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Thursday, March 31, 2011

Special Interests At Work

In case anyone is still wondering how Special Interests influence government, this article in Business Week should clear up any lingering questions. This is about Republicans but it works just as well for Democrats.

The Republican Money Primary Begins

While no GOP candidate is officially running, Romney, Pawlenty, Barbour, and others are courting fundraisers who have come up big in the past

BW Magazine

This Issue

magazine cover

March 21, 2011

Before they announce their candidacies, plant a yard sign, or rent storefront space in Des Moines, Republican Presidential hopefuls, including former Massachusetts Governor Mitt Romney, former Minnesota Governor Tim Pawlenty, and Mississippi Governor Haley Barbour, are building high-powered fundraising teams. Every four years a number of preliminary contests "occur before a single vote is cast," says former Representative Bill Paxon of New York, and "the most important of those is for the major fundraisers." Paxon, a senior adviser at law and lobbying firm Akin Gump Strauss Hauer & Feld, will support Barbour, should he run.

With individual donations capped at $2,500 for primaries and candidates unwilling to limit spending in exchange for federal financing, the importance of "bundlers" who can tap large networks of friends and associates has grown. President George W. Bush called his bundlers Pioneers (those raising at least $100,000) and Rangers (at least $200,000). In 2008, Barack Obama and John McCain elevated bundling to an art: Some 47 people collected at least $500,000 apiece for Obama, and 65 people took in at least $500,000 each for McCain. "Money is nothing but voice," says former Republican National Committee Finance Co-Chairman Mel Sembler, a shopping-center developer in St. Petersburg. "You can always tell how much support a candidate has by how much money he has raised," he says. Without it, "you can't hire staff, you can't fly over the country, you can't have television ads."

With the Feb. 6, 2012, Iowa caucuses less than 11 months away, prospective Republican candidates are courting the Pioneers and Rangers. "There is a base of hundreds of folks who go back to the Bush campaigns," says Paxon, himself an ex-Pioneer. "I hear from folks who are being asked to go to Boston or Minneapolis or Biloxi. They're not going to those cities this time of year for nice weather or a dinner."

Former Bush Ranger Robert Wood Johnson IV, the New York Jets owner, is backing Romney. So is lobbyist Wayne Berman, another past Ranger. Both raised at least $500,000 for McCain in 2008. Sembler is also on the Romney team, having hosted a Mar. 10 Florida meet-and-greet for the former governor. Pawlenty can count on the support of at least two other former Bush fundraisers: William Strong, a Morgan Stanley (MS) managing director, and Warren Staley, the former Cargill chairman and CEO.

Others are staying neutral for now. "I'm going to keep my powder dry," says Dirk Van Dongen, president of the National Association of Wholesaler-Distributors. A former Bush Ranger, Van Dongen also raised at least $500,000 for McCain. "It's a very uncomfortable situation to have to choose among friends," he says.

At least for now, he doesn't have to. No major Republican candidate has officially stepped forward. Former House Speaker Newt Gingrich said on Mar. 3 he's exploring a run and has set up a website for donations. Romney, Pawlenty, Barbour, and former Alaska Governor Sarah Palin are all hinting they'll run. By postponing announcements, they are able to build war chests through so-called leadership political action committees, which can take in $5,000 per election from individual contributors, twice what a campaign committee can accept. While leadership accounts can't be used in an actual campaign, they allow likely candidates to pay salaries to lock in staff who might later join their campaigns. The arrangement also allows candidates-in-waiting to travel to meet prospective supporters, develop lists of potential donors, and build goodwill by giving money to fellow Republicans.

By contrast, Obama raised almost $26 million in the first three months of 2007, instantly transforming him into a front-runner. Obama wound up raising a record $745 million and was the first major party nominee to shun public funds for the general election. In 2012, says Sheila Krumholz, executive director of the Center for Responsive Politics, the President could raise a record-shattering $1 billion, creating quite a challenge for any Republican foe.

The bottom line: Republican Presidential hopefuls haven't declared their candidacies, but the competition for top fundraisers, known as bundlers, has begun.

Salant is a reporter for Bloomberg News in Washington.

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