A crony polician bites the dust

Eric Cantor, in the news last week, was the best sort of politician. When he was bought, he stayed bought. When campaign season came around, the oligarchs wouldn’t forget him. The trouble was, he forgot the poor little garchs. That is, he was so sure he had the election in the bag, he forgot to lie to the voters.

Some say Goldman Sachs owned him. But that is an overstatement. Wall Street only had a leasehold, which expired when his grip on House Republicans gave out. Besides, most leading industries had a piece of him, too; the defence industry, for example, rented major parts of his heart and brain.

Taking no chances, Goldman Sachs also bought a substantial interest in his likely successor, Kevin McCarthy. The Wall Street Journal says Goldman is his largest single contributor.

Many are the explanations for Cantor’s surprise defeat. We put it down to a failure to run a balanced campaign. He forgot that political commerce in a modern democracy is a two-way street. You have to buy as well as sell. All very well to offer your services to the 1%. But don’t forget the 99% who will decide an election.

Conservatism in America took a nasty turn in the ‘80s. A whole generation had grown up since Ike Eisenhower was president. This new generation, much of it slipping into Washington along with Ronald Reagan, had come to see Washington as a force for good in the world, especially outside the 50 states. And even if Washington didn’t always do good, a sharp politician could always do well.

The trick was to talk the old conservative talk for the rubes back home, but to vote for every money-guzzling boondoggle that came along.

Cantor talked the talk too. But it was a mushy talk, full of mindless platitudes and empty phrases. That would have worked fine had his district been a little farther north. Squeeze up nearer to Washington and blah, blah is all the voters want to hear.

FREE daily investment email from MoneyWeek
Receive our thought-provoking investment email Money Morning every weekday morning, plus occasional promotions, & become a smarter investor.

Please enter a valid email address

To sign up, enter your email address:

They know how it works. The whole nation is tilted towards the Potomac. The money rolls towards its denizens like loose change down a storm drain. The last thing they want is a candidate who speaks clearly about the need to change things.

But poor Mr Cantor’s district is on the James River, not the Potomac. Around Richmond, voters are less sympathetic to crony democracy. This is not because they are more high-minded, far from it. It is simply because they get less from it. They don’t necessarily want more of other people’s money; but they definitely want to keep more of their own.

And they knew that their man in Washington wasn’t helping. Congress reacted to the crisis of ’08-’09 with the TARP programme, which transferred $700bn to the banks, and gave them $23trn-worth of credit guarantees to boot.

The first time it was proposed in the House, Republicans voted ‘no’. But Cantor – leader of the pack – turned them around. The second vote put TARP in business and began the greasiest fix the world has ever seen.

Five years later, the voters of central Virginia are still puzzled by it. How come, after five years of recovery, are there so few good jobs? Why is the Fed still handing out free money to Wall Street? Does it have something to do with Goldman Sachs’ generous contributions to Mr Cantor’s political campaigns? And might it help him secure a nice position – maybe like Mr Geithner, at a private equity firm – after his political career is over?

Cantor raised $5.4m from his cronies for this year’s campaign. At the time, it seemed like overkill. He was the leader of his party in the House. He was on the escalator, set to become speaker when John Boehner left. He was a household name in Republican circles.

His opponent, on the other hand, was unknown, and had only $200,000 to work with. The oligarchs had nothing for him, because he had nothing to offer them. Now his stock is rising fast. Goldman should have made a bid sooner.

FREE daily investment email from MoneyWeek
Receive our thought-provoking investment email Money Morning every weekday morning, plus occasional promotions, & become a smarter investor.

Please enter a valid email address

To sign up, enter your email address:

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Prime location

The best property buys in the eurozone

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.

22 May 1980: Pac-Man hits the arcades

It didn't take long for Pac-Man, or Puck Man as it was originally called in Japan, to become a worldwide craze after it was released on this day in 1980.

The Kids' Portfolio: the four best funds to buy for your children

Investing for your children's long-term future is an excellent idea. But what should you buy? The Kids' Portfolio is a simple collection of four funds intended to be tucked away for 20 to 40 years.