It’s Good to Have Friends in Texas

The University of Texas System regents have chosen to invest $10 million in a start-up company that provides web-based advising services to university students. Perhaps a good idea, although unlike nearly all other investments of the System’s endowment, this one was made by fiat of the Board of Regents with no consultation of its investment advisors. Interestingly, the start-up is run by a man who was on Gov. Rick Perry’s re-election finance committee and by another whose father was a previous chancellor of the System (with the former chancellor being part-owner of the company).

This is one of the best examples I’ve ever seen of successful rent-seeking in the public sector (although laypeople might use a less felicitous term than rent-seeking).  This blog needs a contest for the most outrageous example of this behavior, and this is my entry into that contest. So, dear readers, please share your examples in the comments section.

[HT to AC]

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  1. jonathan says:

    This is the way it’s done in Texas: old fashioned who you know business. What was called “cronyism” until the GOP – particularly Paul Ryan – decided to change the meaning so “cronyism” means regulation. There are newspaper and magazine articles about how businesses with ties to Perry prosper – and by that I mean stuff written in state, not as part of the Presidential campaign.

    But Texas isn’t different from other states. It seems to be a law that the governor of Illinois must go to prison. Same for the speaker of the Massachusetts house.

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    • Tiffany Madison says:

      True, but please remember that our business culture is anti-government. Perry plays politics for survival, or our titans will eat him alive. They fun his campaign and it’s a back-scratching situation the business entities control because our business culture is tribal and leaders stick together to keep politicians out of their way.

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      • James says:

        “They fun his campaign…”

        Really? And how could they do that better than the man does himself? He is, after all, the Governor who responded to Texas’ ongoing drought problems by proclaiming that Texans (at least the good, Gawd-fearing ones) should just pray it away.

        Some months later, unfazed by the fact that God’s response to his prayers was to send Texas the hottest, driest summer in recorded history, he applied the same prayer tactic to fixing the economy.

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      • Tiffany Madison says:

        Fund* I am not a Perry fan, perhaps I should have stated that to ease your attack, because I am unsure what your point is? He is crooked, a snake-oil salesman and has no chance of winning the nomination. He’s ridiculous.

        I was simply stating that Texas businesses fund his coffers, just like other businesses, special interests, etc. in other states fund the coffers of politicians on both sides of the party line. Our nation has been bought and sold long ago… that is how business is done. However, in Texas, our unique business culture is very tribal. There is a camaraderie amongst business owners, even those that are competitors, that keep men like Perry in line.

        Low unemployment, great business tax culture, and restraint on government growth and regulating business is less about Perry’s supposed genius and more about the fact that the 204 super-donors who each gave $100,000 or more cushioned Perry’s coffers with $51 million (he raised $102 million total) for his state campaign committee between 2001 and 2010. He is their puppet and acts accordingly because they will work together to remind him who pays the piper if he doesn’t watch himself.

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  2. Jack says:

    Hidden due to low comment rating. Click here to see.

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    • Daniel says:

      I hardly think they are comparable

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      • EP says:

        You’re right, Solyndra got 50 times as much money.

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      • Tiffany Madison says:

        The corruption stinks across the board, across party lines.

        “A House Energy and Commerce subcommittee investigating the collapse of Solyndra voted today to authorize the panel to subpoena the White House to produce internal correspondence on its dealings with the bankrupt solar panel manufacturer. The committee issued a broad call for all internal documents–including correspondence, memorandums and drafts–and authorizes the panel’s chairman to issue to subpoenas to White House Chief of Staff Bill Daley and Bruce Reed, Vice President Biden’s chief of staff.

        “This is not a fishing expedition,” said Cliff Stearns, the chairman of the Energy’s oversight subcommittee. “We want answers and so do the American taxpayers. It’s unfortunate that it has come to this, but we do not have faith in the White House overtures” to produce relevant documents.

        The White House has handed over 85,000 documents on the Department of Energy loan guarantee program since the committee launched its investigation. Days before the collapse, an investment banking firm that had already made a million dollars analyzing options for Solyndra advised the White House to bail the company out, presumably so they could continue making money analyzing options for Solyndra. But the full bailout recommendation was rejected. By then it was too late because they’d already auctioned off the whistling robots.

        Solyndra’s former CEO received nearly a half million dollars in severance. What was your cut?

        I don’t even want to think of how many “collapsing” companies rose and fell under the Bush administration, either. It’s bi-partisan greed.

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    • Ben says:

      C’mon, dude. This has nothing to do w/ Republican/Democrat. This is about corruption. No one is claiming either side is more corrupt. The point is to shine the spotlight on this stuff (since big media has no interest in doing it) so we can limit it.

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    • stedebonnet says:

      Hammermesh, regardless of his political views, is reporting on an economic topic (rent-seeking). He probably is in a good position to talk about rent-seeking in Texas, since he teaches at the University of Texas. I don’t think hes necessarily undermining Perry, just providing us an example of rent-seeking that probably has a direct impact on his teaching career.

      My example of rent seeking:
      AARP’s support of Obamacare, even though it cuts billions from Medicare. While not as direct as the Perry example, the organization manipulated its members, who happen to be one of the largest cohorts of voters, to support the healthcare bill. Why would AARP drum up support among its members if it hurts them? Because the organization (and its subsidiaries) will make billions.

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  3. lou says:

    My example is from earlier in the year when former FCC Commisioner Meredith Attwell Baker took a job at Comcast as senior vice president for government affairs mere months after voting to approve a hotly contested merger between Comcast and NBC.

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  4. EP says:

    The entire DHS.

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  5. Tiffany Madison says:

    Fund* I am not a Perry fan, perhaps I should have stated that to ease your attack, because I am unsure what your point is? He is crooked, a snake-oil salesman and has no chance of winning the nomination. He’s ridiculous.

    I was simply stating that Texas businesses fund his coffers, just like other businesses, special interests, etc. in other states fund the coffers of politicians on both sides of the party line. Our nation has been bought and sold long ago… that is how business is done. However, in Texas, our unique business culture is very tribal. There is a camaraderie amongst business owners, even those that are competitors, that keep men like Perry in line.

    Low unemployment, great business tax culture, and restraint on government growth and regulating business is less about Perry’s supposed genius and more about the fact that the 204 super-donors who each gave $100,000 or more cushioned Perry’s coffers with $51 million (he raised $102 million total) for his state campaign committee between 2001 and 2010. He is their puppet and acts accordingly because they will work together to remind him who pays the piper if he doesn’t watch himself.

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  6. Eric says:

    Here’s another example from Texas Tech University, where the University and the alumni association helped bankroll a frat brother’s parking garage project. They now stand to lose $1.2 million. http://www.dailytoreador.com/news/article_9802d34c-ff90-11e0-b8cb-0019bb30f31a.html

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    • Tiffany Madison says:

      It definitely happens. That’s also investment. I would love to look at these examples in California. Can you imagine how much corruption has run away with both private and public funds through special favors? Mind-boggling.

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  7. Adam says:

    I guess I am new to economics (I had to look up the term “rent-seeking”), but after looking at the definition of rent-seeking, how are the majority of IPO’s and perhaps the entire stock market not just a giant rent-seeking scheme. In reality, they don’t create wealth, they just let people cash out. And the majority of people who buy stocks aren’t actually adding to economic output in a measurable way. They are just along to see if the natural resource becomes any more valuable.

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