern Overblown, Stocks Set to Rally (Bloomberg)
The view that “the West is in trouble” is wrong when nations including Germany, Sweden, Australia and Canada are performing strongly, O’Neill said in an interview with Bloomberg Television in Hong Kong, recorded yesterday and broadcast today. Investors should “stop worrying so much,” said O’Neill, known for coining the BRIC acronym for Brazil, Russia, India and China…“Every little problem that crops up somewhere in the world is not going to create another black swan,” he said, adding that “there’s far too much conservatism,” in terms of investors holding cash.

Rajaratnam Loss Raises Questions Over Defense Strategy (WSJ)
Mr. Dowd’s closing argument was one of many components of Mr. Rajaratnam’s ultimately failed defense strategy. Many moves by the defense team and Mr. Rajaratnam are now likely to be evaluated, including the selection of a largely working-class jury in a case involving a billionaire, his choice not to take the stand, Mr. Dowd’s often-combative style, and the overarching attempt to convince jurors that the hedge-fund titan only relied on publicly available information in the face of recordings to the contrary.

Rand Paul says people who support universal healthcare ‘believe in slavery’ (LA Times)
Rand Paul, the freshman senator from Kentucky, was speaking recently about healthcare, specifically the new healthcare law some refer to as “Obamacare.”  Like many Republicans, Paul, the son of Rep. Ron Paul (R-Texas), doesn’t like it. Unlike many conservatives, the “tea party” darling doesn’t like the law  because it reminds him of slavery.

China Fund Confident of Getting More Cash (WSJ)
China Investment Corp. is making progress toward getting fresh funds, one of its top officials said, addressing uncertainty about the future of the sovereign-wealth fund, which faces critical scrutiny over its performance after investing all of its initial $200 billion.

Crédit Agricole doubles profits to €1bn (FT)
Crédit Agricole’s quarterly net profit rose to €1.0bn ($1.42bn) from €470m a year ago, which was higher than average analyst expectations of about €992.5m, according to a Reuters poll.

I.R.S. Moves to Tax Gifts to Groups Active in Politics (NYT)
Invoking a provision that had rarely, if ever, been enforced, the Internal Revenue Service said it had sent letters to five donors, who were not identified, informing them that their contributions may be subject to gift taxes depending on whether the donations exceeded limits under the tax laws.

1 in 3 young NYers plans to leave state (AP via NYP)
A recent poll finds that 1 in 3 New Yorkers under age 30 plans to move to another state at some point…The poll finds that most of those who plan to move will do so because of economic reasons including jobs, the cost of living, and taxes.

‘Fair Value’ Accounting Guidelines Tweaked (WSJ)
Perhaps the most significant changes affect companies’ disclosures about their “Level 3″ assets, which are the risky, illiquid securities valued using a company’s own estimates and models rather than market prices. Companies will have to disclose more about the processes and assumptions they use in their Level 3 valuations. They will also have to discuss what might happen to the company’s valuations if the factors they are using were to change.

Ashton Kutcher Will Join ‘Two and a Half Men’ (Hollywood Reporter)
Two sources close to the deal-making tell The Hollywood Reporter that the actor is putting the final touches on a deal to replace Charlie Sheen as the star of TV’s No. 1 comedy.

Article courtesy of Dealbreaker

Paul Krugman Is Eagerly Awaiting Your Friend Request

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The latest issue of New York contains a lengthy profile of Paul Kruman entitled “What’s Left of the Left: Paul Krugman’s Lonely crusade.” Writer Benjamin Wallace-Wells examines the Nobel Prize-winning economist’s position as “the leading exponent of a kind of liberal purism” (played out in his column for the Times and his blog, The Conscience of a Liberal); few peers or policymakers wholly agree with Krugman’s stance, making him a very “lonely” man (save for his commenters). And it’s not just in his professional life that Krugs lacks pals, Wallace-Wells tells us, but, heartbreakingly, in his personal life as well.

Paul Krugman is a lonely man. That he is comfortable in his solitude, that he emphasizes its virtues, that his intelligence gives it a poetic gloss, none of this diminishes the poignancy of his isolation. Krugman grew up an only child and is deeply self-conscious. He will list his shortcomings as though he’d been preparing for the chance: “Loner. Ordinarily shy. Shy with individuals.” He is married but has no children nor—rare for a Nobelist—many protégés. When I asked him if there were any friends of his I could talk to in order to understand him better, he hesitated, then said, “That’s going to be hard.”

Regardless of how you feel about P.Krugs’ politics, you cannot be a human and not want to give Kruggles a hug as well as a hand. We need to find him some friends and fast. Before you start coming up with ideas, make sure none of them are the following, who we’ve already deemed out:

- Andrew Sorkin, on account of last year’s awkward tiff around the office

- Robert Reich, who is probably not taking PK’s calls (Krugman wrote: “talented writer, too bad he never gets anything right.” )

- Projectors (Krugman had prepared slides, but after a sustained five-minute assault on the projection technology, he gave up. “Never mind,” he said, abandoning the projection screen. “I can just sketch it on the board myself.”)

- Larry Summers, who’s sick of his negativity (“Paul hasn’t liked any president or any Treasury secretary,” Summers continues. “He always gravitates to opposition and dramatic policy because it’s much more interesting than agreement when you’re involved in commenting on rather than making policy. He savaged the early Clinton administration from the right, blistering Laura Tyson and Bob Reich, and then moved to savage the more liberal Obama administration from the left. He liked the Bush administration least of all. The only politician I remember him praising in the last sixteen years is John Edwards.”)

- Art Laffer

- Anyone from the University of Chicago, as he hates “freshwater” economists

- The governor of Wisconsin (you know why)

- Dogs (man’s best friend Paul Krugman’s ass)

- Kate Middleton, who knows what she did (No one else on the planet should ever be allowed to wear Diana’s ring.)

Excluding the above, let’s hear what you got.

Article courtesy of Dealbreaker

Opening Bell: 04.20.11

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US Weighs Summer Sale Of GM Stock (WSJ)
To break even, the U.S. Treasury would need to sell its remaining stake—about 500 million shares—at $53 apiece. GM closed off 27 cents a share at $29.97 in 4 p.m. trading Monday on the New York Stock Exchange, hitting a new low since its $33-a-share November initial public offering. “Planning for the sale of our remaining GM stock is still at an early stage, and the IPO lock-up does not expire until late May,” a Treasury spokesperson said. “At that point, we will consider all of our options, based on our twin goals of protecting taxpayers’ interests and exiting as soon as practicable.”

Obama administration officials tried to keep S&P rating at ‘stable’ (WP)
Treasury officials told S&P analysts that they were underestimating the ability of politicians in Washington to fashion a compromise to curb deficits, a Treasury official said. They argued a change in ratings was not needed at this time because the debt was manageable and the administration had a viable plan in the works, the official said.

IMF’s Blanchard Says US Lacks Deficit Plan (Reuters)
“There are reasons to be worried. The United States lacks a credible plan, for the medium term, to reduce its budget deficit,” Blanchard said.

Justice Department Seeks Data In Nasdaq-NYSE Anti-Trust Review (Bloomberg)
Antitrust review is emerging as a key test in the battle for the 219-year-old market, which Nasdaq OMX Chief Executive Officer Robert Greifeld tried to snatch away from Deutsche Boerse with an $11.3 billion offer on April 1. Giving Nasdaq control would create a monopoly in listings, a prospect that may create undue risk the takeover will be blocked, according to NYSE CEO Duncan Niederauer.

Congress Mulls Budget Deal Forcing More Taxes, Spending Cuts (Bloomberg)
Proposals being circulated among the bipartisan “Gang of Six” Senate negotiators, and about 20 other lawmakers in both chambers, would set deficit-cutting targets, according to people familiar with the plan. They would impose automatic, across-the- board spending reductions and higher taxes if Congress failed to meet the goals.

Freshman Republican’s bind: Vote convictions or help economy by rising debt limit? (WaPo)
“I desperately want to vote ‘no,’ ” Rep. David Schweikert said at the town hall. “I also desperately don’t want [the economy] to crash.”

Bank of America Merrill Lynch to Exit Private Equity Business (CNBC)
The unit, BAML Capital, has not been particularly active in recent months, having made its last investment in the fall of 2010. Bank of America, under pressure to conserve capital, has apparently decided it could no longer provide capital to the unit, which has roughly 35 professionals. A Bank of America spokesperson said BAML Capital is being spun off, and will be run by the current management team. The team will continue to manage the $5 billion in assets owned by BofA. Those assets will remain on the bank’s books, with expecations they will be monetized.

London Skyscraper Boom Ends as City Goes ‘From Vanity to Sanity’ (Bloomberg)
“The age of bling is over,” said Shuttleworth, who led the team at Norman Foster’s firm that designed the seven-year- old tower in the City of London financial district. He said it would never get off the ground today. “Money now drives everything, so if you can build something for half the price, you will,” he said.

Mubarak clinically depressed in hospital, officials say (NYP)
Doctors said the ousted leader spends all day in bed and is eating very little with his wife Suzanne by his side, the official added.

Facebook Seeks Friends In Beltway (WSJ)
Until lately, Facebook has spent very little money in Washington, even by Silicon Valley’s frugal standards. The company’s outlays on lobbying totaled $351,000 last year, federal records show. That’s a fraction of the amount spent by other technology giants, including Google Inc.’s $5.2 million and Microsoft Corp.’s $6.9 million. Facebook’s new Washington office, designed to look like a hacker’s lair, with walls of faux construction rubble, is a work in progress. People familiar with the company’s plans said talks to hire former Obama press secretary Robert Gibbs to guide the company’s communications strategy, including with Washington, have fallen apart in the wake of a leak to the media that made a deal for him to join the company sound imminent.

China Speed Yuan Push (WSJ)
A senior Hong Kong monetary official told The Wall Street Journal on Tuesday that China’s central bank is “actively considering” new rules that would make it easier to bring yuan funds raised offshore back onto the Chinese mainland.

Leader of Big Mortgage Lender Guilty of $2.9 Billion Fraud (NYT)
After more than a day of deliberations, a federal jury in Virginia found Lee B. Farkas, the former chairman of Taylor, Bean & Whitaker, guilty on 14 counts of securities, bank and wire fraud and conspiracy to commit fraud. Mr. Farkas, 58, faces decades in prison for his role in the $2.9 billion plot, which prosecutors say was one of the largest and longest bank fraud schemes in American history and led to the 2009 collapse of Colonial Bank.

Goldman Luster Fades On Revenue Worries (NYP)
“There’s a possibility that at least over the next six months the bank will have weak earnings,” said Rochdale Securities bank analyst Dick Bove, who cut the firm’s shares to “neutral” from “buy.”

Article courtesy of Dealbreaker

Would Matt Taibbi Have Been Less Angry About John Mack’s Wife’s TALF Fund If The Former Morgan Stanley CEO Waxed His Eyebrows?

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A passage from his latest screed implies as much.

The Macks make for an interesting couple. John, a Lebanese-American nicknamed “Mack the Knife” for his legendary passion for firing people, has one of the most recognizable faces on Wall Street, physically resembling a crumpled, half-burned baked potato with a pair of overturned furry horseshoes for eyebrows. Christy is thin, blond and rich — a sort of still-awake Sunny von Bulow with hobbies. Her major philanthropic passion is endowments for alternative medicine, and she has attained the level of master at Reiki, the Japanese practice of “palm healing.” The only other notable fact on her public résumé is that her sister was married to Charlie Rose. It’s hard to imagine a pair of people you would less want to hand a giant welfare check to — yet that’s exactly what the Fed did.

Real Housewives Of Wall Street [Rolling Stone via BI]

Earlier: John Mack Not The Only Money Maker In The Fam

Article courtesy of Dealbreaker

Opening Bell: 03.25.11

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Rajaratnam’s Wiretapped Call With Brother Bolsters Insider Case (Bloomberg)
And in testimony earlier this week, Goel said that Rajaratnam told him in 2003 that Rajaratnam had given BMW cars to two women in Intel’s sales department who leaked information to him. Lynam asked Goel if he thought Rajaratnam was joking. “I don’t think that was a joke, sir,” he responded. Wasn’t Rajaratnam kidding when he told Goel in a wiretapped conversation that he would kiss Goel on the cheek the next time he saw him? Lynam later asked. “I hope he was,” said Goel, to laughter in the courtroom. “If not, I had him figured out all wrong.”

Economy Grows 3.1%, Aided By Surge in Corporate Profits (Reuters)
Gross domestic product growth was revised up to an annualized rate of 3.1 percent, the Commerce Department said in its final estimate, close to its initial estimate of 3.2 percent published two months ago and up from its tally of 2.8 percent made in February.

Barclays Said to Be Investigated by Regulators in Libor Probe (Bloomberg)
U.S. and U.K. regulators are examining if communications between Barclays’s traders and its treasury broke regulations that stop information being shared across the bank.

S&P Warns Big Banks About ‘Excessive’ Dividends (NYT)
The credit rating agency said in a report that it “remains wary of banks aggressively increasing capital returns to shareholders at this juncture of the economic recovery.” S.&.P. indicated it might downgrade credit ratings at banks that made “excessive” payouts to investors.

Goldman Slides to 10th Spot in US M&A Rankings (Reuters)
Goldman advised on $71 billion worth of U.S. deals in the first quarter, far less than JPMorgan’s chart-topping $170 billion, and even lower than much smaller banks such as Rothschild, Evercore Partners and Lazard.

China-Focused Hedge Fund Assets Rise Despite Laggard Performance (DJ)
China funds added $3.5 billion in assets in 2010 to a total $18.68 billion, even as their 6.11% gains were short of the global industry average of 10.55%.

Warren Says Consumer Bureau Foes Should Look at Bank ‘Behemoths’ (Bloomberg)
“If we’re going to go out there and spill ink on accountability, we should also ask about how to hold powerful financial institutions accountable,” Warren said yesterday in an interview with Bloomberg News. “The idea that we should be worried that some agency that will speak up for consumers might get a little too loud is looking in the wrong direction.”

Bernanke To Hold Press Conferences 4 Times A Year (WSJ)
“The introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve’s monetary policy communication,” the Fed said.

Spain’s Bank Rescue Hits Headwinds (WSJ)
Eight of Spain’s cajas must present their capital-raising plans to regulators by April 10. That has caused a flurry of activity in recent weeks as savings banks sounded out hedge funds and private-equity funds and others pursued initial public offerings. But the exercise has stirred questions from investors about the level of reserves that the banks hold against real-estate risk in their portfolios. The banks also have faced questions over whether their executives have distanced themselves sufficiently from local politics; in some cases, they have even been quizzed about managements’ own understanding of what is on their books. In general, “people don’t understand what they are buying,” said a Spanish banker who has tried to get investors interested in the cajas.

Reactor Core May Be Breached at Damaged Fukushima Plant (Bloomberg)
“It’s very possible that there has been some kind of leak at the No. 3 reactor,” Hidehiko Nishiyama, a spokesman at the Japan Nuclear and Industrial Safety Agency, said in Tokyo today. While radioactive water at the unit most likely escaped from the reactor core, it also could have originated from spent fuel pools stored atop the reactor, he said.

Fed Mulls Auction For AIG Bonds (WSJ)
The Federal Reserve is considering an auction for a large portfolio of subprime-mortgage bonds and is consulting with BlackRock Inc. about the process, according to people familiar with the matter.

Article courtesy of Dealbreaker

CrowdGather raises $7.85M to roll-up the Web’s forums

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sanjay sabnaniCrowdGather, a company that says it owns more than 65,000 online forums, has just completed $7.85 million in new funding through a private placement.

Chief executive Sanjay Sabnani said the money should help the startup continue acquiring more forums. He’s open about the fact that his strategy isn’t focused on technology, but rather on a “roll up” of existing sites. With investments and valuations climbing in the startup world, Sabnani said he felt a little more urgency to raise the money so he can close some deals before they’re out of his price range.

Forums aren’t exactly a sexy topic right now — in a recent interview with the New Tech Post site, Sabnani was asked, “But haven’t social media sites subsumed the role of forums?” He discussed the question in-depth, but he also gave me a more succinct answer yesterday.

“Everyone’s trying to chip away at this — Yelp with reviews, Facebook with chitchat, Quora with Q&A,” Sabnani said. “But if you’re into coins, you want to go to a site called CoinTalk.”

For another example of how a forum site is growing and evolving, you can read my coverage of how Topix is refocusing on politics.

The Woodland Hills, Calif. company launched in 2008, but it has actually been publicly-traded since April of that year. Sabnani said that with his connections at the time, it made more sense to raise money through the public markets rather than venture capital — though that decision looked a little less smart after the market crash in fall 2008. In addition to funding acquisitions, Sabnani said the new capital will put CrowdGather in a better position as it applies to one of the national listings. (Sabnani won’t say which one, but those listings include NASDAQ, the New York Stock Exchange, and an American Stock Exchange.)




Article courtesy of VentureBeat » deals

James Gorman Invites Morgan Stanley Employees To Help Educate, Elect Politicians Who Support The Bank’s Business Objectives

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Email to all staff from the Morgan Stanley CEO sent today:

By law corporations cannot contribute directly to candidates for federal office. However, we are permitted to maintain a political action committee, MSPAC, which pools together employee contributions to support candidates. By banding together to participate in the political process, we can educate lawmakers as they prepare to draft new rules addressing taxes, wealth management and other critical financial services issues. MSPAC helps elect candidates who support our business objectives.

Suggested giving levels:

* Management committee $5,000
* Managing Director $2,500-5000
* Executive Director/SVP $1,000-2,500
* VP $500-1,000

Article courtesy of Dealbreaker