Working the Refs

Obama’s favorite “independent” economics analyst donated to his campaign, currently advises hedge funds

April 23, 2012

One of the White House’s favorite sources of "independent" economic analysis is run by a long-time Democrat and prominent hedge-fund adviser who has donated thousands of dollars to Barack Obama’s presidential campaign.

Laurence Meyer, a former governor of the Federal Reserve Board under President Clinton who oversaw the controversial bailout of the major hedge fund Long-Term Capital Management, founded the economic consulting firm now known as Macroeconomic Advisers (MA), where he currently serves as a Senior Managing Director.

Meyer is one of a number of former Fed officials who have gone on to high-level positions in the financial industry, taking with them privileged information from the notoriously secretive body.

Meyer’s firm, based in St. Louis, advises some of the largest hedge funds in the world and provides analysis to "major financial firms and central banks."

In its spare time, MA provides "independent" economic analysis to the White House.

When President Obama unveiled his $450 billion stimulus proposal—the American Jobs Act—in September 2011, the administration chose not to include its own projections of the bill’s economic impact.

Instead, MA delivered a mostly positive and headline-friendly analysis, predicting that the America Jobs Act "would give a significant boost to GDP and employment over the near-term."

The White House was eager to tout the study as "independent" evidence that the president’s plan was preferable to the Republican alternative.

That is what Obama did at an Oct. 6, 2011 press conference, even handing out a "little homework assignment" to the White House press corps.

"Go ask the Republicans what their jobs plan is if they’re opposed to the American Jobs Act, and have it scored, have it assessed by the same independent economists that have assessed our jobs plan," Obama said, referring to the MA report. "Have those economists evaluate what, over the next two years, the Republican jobs plan would do. I’ll be interested in the answer."

Several weeks later, Meyer’s firm released a comparative analysis of the Jobs Through Growth Act, a plan authored by a group of GOP Senators.

White House Press Secretary Jay Carney pounced, delivering a verbatim but selective reading of the analysis to reporters traveling aboard Air Force One.

MA took issue with a particular aspect of the GOP plan—a balanced budget amendment (BBA)—writing: "If actually enacted in fiscal year (FY) 2012, a BBA … would quickly destroy jobs while creating enormous economic and social upheaval."

Carney then offered his own summary of the analysis, again noting the ‘independent’ source.

"By the observation of independent outside economists, those proposals as best would have no positive impact on economic growth or job creation in the near term, as I just read to you," he told the reporters.

When it comes to describing Meyer and MA, however, "independent" and "outside" appear to be misplaced adjectives.


Meyer and two other high-ranking MA officials (no other employees are listed in the database) have given a combined $24,750 to Democratic candidates and committees since 2007, according to a database maintained by the Center for Responsive Politics.

Meyer gave at least $3,000 to Barack Obama in 2008 while his son, Kenneth Meyer, the firm’s vice president of sales, contributed approximately $3,000 to Obama’s campaign.

MA president and co-founder Chris Varvares has given at least $18,650 to Democratic candidates and committees since 2007, including at least $4,600 to Obama.

None have contributed money to Republicans.

In his 2006 book titled A Term At The Fed, Meyer argued that his partisan bona fides were a key factor in his nomination to the Federal Reserve Board.

"I was widely recognized as a Democrat and modestly outspoken in support of Democratic positions on economic policy," he wrote. "My consulting firm had even earned a gold star by doing a much appreciated piece of policy analysis for the Clinton presidential campaign. So I had the credentials."

MA also has connections to the Obama administration.

In 2010, the president appointed former MA employee and Clinton adviser Janet Yellen as vice chair of the Federal Reserve. Meyer hailed his former colleague as "the best possible choice."

"Janet is one of my favorite people, a good friend, a former colleague (both at the Board and briefly at Macroeconomic Advisers), one of the best economists I have ever worked with, and someone whose judgment I so much respect," Meyer wrote on the MA blog.

Yellen has donated at least $3,000 to the Democratic National Committee since 2000, and gave at least $2,000 to failed presidential candidate John Kerry (D., Mass.) in 2004.

In addition to advising major hedge funds, MA provides economic forecasting data for the ADP National Employment Report, which typically releases its projections ahead of the official report from the Bureau of Labor Statistics (BLS). Investors typically watch the ADP report for a "sneak peak" of what to expect from the BLS.

The ADP report has a history of inflating employment data, however.

In July 2011, ADP reported 157,000 new jobs created. Financial markets skyrocketed. But, when the BLS data came in 40,000 jobs below the ADP report, the S&P 500 lost 5 percent of its value.

Four months later, ADP overshot the BLS employment figures by more than 120,000, causing similar turmoil in the markets.

In December 2011, when ADP projected job growth at levels three times higher than was reported by the Wall Street Journal, finance writer Dan Burrows urged readers to take the ADP data "with a boulder of salt," noting that the "notoriously volatile" firm had "a history of big misses in forecasting the official number."

That could explain why most of the bad economic news over the past few years has been "unexpected."