An odd Financial Services Committee hearing last week highlighted the importance of money in this town, and the increasing need of businessmen to become friendly with politicians.
Chairman Barney Frank called a hearing of the committee to discuss new rules for initial public offerings. The timing was odd: It coincided with meetings of the Republican caucus and the Democratic Steering and Policy Committee. As a result, Rep. Frank stepped out of the hearing early on.
The proposal makes sense. Under current law, companies wishing to go public for the first time must go through a long, costly registration process unless they are selling less than $5 million in stock — an exemption called “Regulation A.” The proposal would lift that threshold to $30 million. A witness at the hearing, San Francisco financier William Hambrecht, describes it as a private-sector stimulus program involving no government outlays — just a way to get government out of the hair of investors and entrepreneurs who want to connect.
Hambrecht knows about bringing together investors and businessmen. He does it for a living. WR Hambrecht & Company pioneered an auction format for IPOs, and is a premier IPO underwriter. Expanding the regulation would profit Hambrecht by making it easier for companies to go public, thus giving him more potential customers. There's nothing insidious here, though. Hambrecht is openly asking Congress to step out of the way of businesses that would want his services. The benefit isn't narrow, either: Any IPO underwriter would gain, especially anyone who can one-up Hambrecht and invent better ways of taking midsize companies public.
However, for the outgoing Democratic majority that has relentlessly fought to increase government control over the economy, especially finance, this proposal is out of character. That's why the money trail matters. And it leads from Hambrecht to Nancy Pelosi.
“I should note also that it was Speaker Pelosi,” Frank said at the beginning of Tuesday's hearing, “who first called this to our attention earlier in the year.” Frank went on: “It is something that the speaker has taken a great interest in because of her interest in job creation, so we have had to find a way to have this hearing.”
Hambrecht has given more than $1 million to Democrats since 1989, according to the Center for Responsive Politics, and his wife has given more than $200,000. Of that, $24,000 has gone to Pelosi, and many hundreds of thousands to elect the House Democrats who made her speaker. The San Francisco Chronicle reported in 2006 that Hambrecht “said he never contributed to politics until he was inspired by Pelosi after meeting her in the early 1970s.”
On July 19, 2001, Pelosi went on the floor of the House and delivered an address titled “In Honor of William Hambrecht.” Hambrecht was being inducted into the Bay Area Business Hall of Fame. “Mr. Speaker, I rise today to celebrate a business pioneer, a philanthropist, and a longtime friend, Bill Hambrecht,” she said of the man who had six weeks earlier given her the maximum contribution and also given $5,000 to Pelosi's political action committee.
Pelosi regularly invites Hambrecht, along with other big donors, to speak at an annual Napa Valley conference she organizes with her husband Paul. Speaking of Paul Pelosi Sr., he recently invested $12 million to launch a professional football team, the California Redwoods — one of the teams in the nascent United Football League, which hopes to compete with the NFL. Hambrecht founded the league.
Finally, Paul Pelosi Jr., Nancy's only son, works for Bill Hambrecht at WR Hambrecht.
So why would the Financial Services Committee hustle to hold this hearing despite so many other more pressing issues? Maybe because Nancy Pelosi's friend, donor and business partner wanted it.
Pelosi's office didn't return a phone call, but Hambrecht did. I asked him if his ties to Pelosi earned him the hearing. He said Pelosi was motivated only by “genuine desire to find a private-sector solution” to unemployment. Hambrecht added that Democratic Rep. Anna Eshoo, whose Silicon Valley district includes many start-ups, was the real prime mover.
Hambrecht is no regulatory robber baron or subsidy suckler. He's a businessman who, in this case at least, wants government to stop interfering with his effort to deliver services that are in demand and that can create wealth. His ties to Pelosi, however, show what it takes for a businessman to get his voice heard in this town.
Timothy P.Carney, The Examiner's senior political columnist, can be contacted at email@example.com. His column appears Monday and Thursday, and his stories and blog posts appear on ExaminerPolitics.com.