April 28, 2010 06:30 AM

A couple of months ago Grass-Roots Organizing (GRO) held an anti-big banks rally sponsored by a progressive local activist organization. I am generally in favor of breaking up big banks or adopting some kind of regulatory approach that limits the systemic risks that large, complex institutions created.

But a second message from GRO had a decidedly different tone. Along with the opposition to big financial institutions whose ignorance and malfeasance brought our economy to a very ugly place, there was also a diatribe against Rex Sinquefield, a multi-millionaire retired investment banker. Rex (and his wife Jeanne) have liberally funded politicians on both sides of the aisle to promote a policy agenda that includes increased school choice, more transparent and data-driven governance and reform of Missouri's tax system. There are legitimate debates to be had on these policies but if you disagree with Rex Sinquefield on his political agenda or his methods, it is unfair to conflate these disagreements with opposition to big banks and financial deregulation.

There are two arguments for that thesis. The first, and obvious one, is that opposition to big banks is not premised on the same assumptions of opposition to the "Fair Tax Proposal" or school choice. The second and more important argument is that Sinquefield represents a school of thought that is diametrically opposite to the ideology that captured the financial services sector and brought the global economy to the brink of collapse. Moreover, the harshness of the criticism thrown his way is stunning; it is demonstrably true that Sinquefield’s political agenda around the state does not represent efforts to protect the rich and powerful at the expense of the politically weak and powerless.

Here is an excerpt from Grass-Roots Missouri’s press release mentioned above:

Hundreds of people from across Missouri traveled to converge on the Capitol and March Forth on March Fourth to call out lawmakers’ unfair budget cuts proposals and ill-conceived income tax repeal legislation.  They exposed Rex Sinquefield, a retired investment banker and multi-millionaire who uses his millions in "pay-to-play" politicking to advance his personal crusade measures that benefit corporate investors and the wealthy elite.  

They continue:

Those assembled blamed Rex Sinquefield for misusing his personal wealth to buy influence in the Legislature, and for single-handedly funding the "Let Voters Decide" campaign to press forward a harmful statewide ballot initiative to eliminate valuable local revenue in Missouri’s largest cities.  Following the rally, the Show-Me Showdown crowd headed to lobbyist Gaines Brown Consulting’s office on Madison Street to deliver a letter with demands for Sinquefield to resign from the presidency of Show-Me Institute, the embezzlement-ridden think tank he founded and to stop funding efforts like the mega sales tax proposal being discussed inside the Capitol.

When Grass Roots Missouri says "pay-to-play," they’re probably referencing the 100 political action committees Sinquefield created to support candidates and causes. This action attracted a lot of negative publicity but what it did not do was attract legal challenges.  It was, in fact, legal. This tells you that the people complaining about the creation of multiple PACs were not smart or motivated enough to use the same strategy, which they could have easily done. It is also not the case that Democrats, either in the 2008 election cycle or in this one, have trouble attracting donations or setting up smart, ultra-sophisticated campaigns that utilize every resource at their disposal. In fact, one of the most prominent beneficiaries of this maneuver is current Missouri Attorney General Chris Koster, who ran as a Democrat in the 2008 cycle.

It seems incongruous to me that GRO does not challenge Sinquefield’s proposals on their merits, but chooses to focus their advocacy on the notion that a private individual should not use their resources to advocate for favored policies. Worse, GRO does not just want to advocate against these policy proposals; they want to prevent Missouri citizens from having the option of voting on them.

It is not the case that Rex and Jeanne Sinquefield are misusing their wealth to promote policies that they advocate; indeed, if there is an allegation of misuse it should be made through a legal challenge rather than an allegation of misconduct.

Regarding those allegations, first, there is no warrant for the claim that Sinquefield’s personal crusade is exclusively designed to benefit investors and the wealthy elite. Second, an examination of the Sinquefield’s charity work indicates that it is both extensive and intellectually coherent with their political efforts. The website for the Sinquefield Charitable Foundation indicates a long history (at least 15 years) of supporting programs like Teach for America, Voices for Children (advocates for abused and neglected children) and the Special Learning Center (a program that aids children with developmental delays and disabilities). Also listed are their efforts to fund autism research and their sponsorship of the University of Missouri-Columbia’s School of Music to the tune of $1 million.

The further implication that Sinquefield represents big bankers and the moneyed elite is also implausible. To understand why, you have to be familiar with the company that Sinquefield co-founded, Dimensional Funds Advisors (wiki here, Fortune article here).

Dimensional Funds Advisors (DFA) is an investment bank with a philosophy unique among investment banks. DFA’s investing revolves around the efficient markets theory developed by Eugene Fama at the University of Chicago.  It argues for the use of enhanced indexing and passive management rather than stock-picking and active management. In a nutshell, they eschew the idea that investors gain when depending on costly and highly mathematical forecasting methods prioritized by Wall Street in favor of value-oriented, long-term investments. Keep in mind that this wasn’t a company founded by Wall Street millionaires; it was started in a New York apartment in 1975.

DFA has met with astounding results.  By containing both the transaction costs associated with active investing and the costs associated with highly sophisticated predictions, they were able to offer consistently excellent returns.  They currently manage more than $100 billion in assets. More importantly, the DFA model is not one that prioritizes outsize compensation packages that are not linked to performance. As a result, while companies like Enron and AIG and Goldman Sachs were inventing new ways to rip people off, DFA represented an ethos that was simultaneously profitable, honest, intelligent and in some senses extremely subversive.

From this standpoint, it’s not fair or honest to describe the Sinquefields as corporate shills, nor is it fair to demonize them for taking stances that Grass Roots Missouri either doesn’t understand or chooses to not engage on the merits.

Eapen Thampy is a freelance writer who studied economics and mathematics at the University of Missouri-Columbia.  You can read more of his work at ducksandeconomics.wordpress.com.

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First, there is no warrant for the claim that Sinquefield’s personal crusade is exclusively designed to benefit investors and the wealthy elite. Second, an examination of the Sinquefield’s charity work indicates that it is both extensive and intellectually coherent with their political efforts

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