Thursday, December 15, 2011

A financial exchange

Posted By on 12.15.11 at 08:00 AM

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I applaud Springfield's gift to our financial exchanges. Sure, it's a lot of money: the tax breaks the general assembly just passed for CME Group Inc. and for the smaller Chicago Board Options Exchange will cost Illinois $85 million a year.

But running an exchange is expensive business, especially with so many hungry mouths to feed. For CME—the parent of the Chicago Mercantile Exchange and the Chicago Board of Trade—those mouths include mayor Rahm Emanuel, house speaker Mike Madigan, governor Pat Quinn, and alderman and finance chair Ed Burke, big eaters all.

Just since 2010, CME's grocery bill for these four has set it back $420,000: the exchange group has given $200,000 to Emanuel, $100,000 to Madigan, $90,000 to Quinn, and $30,000 to Burke.

CME has also contributed $25,000 since 2006 to Madigan's daughter, Lisa—the attorney general. That's a drop in the bucket for the younger Madigan, who has raised millions since she first ran for state senate in 1997—but it's a nice gesture to the speaker. It was also a nice gesture when CME gave Anne Burke—Ed Burke's wife—$2,500 in 2007 for her successful campaign for the Illinois supreme court.

The needs of elected officials don't disappear in tough times, and CME has not abandoned its children just because the economy has foundered. The elder Madigan once could count on $5,000 every year or two from the Chicago Mercantile Exchange (CME's title before it acquired the Board of Trade in 2007). Lately the speaker can count on CME for much more: it gave him $35,000 in 2008, $50,000 in 2009, and the $100,000 last year.

There was a time when some drivers who were curbed by a police officer for a traffic violation would wrap a twenty around the license they handed over. This was not a bribe, of course; they were just showing their appreciation for the great service of police officers. The timing was coincidental. As it surely was when CME upped its support of Madigan to 100 grand last year, not long before the discussion about the tax breaks got going.

The Merc gave Mayor Richard M. Daley a hefty raise in 2007. He'd gotten merely a $5,000 contribution in 2001, and $25,000 in 2003. Then, in February 2007—$107,000. That summer the Merc bought the Chicago Board of Trade, with the mayor paving the way, as Ben Joravsky recounted last December. When an Atlanta exchange made a higher bid, hizzoner promised financial aid for the Merc (ultimately $15 million in tax increment financing) if the deal went through—and, voila, it did. Was the $107,000 given to Daley to entice him into helping the Merc prevail? Of course not. The Merc knew the deal would cause the mayor a lot of stress, and wanted him to be able to stock up on aspirin.

CME would have it hard enough if it only had to provide for the pols here at home—but it's got all those dependents in Washington to nourish as well. In the last election cycle, CME made almost $1.3 million in contributions to congressional candidates and federal PACs, and it's already spent another $582,000 federally in the current election cycle. With that large a charitable budget, you can understand why CME would need a little government help. And its good deeds are being rewarded: the tax break its getting will save CME $63 million annually, according to one exchange analyst.

Our Springfield legislators are assuring us now that the tax break was needed to keep CME from moving to another state, as it had threatened to. We couldn't afford to lose the exchange, and the taxes it pays the state, and the jobs it provides, the legislators say. That resembles what Daley said in 2007 regarding why he was helping CME: because if the Atlanta exchange bought the Board of Trade, it might move it to Atlanta.

Those explanations are reasonable, and might even be true. But with the large gifts from CME to high and mighty officials—how can we know?

I write about the murky world of campaign financing in this week's Reader—specifically, about mayor Emanuel's new PAC. In the story, I mention an intriguing campaign finance system proposed by a Yale law professor, centering on a "private donation booth." Under that system, campaign contributions would go into a blind trust before they're passed on to the intended recipients, so that the recipients wouldn't know who gave them.

It's hard to believe that we could devise a system that would truly keep contributions secret. But it's harder still to believe that under any system in which elected officials know who's throwing money at them, they won't reciprocate from time to time. Do you bite the hand that feeds you, or kiss it? Citizens are bound to be cynical under the present system. As with the twenty and the driver's license, sometimes people will just jump to the wrong conclusion.

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