Leahy: We are delighted to welcome back to our microphones for the first time in a couple of weeks, the original all-star panelist, Crom Carmichael. Good morning, Crom.
Carmichael: Good morning, Michael.
Leahy: Well, you had an adventure.
Carmichael: We did. We went on a golf cruise to New Zealand. And I don’t know if the people here were paying any attention, and no particular reason to, but New Zealand was experiencing incredible floods.
Leahy: Let’s just stop. The idea of going on a golf cruise to New Zealand, which is a beautiful country, I am told is great.
Carmichael: And the golf courses are spectacular, but when they’re played in the rain and 30 miles hour winds, and then you’re on a ship with 20-foot waves, it’s not an experience that you want to repeat. That particular experience.
The staff and the organization could not have been better under incredibly difficult circumstances. Kathy and I ended up catching a bit of a cold. You may recognize that. I’m having to not project that loudly, otherwise, I’ll start coughing.
Leahy: You don’t sound bad.
Carmichael: Well, thank you.
Leahy: Those of our listeners who remember the Kermit the Frog voice that I had back in October, you are not even close to Kermit the Frog territory. You like that?
Carmichael: Okay. That’s good.
Leahy: This New Zealand cruise was memorable, I would say then the golf cruise was memorable.
Leahy: Were you able to play much golf?
Carmichael: We played some golf.
Leahy: Some golf.
Carmichael: The combination of not feeling well and the weather made golf playing less likely than it would have been had I not been feeling poorly, also. Other people managed to golf and we were only completely rained out once. Completely rained out. But a lot of people played nine holes.
Leahy: Instead of 18.
Carmichael: During the bad weather. But I met a lot of nice people and a lot of people from Chicago and a lot of people from California.
Leahy: So they went to New Zealand on their way to Tennessee, is that right? (Laughter)
Carmichael: There are also a lot of people who now live in Florida, who used to live in New York.
Leahy: I saw a story that said there have been, like, a million new residents in Florida in the past four or five years, and only 17,000 of them have registered as Democrats.
Leahy: Did you see that? Crom, we are glad you are back. We missed you. And do we have a commentary this morning?
Carmichael: We kind of had a discussion. When you were out of the country, it’s not really a Crommentary per se.
Leahy: We are going to ease into this folks. This is not a commentary officially, that will come on Wednesday, but here’s Crom’s discussion on viewpoints of America from abroad.
Carmichael: When you’re out of the country, first of all, you’re on a boat. So the amount of news that you’re getting is somewhat limited. And then I would log in and I would go to some of my sources and kind of get the news from time to time. So not nearly as much reading as is typical. New Zealand is a very small country.
New Zealand only has four and a half million people. It has the North Island and the South Island and one of the islands, is built right on what is called a Ring of Fire. And so the South Island is very prone to earthquakes. The North Island is very prone to volcanoes.
And in fact, Auckland, a major city in New Zealand, is built on a series of volcanoes. It’s really kind of interesting. They live with the idea, and I guess it’s similar to California in the sense that you’ve got the San Andreas Fault, which could be catastrophic at any particular point in time, but people live there anyway, assuming it’s not going to happen during their lifetime. And the North Island had terrible volcanoes that were hundreds and hundreds of years ago.
Leahy: The soon-to-be-former prime minister.
Carmichael: I think she’s already resigned…
Leahy: Is she out of the office now? I don’t know what her departure is but it can’t be soon enough.
Carmichael: But she announced her resignation, which was I don’t think it was a surprise to her party, but it wasn’t on the calendar. Let’s put it this way. It wasn’t re-election, but she just announced that she was out of gas and she kind of recounted all of the crises that have befallen New Zealand and the world since she became the prime minister, and it was a litany of issues that she has had to deal with. Then shortly after, she admits it, and says this and announces her resignation in the airport and goes foot underwater. (Leahy chuckles)
Leahy: Another crisis.
Carmichael: And they had the giant floods of Auckland. Now we started in Sydney, Australia. And Sydney is a very large city with probably five or six million. It’s an incredibly clean city. Incredibly clean. You see a real difference. The politics are much lower-key. The partisan nature. There’s not a bunch of yelling and screaming about racism and sexism and one thing or another. It’s just not present there. And then you come back here, you get an earful, then you see this balloon. And essentially the balloon was a spy balloon and it was collecting data as it floated across North America. And we didn’t shoot it down until it had collected all of its data.
Leahy: Until it had done all of its spying, as The Babylon Bee reported accurately.
Carmichael: Right. That’s not even being funny. It’s apparently what happened. And then you had the Biden excuse machine
Leahy: That’s a good phrase.
Carmichael: Parroted by the media. And you say, well, not much has changed since I’ve been gone for three weeks because that’s pretty much the way it was when I left. One thing that has happened that I did notice is that during the first 90 days of this year, the federal government is going to borrow $900 billion.
Leahy: B with a billion.
Carmichael: In 90 days.
Leahy: In 90 days.
Carmichael: So that implies north of $3 trillion is the deficit they are running on an annualized basis. I don’t think it will be that great.
Leahy: Pretty close.
Carmichael: But for Biden to claim he is reducing the deficit is a farce. But he can still say it and the media will repeat it. So nothing much has changed. But I did learn that the United States cannot default on its debt.
So people that say, if the Republicans don’t agree to an increase in the debt ceiling and the US is in default. That is false. It means it can’t pay for other things. But constitutionally, the debt of the United States shall not be questioned. That’s what it says.
Listen to today’s show highlights, including this interview:
Michael, there are three things that are going on at the same time and they’re all related. One is CNN Plus is imploding even though owes a great and mighty Chris Wallace left Fox News and went to CNN. Because CNN believed that Chris Wallace was popular. And he never has been popular.
He’s always been kind of a daddy’s boy. And he’s made a lot of money because he was Mike Wallace’s son. But CNN is now imploding. And what’s interesting is when he left, he was there 18 years, paid millions of dollars for at least each of the last 10 years.
And when he left, he was very ungracious. He did an interview in The Western Journal and he sneered at the network, at Fox network and his viewers saying about his long tenure at Fox, ‘But I can certainly understand where somebody would say, gee, Chris, you’re a slow learner.’
He was really talking about how he is now free to think and to act. But CNN Plus, which is why he left, is imploding. And by the way, that’s because people who watch CNN don’t pay for news.
They won’t pay for it. They just like to be propagandized. Which ties into Mark Zuckerberg. After Molly Hemingway’s book Rigged came out and the documentary was aired within 24 hours, Mark Zuckerberg said he’s not going to participate in the midterm elections in the way that he did in the last election.
So what he is seeing from that documentary is that they have the goods on him. So the question is going to be whether or not he is treated appropriately under the law.
If the next administration is a Republican administration because there are laws about campaign spending and the book Rigged makes a very good case that he broke those laws.
Now let’s move to what Elon Musk is doing in his attempted takeover of Twitter. Twitter stock has fallen from 80 to 30 over the last 18 months. It’s very clear that the board of directors and the executives at Twitter do not believe that their shareholders are that important to them.
Well, now they have a very stark choice. They can either see their stock go back to approximately 30 and maybe even lower, or they can take Musk’s offer of $54.20 a share and do what is right by the shareholders.
So the question is whether or not the board of directors are going to do what’s right by the Democrat Party and the left, or whether or not it’s going to do what’s right by the shareholders. But what’s also fascinating is that there are reports that the DOJ and the SEC are now attacking Tesla.
And let me just say that the DOJ and the SEC are people. They’re not just institutions. So the institution of the DOJ and the institution of the SEC does not attack Tesla. It will be the individuals inside those institutions.
And then the question is if they are using their positions of power for political purposes and the next President is not of their thinking, it’s a question of whether or not those people because what they are doing is seditious what they’re doing is using the power of government to try to silence the potential opposition of other people.
It should be obvious to any thinking person that the left believes that it is now in control of the government and that it must maintain its control of the government or for them, there is a great risk, and for all of those associated with the left.
So the next 30 days are going to be absolutely critical and then the midterms of course. But with Zuckerberg not agreeing to help the Democrat Party with what you and I think is cheating in the last election, with him saying he’s not going to do that again, I’m not sure that they can replace him at this late date with somebody who is willing to take the risk of going to prison for 20 years.
Which if they do that again could very well happen. So we will see. But these three things all happening at the same time are both ominous on one hand and very hopeful on another.
Over the weekend I read two articles. One is Christendom’s Greatest Satirist. And then I’ve read a series of articles about Roe v. Wade and about what is going on. And Henninger wrote a really good one. He said that Roe v. Wade is the quintessential court case that gave power to Washington, D.C. over literally every state.
Ever since then, Washington has been gaining more and more and more power. Then there was this story about Erasmus. They call it Christian’s greatest satirist. And Erasmus lived at the same time that Martin Luther lived.
And Martin Luther is the person who tacked the 95 theses on the door of the Church in Whittenburger, Germany. Basically challenging how the Catholic Church had gotten away from the Scripture. But he said that you’re saved by your good deeds.
That’s what the Catholic Church said. And Martin Luther said, no, you’re saved by the Grace of God and the Grace of Jesus Christ. But what also was going on at that time was the relationship between the church and the state was pretty much one and the same.
And the church had immense power over the people, not just from a theological standpoint, but from a political standpoint. And when I look at what’s going on right now, I look at Washington, D.C., and I see Washington, D.C. as a combination of the old Catholic church and the old kingdoms, where their moral authority is now being challenged at every level.
And unfortunately, back in those days, and I don’t think it’s necessary now, Erasmus argued for conciliation and talk and discussion, and he would not side with Martin Luther, nor would he condemn him. But he also wouldn’t support him.
So he tried to be the person in the middle, and he tried to keep the religious wars that ultimately happened. He tried to keep them from happening. And I don’t think we’ll have wars here in the U.S. because we have politics.
We have the ability through elections as long as they’re honest and fair, we have the ability for the people to change the power structure. And I think that that’s what you see going on now. You see an awakening on behalf of the people in a very similar way to Martin Luther tacking his 95 theses on the church door, saying, you are morally corrupt.
I think what the people are saying to Washington D.C. is Washington, D.C., you are morally corrupt. And this isn’t about just simply abortion. This is about how can a school board have the moral authority to force their agenda on parents and on children?
Where does the moral authority come from? It certainly doesn’t come from God. It must come from some centralized authority that can be attacked in our country through the political process. And I believe that that’s what we see going on right now.
Leahy: In studio with us, our friend, former Tennessee Speaker of the House, Beth Harwell. Beth, so you’ve had quite a career after eight years of speaker.
You ran for governor, didn’t win the primary. You haven’t been goofing off ever since. (Harwell chuckles) What have you been doing?
Harwell: Well, I’ve been doing a few things. I do a little bit of teaching at Middle Tennessee State University. It’s very important to me that the next generation learn about the government and its history and are proud of it.
Leahy: So I didn’t know you were teaching at MTSU.
Harwell: Well, I don’t teach full time. I just go on and do lectures and about – just a visiting professor.
Leahy: Where do you teach? What do you teach?
Harwell: It’s usually in the honors program in the political science department.
Leahy: And so are these, like, small classes, big classes?
Harwell: We did a democracy project that I participated in. They’re trying as a school to engage young people. And we desperately need young people to be engaged.
But we need to have them, well-informed young people, before they engage. That’s the key there.
Leahy: Not propagandized little community activists.
Harwell: Exactly right. And then I also serve in the Tennessee Valley Authority Board, a number of other boards here in Nashville – Montgomery Bell Academy and KIPP Academy.
Leahy: Montgomery Bell Academy and KIPP. Oh boy. The Metro National Public School Board hates them because they’re a charter school.
Harwell: Well, they’re doing an excellent job. I know they helped a lot of kids through the pandemic. They’ve been involved in these young people’s life. And that’s just been a sharp contrast in which I’m very proud of them for what they’re doing.
Leahy: Do you like serving on the Tennessee Valley Authority Board?
Harwell: You know, it’s a challenge because it’s outside of my true area of expertise.
Leahy: You’re not an expert necessarily on energy.
Harwell: I’m not a physicist or specialist but I’m learning a lot. And I tell you, Tennessee Valley Authority does a lot of great things for the Appalachian area.
I’m learning more about them every day. But the one thing I appreciate is they do keep our rates relatively low. We can always be lower.
But they are low compared to other places. But more importantly, you saw what happened in Texas. TVA has a diversified portfolio that I really think serves the public well.
Leahy: Well, it’s interesting because we had on this program yesterday, State Representative Chris Todd. You probably know Chris from Jackson. Great guy.
Chris told us that here the group of 15 states from the South, their state legislatures convened. He was part of that group.
And he said they got a presentation from TVA and told them how they had set up redundancy and resilience so they didn’t have the kind of problem Texas did.
Harwell: Right. And that’s good management. We can be very proud of that.
Leahy: Well, that’s good. That’s good. So is it more relaxing not to be the speaker of the House? Are you goofing off more? Are you going out to dinner more?
Harwell: Of course I’m definitely doing my walking and doing a little more reading other than political things.
Leahy: What are you reading?
Harwell: You know what? I have a whole spectrum of books I read. I’m reading right now a book called Someone’s Daughter that someone let me borrow. And it’s actually good. So I like a diversity of books.
Leahy: I recommend a book for you. I just discovered this writer, Conrad Richter. R-I-C-H-T-E-R. He won the Pulitzer Prize in 1950 for the third part of a trilogy.
And the third part of the trilogy was called – a book called – The Town. The first part was The Trees. The second part was The Fields.
It was a story. Wait for it … of a 15-year-old girl and her family who in 1795 left a little town in Eastern Pennsylvania and walked to Ohio. And it’s about their life from 1795 to 1860.
Harwell: That sounds fascinating.
Leahy: It’s really great. And it’s part of a trilogy called The Awakening Land. I just discovered this. It’s a great book, and I really enjoyed it. Beth, for the big question. The big question. What’s in your future?
Harwell: Well, Michael Patrick, first, I want to thank you for letting me be on here. It was nice and reminisce with you a little bit. (Leahy laughs) We go way back.
Leahy: We do go way back. And it’s interesting because we didn’t always see eye-to-eye, but we are always were friendly.
Harwell: Absolutely. Always able to talk and discuss things.
Leahy: This is the way to do it.
Harwell: It is the way to do it. I think it’s critical as we go forward that we can discuss issues that have been important. As far as my future, I’ve had a wonderful opportunity to serve the public and hope that I’ve done that well, and I don’t know what the future holds.
I don’t think anyone does. We’re gonna have to wait and see what happens. But I’ll certainly let you be one of the first to know.
Leahy: So if you were to do something back in your old line of work, would you make a statement first here on this program if you were to do that?
Harwell: If that would please you. (Chuckles)
Leahy: It would! If you want to do something, that would be very interesting. Overall, Beth, on a scale of one to 10, one being not worried at all and 10 being extremely, existentially worried, how worried are you about the future of our country?
Harwell: I’m probably at an eight or nine. And I’ll tell you why that I’m not the full 10. I believe in America. And I think our elected officials have left us.
American people are as good and have as strong of values and beliefs that they’ve ever had. It’s that we’ve allowed our elected officials to leave us and we need to hold them accountable. I’m amazed at the people that will say to an elected official, oh I’d love to have my picture taken with you.
You know what? That elected official ought to be saying that to the citizen. I’d love to have my picture taken with you, because we’ve allowed them to forget that they’re our servants.
In Washington, D.C., they’re just up there not even obeying our Constitution. And we’re letting them get away with it. And it makes my heart bleed. It really does. This is a great nation. If we let it go, there’s no other place in the world we can go. This is it.
Leahy: So eight or nine. I have to kind of agree with you in terms of where we are as a nation right now. Do you think we can make it as a country with the current occupant of 1600 Pennsylvania Avenue, who appears to be engaged in illegal – and this is my word, not yours – illegal actions by not enforcing our immigration and weak on foreign policy?
Freedom is now something that the people of Cuba want.
And the current occupant of 1600 Pennsylvania Avenue appears to be doing very little to support those efforts. He’s letting China dominate the South China Sea.
He’s not building up the Navy. You look around and you say this guy is intending to destroy our Constitutional Republic.
Harwell: It makes you think he doesn’t love our country because he’s deliberately taking us down a path that I don’t know that we can turn around and get back off of unless we change things and change things quickly.
Leahy: Yeah, it does seem to be deliberate, doesn’t it?
Harwell: It does.
Leahy: That is very troublesome. Beth Harwell, former speaker, Tennessee House of Representatives, thanks so much for joining.
Harwell: Thank you. My pleasure.
Leahy: It’s been great to have you in here and come back again if you would please.
Leahy: We are delighted to welcome to our newsmaker line from across the pond, Rupert Darwell, a senior fellow at the Real Clear Foundation. He just released a study on capitalism, socialism, and a thing called ESG. And if you haven’t heard about it, you got to listen up. It’s very important what he’s written. Rupert, thanks so much for joining us this morning.
Darwall: It’s my pleasure, Michael.
Leahy: ESG, it sounds like a food additive, but it’s much more dangerous. Tell us, what does ESG mean? And why should we care about it?
Darwall: ESG is environmental, social, and government. It’s a form of investing. It’s meant to be for the clean, moral, pure types that want to make the world a better place. And it’s a bit of a con, really, because what it says on the outside is ESG investing, you’re doing well by doing good.
So you’re going to make more money by doing the things that are going to make the world a better place. But actually, it’s all about that at all. It’s politics by other means. It’s the politicization of business and investing. And you’ll say goodbye to those higher returns because that’s just sales chatter.
But fundamentally, it’s about turning capitalism into something very, very different. And it’s also about political power. It’s about giving financial oligarchs on Wall Street and in the big state pension funds like CalPERS in Sacramento and the Neivers New York pension funds, enormous amounts of political power of business.
Leahy: Yeah, that’s exactly it. We’ve noticed, of course, I guess the publicly traded corporations, I don’t know, 90 percent of them seem woke beyond repair. They’re always preening about some moral issue, and it’s just highly destructive it seems to me. When did this really start being a thing?
Darwall: Well, there was a phase of it, I think, in the 1970s because Milton Friedman wrote a fantastic article saying the role of business is judged by how much money it makes for shareholders. It’s about profit. Because if you’re a good business creating and innovating things in the market that customers want, you’ll do well and that kind of thing.
It kind of then went through the 80s and 90s and then receeded. But it’s really come back with a vengeance now. And you may remember, a couple of years ago, the Business Roundtable issued that 181 CEOs signed the Business Round Table statement on stakeholderism.
The businesses are meant to serve a wide variety of interests and demoting the stockholder. So it’s really come in very powerfully. And, of course, the so-called climate crisis, this existential threat to life on earth kind of thing, businesses have got to emit zero. So it’s really kind of taken business and particularly financed by storm might say.
Leahy: I don’t know what your background is other than your finance guy in London and you write about it. I’m a graduate of Stanford Business School. I have an MBA from Stanford way back when. And what I’ve noticed is the ideas that are taught in business schools today seem much more socialist at the highest level than they were when I was in school.
Tell me what you think about this. You have a generation of left-wing socialists now that are influencing these hedge funds like Black Rock and are serving on corporate boards and are in the marketing departments and the finance departments of Fortune 500 companies and they’re forcing that ideology that they’ve grown up with upon these publicly traded companies. Do I have that right or is there another element to it?
Darwall: I think that’s a very important aspect of it. I would also point to there’s also kind of a revolving door between the corporate affairs department of large corporations. At the end of the Obama administration, you saw a load of Obama administration officials exiting the federal bureaucracy and jumping into the C-suites of corporations.
For example, you mentioned Black Rock. One of the Black Rock guys is now a very senior economic advisor in the Biden administration. So it’s kind of this revolving door. It’s this intertwining of business and politics. And in my view, the business of business, the business of business is business. It’s not politics. It’s not politics by other means.
But what we’re seeing is polity of businesses becoming armed tools of political agendas, which I think is very dangerous for democracy, because these questions should be decided through the ballot box and through the Constitution.
The United States has a brilliant, perfect Constitution, if you like, of representative democracy. And the second danger to capitalism because as businesses become woke, they become less innovative and doing less of driving the things that make living standards rise and which makes capitalism the greatest economic system there’s ever been.
Leahy: The title of your study is Capitalism, Socialism, and ESG. But I look at this interconnection between the very large, publicly-traded corporations and government and politics. And to me, the ism that comes to mind is more a form of fascism. What’s your thought about that?
Darwall: Corporatism, because both socialism in its extreme form and fascism, but they both see that the political ideology must trump everything and every aspect of society. And particularly economic ones should be the tools of the state.
Yes, there is. You are absolutely right. It’s a form of corporatism. It’s very nasty. It’s unrepresentative, as I say, it’s about usurping, the Democratic prerogatives of the people through the ballot box.
Leahy: The other element of this to me, for free markets and capitalism to work, the capital markets have to work for all sizes of companies. Large companies and small companies. And of course, startup companies, small companies, entrepreneurial companies, that’s where most innovation does occur.
It seems to me that the rise of ESG, environmental, social, and governance standards among larger corporations has kind of made the capital markets much more difficult for small businesses and those that are providing innovations. Do you see that as well, or am I just looking at it from a small business lens?
Darwall: No. I think what happens is that large businesses call for large woke businesses if you like. When they embrace this agenda they say, well, our business model could be under threat from startups, therefore, because we’re doing what the politicians want and because what Democrats in Washington want, we need protection from startups.
Inevitably you get distortions in markets. You have you know what economists call rent-seeking behavior and businesses trying to protect themselves from businesses that are unencumbered by ESG and are free to perform as they want. I think you’re absolutely right. It’s a big threat to the layer of new businesses which really have driven growth and innovation.
Leahy: The other thing is to look at alternatives to ESG. Is this just a huge group think among hedge funds and Fortune 500 companies? Is there anybody in that world that you see right now that is not embracing ESG? And what consequences are they facing?
Darwall: I would say corporate CEOs are very exposed to proxy battles. If they put their head above the parapet, they’re likely to have a shareholder and stockholder revolt at the next annual general meeting. So they’re quite nervous individuals.
They have to go with the flow. The greatest economist of capitalism was Schumpeter. He wrote that an incredible book, Capitalism, Socialism, and Democracy. And in that, he described the publicly traded corporation as capitalism’s vulnerable fortresses for exactly this reason in that you have a split between ownership and control.
But I think the ESG thing because it’s such a distortion of the capital markets, there will be people who come in and contrarian investors who can make lots of money out of the fools who follow the ESG sales pattern. Because when you have people investing for non-financial reasons, they make mistakes.
They’re the easy ones you can pick off. I think there’s an aspect of it that this is set up so that more savvy investors at some point will make a great deal of money from the investors chasing the fools gold of ESG investing on the basis that they’re going to do well by doing good, which is, as I say, is complete junk.
Leahy: Rupert, you mentioned before that ESG actually doesn’t perform well financially, and it’s a bit of salesmanship, if you will, for the left. And you mentioned that perhaps some more savvy investors will come up with contrarian views.
I just sent you an email that includes some information about just such a group based here in Nashville, as it turns out, called 2nd Vote Advisors. And basically, they manage funds and they have private funds that are exchange-traded funds.
One is focused on pro-life. The other is focused on Second Amendment-type issues. They say that without 2nd Vote Advisors as a counterweight to existing asset managers, a progressive ESG agenda will continue when investors can rest assured that we will never vote proxies in support of ESG shareholder initiatives. I don’t know if you’ve heard of 2nd Vote Advisors, but it’s almost as if you predicted they would come into existence.
Darwall: It does sound like that. The smart investors will. When I say smart investors, investors that have got their feet on the ground, and they’re the best ones will see this as an opportunity. Because what will happen is that they will dump lowly rated ESG stocks, which means that they’re cheaper for others to buy.
There’s that thing that Ben Graham, the Warren Buffett guru, said, in the short term, a stock market is a voting machine, and in the long term, it’s a weighing machine. And at the end of the day, what will happen is it will be the cash flows that companies generate. The ESG investing movement is creating a massive investment opportunity for smart investors.
Leahy: But besides 2nd Vote Advisors, is there anybody promoting these contrarian options to ESG investments?
Darwall: That’s one of the things that’s needed to happen because what you’ve got is the big three index providers, ETF index providers led by Black Rock. You’ve got State Street and Vanguard. Those big three, which Black Rock is the largest asset manager in the world have gone woke.
Larry Fink is leading the charge on ESG, climate, and on stakeholderism. He has threatened encumbered management to vote against them if they don’t bow to the God of ESG. That means that if you don’t subscribe to that view of politics and that is what it is, it is essentially politics and ideology, you need to find the ETF provider who will vote your proxies the way that you want and not the way Larry Fink wants.
I think in time you will see alternative providers. The market should respond in the way that people who want politically free investing can have that demand satisfied. But as yet, I haven’t seen those ETF providers come over the horizon. America is still the most dynamic economy in the world, the freest economy in the world, and that over time that will happen. There will be a market reaction against this.
Leahy: How is it that a guy like Larry Fink, who is, in essence, a financially sophisticated left-wing ideologue, how is it that we have so many guys like that now?
Darwall: He was a bond trader who correctly spotted the diverse portfolio and index investing. These are both low costs and over time give very good performance. And he’s ridden that. And now he’s made as much money as he can ever hope to.
And he’s got the whiff of political power in his nostrils. And sitting in as chairman and CEO of Black Rock, he has the best of both worlds of having immense financial power on Wall Street and also access to every political leader he ever wants. So there is a lot of that.
There’s something that he said. Every year he writes to corporate CEOs just telling them what to think. And last year he wrote to them and said all this disclosure stuff, ESG and climate disclosure, and so forth. He says the goal cannot be transparency for transparency’s sake.
They normally say, well, the market needs more transparency and more data. Then he went on to say disclosure should be a means to achieving more sustainable and inclusive capitalism. Now, that is politics. That is pure politics and nothing to do with boosting investor returns or anything like that.
This is the guy acting as a politician wielding political power. The proxy votes that are embedded in ETF index funds, he’s stripping the proxies out of them, and he’s casting them according to his ideological prejudices.
Leahy: The founders, Alexander Hamilton, James Madison, Thomas Jefferson, didn’t agree on a lot. But one thing they did agree on that if an aristocratic manufacturing class ever arose in America, it would be bad for the constitutional Republic.
We have now this aristocratic leftwing financial class, and they have no constraints. I think what has arisen here with guys like Larry Fink is exactly the kind of aristocratic modern feudalism that Jefferson, Hamilton, and Madison would have absolutely loathed.
Darwall: I absolutely agree with that. These Wall Street oligarchs are essentially usurping, the prerogatives of the Democratic and constitutional political state. That’s exactly what’s going on. This is a parallel government that is not really accountable to anyone and certainly not accountable to voters. When Larry Fink talks about inclusive capitalism, he’s actually talking about exclusive capitalism, insider capitalism.