THOMAS FERGUSON, thomas.ferguson@umb.edu
PAUL JORGENSEN, pdj78@me.com
Ferguson is professor emeritus, University of Massachusetts Boston and director of research, Institute for New Economic Thinking.
Jorgensen is associate professor and director of environmental studies at the University of Texas, Rio Grande Valley.
They just co-authored the piece “Bankman-Fried, Political Money, and the Crash of FTX” with Jie Chen.
They write: “Money in politics today is a Category 5 hurricane. Just when you think you have finally absorbed the worst punch the storm has to offer, some other eddy comes blasting down. We have tried to pull together the many streams of political money from SBF, his senior associates, and all other employees of FTX, together with the executives of Alameda Research, the crypto hedge fund that SBF had co-founded.” They note that they are limited by what is publicly available and can’t track dark money, for example.
They add: “The group donated lavishly to think tanks, including the Center for American Progress. It also nourished a stable of former regulators, especially from its preferred regulatory venue, the Commodity Futures Trading Commission, and — secretly — at least one media outlet.”
They found more money flowing to Congress than others have: “Over $89 million dollars since 2019, with the bulk of it coming during the 2021-22 political cycle when the campaign to keep crypto clear of federal regulation swung into high gear.”
Senate Republican Leader Mitch McConnell, who is on the Senate Agriculture Committee got a whopping $3,626,100 through various committees.
Why the massive campaign? Their answer is that all the money was about securing a revolution in commodities regulation that would open speculation in leveraged derivatives to retail customers using crypto. Or in other words, invite a “vast new herd of eager, but inexperienced lambs to run free in the heady world of leveraged derivatives using crypto, alongside very experienced and well-capitalized wolves.”
They write: “If all this brings to mind the long, disgraceful battles over derivatives regulation in the 1990s, it should. It is a near carbon copy of that earlier travesty, right down to the vast clamor from the media and think tanks that all but drowns out critics. The industry was on the verge of getting its way when the crypto dominoes started tumbling down, temporarily slowing its momentum.”
The House Committee on Financial Services has critics of the SEC (such as Ritchie Torres (D-NY)) who have received money from FTX. The authors note: “Borrowing another leaf from the nineties,” such legislators “are striving to pin the blame on the disaster that’s occurred on the stronger regulator, the SEC, for not acting, even though they spent years trying to block it from doing so.”
They conclude: “The first item of business ought to be the demand for full disclosure of all political money SBF, his colleagues, and their firms contributed to everyone on the Congressional committees and in the rest of the political system, together with a full accounting of grants to think tanks and researchers. And the second should be drastic changes at the CFTC [Commodity Futures Trading Commission], which has once again failed to protect the public.”
