Deep Pockets
Political Donations
Here in America, we love paying for stuff the government should provide for free, like health insurance or filing our taxes. One quirk of our system that drives me personally insane is the fact Americans pay billions of dollars simply to elect the people who (often fail to) represent us in government. Most of those billions, as we’ve discussed at length, end up in the coffers of media companies, consultants, and law firms.
If there is one constituency for whom the investment may actually pay off, it’s old people - Boomers are not only heavily represented by the average age of legislators, they are often the only group politicians are afraid of pissing off. So it makes sense that they’re pouring their retirement savings into campaign contributions:
For years, retirees supplied about $1 in every $10 that federal-level political candidates raised from those contributing more than $200.
But since the 2016 election cycle, they've represented an ever-greater share of politicians' campaign haul. By the 2020 election cycle, retirees accounted for more than $1 in every $5, amounting to more than $378 million.
Much of this is driven by the ease of donating - rather than writing a check, or speaking to someone on the phone, the elderly are bombarded by endless emails and social media ads cajoling them to make a donation with a click of the mouse.
Our essentially nonexistent election laws allow political parties to spend significant time and energy siphoning money from the only living generation with savings and brains conditioned to be more gullible.
In theory, the FEC exists to rein in political fundraising and write rules about what candidates can do with the money - Trump’s PAC has raised hundreds of millions of dollars peddling election conspiracies, some of which he’s used to pay his friends and lawyers. However, the commission is split along partisan lines and literally deadlocked on doing just about anything to fix the system:
The FEC comprises three Democratic commissioners and three Republican ones, all of whom are nominated by the president and confirmed by the Senate. Four votes are required to move any finance violation claim forward, but in recent years the commission has been deadlocked along party lines, particularly in cases that involve Trump.
Cool! With any hope of fundraising reform stalled in the very same government Americans pay billions of dollars to elect, we can expect our parents and grandparents to be swindled by the same predatory fundraising ads, emails, texts, and calls this cycle, and indefinitely.
Trump
It’s been a busy week for the Trump family - the NY AG filed a civil lawsuit accompanied by criminal referrals, citing over 200 instances of the former president inflating or deflating the value of his assets, mostly to do bank fraud or evade taxes:
Among other allegations, the suit claims that the former president's Florida estate and golf resort, Mar-a-Lago, was valued as high as $739 million, but should have been valued at around one-tenth that amount, at $75 million.
[…]
Trump valued his Trump Tower apartment at $327 million, James said Wednesday. "No apartment in New York City has ever sold for that amount," she said, adding the inflated valuation was based on exaggerated square footage despite Trump knowing it wasn't that big.
This is all very Trumpy - telling wildly inflated, easily disprovable lies to banks who, for decades, were happy to loan him money he often did not pay back. It is remarkable, though perhaps not surprising in hindsight, that Trump was able to fleece so many people, so blatantly, and for so long. He even got the IRS to give him money back rather than, I don’t know, pausing to consider whether Donald Trump owned a $300 million dollar apartment. Alas, the American public has shown it has a nearly bottomless capacity for believing whatever wealthy people tell them.
If James is successful, Trump and his family would be banned from running companies in New York and pay a fine that, given the revelations about his financial state, might be ruinous.
Speaking of Trump’s financial state, how’s his social media company doing?
Digital World Acquisition saw its stock price fall as much as 7% on Wednesday, extending its six-day decline to as much as 30% as the company struggles to close its proposed merger with Truth Social.
DWAC, the blank check company that was supposed to merge with TMTG and make Trump rich, hasn’t been able to complete the deal because - of course - Trump is constitutionally incapable of doing a legitimate business deal and the whole thing has been under investigation by three-letter agencies for months:
In June, a grand jury in New York subpoenaed TMTG and, according to DWAC, "certain current and former TMTG personnel have also recently received individual grand jury subpoenas."
In addition, DWAC and some of its board members have been subpoenaed by the SEC, which is investigating the SPAC's communications and due diligence.
One fun characteristic of SPAC deals is the funds DWAC raised have an expiration date - if it can’t close the deal by, well, initially earlier this month, the $293 million it raised goes back to investors, and the sponsors of the deal are out the money they spent to cover filing costs. They - by ‘they’ I mean CEO Patrick Orlando - can pay more money to extend the deadline, which they did, but the company needed 65% of shareholders to vote for a longer extension. That didn’t go so well:
Despite an aggressive campaign by Orlando to reach DWAC’s base of retail investors, just over 40 per cent have voted in favour of the extension as of this week, according to a source familiar with the count. The company requires 65 per cent of shareholders to approve extending the deadline at its meeting on October 10.
So, in keeping with Trump’s standard business practices, DWAC stiffed the company it hired to whip the votes. The former president - and apparently his investors - do not enjoy paying for things themselves, which may become a bigger problem as TMTG struggles to find funding:
Further illuminating the social platform's financial woes, Fox Business Network reported on Thursday that Truth Social is locked in a bitter battle with its vendor, RightForge, and is accused of stiffing the hosting service out of $1.6 million in contractually obligated payments.
I once wrote that TMTG could be the business that makes Trump his first pile of legitimate riches. But - like everything he touches - it’s a haphazardly constructed fraud to fleece his followers that can’t clear even the most basic hurdles of corporate finance. He’s going to be stuck using his PAC money to cover his mounting legal bills for the foreseeable future.
BNPL
Around here we are not fans of buy now, pay later companies. Nor are investors or financial analysts, who have battered the valuations of some of the most popular services. Here’s some potential good news:
The U.S. Consumer Financial Protection Bureau plans to subject “buy now, pay later” lenders to the same vigorous oversight as credit card companies, saying the short-term financing industry harvests consumer data in ways that threatens consumer privacy.
This may be unwelcome news for BNPL companies, who have been largely unregulated in the US. The CFPB spent a year collecting data and it wasn’t good:
The bureau outlined several risks to consumers who use buy now, pay later loans, including a lack of consumer protections compared with traditional credit card companies, data harvesting and monetizing customer data, debt accumulation and “loan stacking” — or taking on numerous loans at the same time.
Late fees are also becoming more common. The CFPB found that 10.5% of unique users were charged at least one late fee in 2021, compared with 7.8% in 2020.
A nearly 50% increase in late fees would be catastrophic in any other industry, but many BNPL firms are hoping their investment float can keep them alive until they reach critical mass, or get acquired, or something. The volume of loans made by BNPL companies has ballooned in the last two years:
Following an inquiry last year, the CFPB found that BNPL providers Affirm Holdings, Block's Afterpay, Klarna, PayPal and Australia's Zip Co originated a combined 180 million loans in 2021, totaling $24.2 billion, a more than 200% annual increase from 2019.
It is reasonable to suggest that an industry offering $24 billion a year in unsecured loans to consumers should be subject to some level of regulation.
Feeding Our Future
We’ve talked before about school lunches, and how keeping kids properly nourished has inexplicably become a political issue in this dumb country. The aid the government pumped into meals for needy children during the pandemic was an unequivocally good thing, even if it was distributed somewhat haphazardly.
We’ve also talked a bit about what happens when politicians and former NFL stars divert funds away from needy families to build volleyball stadiums and enrich their corrupt friends. But what if a nonprofit coordinated with dozens of people to steal funds intended to feed poor kids?
"Feeding Our Future employees recruited individuals and entities to open Federal Child Nutrition Program sites throughout the state of Minnesota," the Justice Department said in a release. "These sites, created and operated by the defendants and others, fraudulently claimed to be serving meals to thousands of children a day within just days or weeks of being formed."
Come on, man! Feeding our Future had been a modest community non-profit for years, but saw the government’s expansion of the Federal Child Nutrition Program as a…business opportunity? It’s leader coordinated with more than forty others to set up shell companies or inflate contracts with existing food banks in exchange for kickbacks. They were so good at being awful they managed to net $250 million dollars in a single year:
"This was a brazen scheme of staggering proportions," said US Attorney Andrew M. Luger for the District of Minnesota. "These defendants exploited a program designed to provide nutritious food to needy children during the COVID-19 pandemic. Instead, they prioritized their own greed, stealing more than a quarter of a billion dollars in federal funds to purchase luxury cars, houses, jewelry, and coastal resort property abroad."
There may never be a full accounting of how much government pandemic relief was stolen, but it’s surely well into the billions. PPP fraud cases will be winding through the court system for years to come. But stealing a quarter billion dollars of funds to feed hungry children and families? That is a new level of depraved.
Short Cons
NYT - “Researchers found that YouTube’s “dislike” button reduced similar, unwanted recommendations only 12 percent, according to their report, titled “Does This Button Work?””
Dallas News - “…as more students have embraced social media as a digital town square to express opinions and organize demonstrations, many college police departments have been using taxpayer dollars to pay for Social Sentinel’s services to monitor what they say.”
VT Digger - “Vermont State Police earlier said that from around 2013 until 2020, Blackmer defrauded at least two dozen people in eight states in deals that also included maple syrup equipment, farm equipment and collectible model cars.”
Consumer Reports - “Dangerous or illegal dietary supplements are regularly promoted or advertised on Facebook, Consumer Reports has found. And in some cases, Facebook hosts product listings for these supplements on its marketplace.”
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