support the pound, but when Soros made his big bet that the pound would have to be devalued, neither European bank joined the Bank of England's fight to maintain its value. Whether Soros really knew that they would stand aside is entirely unproven—Rahn's vaguely sourced charge could be wrong. Yet the value of that policy information would have been extraordinarily high. And investors will sometimes do anything they can to attach themselves to politicians who can tip them off to information like that.
Soros has long recognized the important intersection between politics and finance. Mark Malloch Brown, former deputy chief to UN Secretary-General Kofi Annan, left the United Nations at the end of 2006. A few months later, he was named vice president of the Quantum Fund, which is run by Soros. Brown had no experience in hedge funds, though he had worked with Soros on philanthropic efforts in eastern Europe.14 His chief value lay in his political connections.
In the United States, Soros has given generously to prominent members of the political class. Since Harry Reid became the Senate minority leader in 2005 and majority leader in 2007, Soros has poured more than $220,000 into the Democratic Senatorial Campaign Committee through a variety of ventures and family members. He was also an early backer of Barack Obama. He donated more than $60,000 to Obama's 2004 Senate run and was vital in building the 2008 Obama campaign's war chest.
As one writer put it, Soros was one of Obama's 'first big catches, and within just two months Obama had a New York money machine that rivaled Clinton's.' Indeed, many of Obama's earliest campaign financiers came from the hedge fund industry, including Orin Kramer and Brian Mathis. By the first quarter of 2008, Obama had raised more money on Wall Street than either New Yorker in the race—Hillary Clinton or Rudy Giuliani. Goldman Sachs alone kicked in $571,330.15
Soros is, of course, free to contribute to any candidate he likes, and to help organize fundraising for them. Other financiers do these kinds of things all the time. What is remarkable is that once Obama was elected, Soros not only provided advice and direction on the President's plans for an economic stimulus, but he also had regular private consultations and meetings with White House senior advisers while he was making investment decisions related to the stimulus program. Section 13(f) of the Securities Exchange Act of 1934 requires 'institutional investment managers' to report certain positions in publicly traded securities by filing a Form 13 on a quarterly basis. However, these managers are not required to report transactions or prices. Thus it is extremely difficult to determine how profitable (or not) investments by an investment manager like Soros have been. What is certain is that Soros seemed to have a keen ability to anticipate what Washington was going to do and position himself to potentially profit handsomely from it.
Days after President Obama was elected, Soros was helping to set the agenda. Soros had regular meetings with senior White House officials. He met with Obama's top economist, Larry Summers, on February 25, 2009. He also had meetings in the Old Executive Office Building with senior officials on March 24 and 25 as the stimulus was being forged.16 He was later involved in private discussions concerning widespread financial reform.17
Soros was also a financial backer of the Center for American Progress, which functioned as Obama's think tank. John Podesta, who headed CAP, was Obama's transition director. Several CAP policy ideas became part of Obama's agenda. Soros said at the time, 'I think we need a large stimulus package, which will provide funds for state and local government to maintain their budgets, because they are not allowed by the constitution to run a deficit. For such a program to be successful, the federal government would need to provide hundreds of billions of dollars. In addition, another infrastructure program is necessary. In total, the cost would be in the 300 to 600 billion dollar range.'18 On another occasion he advocated for a 'well-advanced fiscal stimulus package' to help the American economy.19 In these general terms, he spoke like a Baptist.
But as tens of billions of federal dollars became available, he invested like a bootlegger. In the first quarter of 2009, Soros nearly doubled his holdings in Hologic, a manufacturer of diagnostic equipment, which benefited from federal spending on medical systems. He more than tripled his holdings in Emulex, a leading designer of fiber channels and software products and a government contractor that would win big with infrastructure spending. He also tripled his holdings in EMC, a data storage company, which claimed on its website that 'EMC's products and services can support stimulus programs tied to creating and preserving jobs in transportation, education, healthcare, carbon-emission reduction, and more.'20 He also increased his holdings in Teradata by almost 60%. Teradata provides computer and network technologies to the federal government, including the military and Medicare and Medicaid.21
He also bought 210,000 shares in Cisco Systems, another big stimulus winner, and shares in Vulcan Materials, which is the nation's foremost producer of construction materials such as concrete. The company stood to do big business because of infrastructure spending.
One of Obama's stimulus initiatives was for updating Internet networks around the country. Soros bought shares in Extreme Networks in the first quarter of 2009. Months later, the Internet company was 'pushing broadband networks into rural America, as part of President Obama's broadband strategy.'22 He also increased his holdings in Radware, an Internet technology company, by 476%. Radware provides high-tech services and computer applications to twelve government agencies.23
In the second quarter of 2009, Soros bought shares in Blackboard, a sizable stimulus recipient of technology grants in education. He also snapped up shares in Burlington Northern Santa Fe and CSX, which would benefit from President Obama's stimulus plans for railroad transportation. Later he bought shares in Cognizant Technology Solutions, an information technology company that was an important health care vendor as well as an education technology provider. Cognizant was a two-fer, a winner in both realms. Indeed, the company reported in one of its publications that business was strong 'due to federal economic stimulus funds.'24
President Obama's stimulus for alternative energy companies and for developing a smart grid for utilities was also an area where Soros traded aggressively. He snapped up Constellation Energy Group stock (300,000 shares), which received $200 million in federal stimulus money through a natural gas utility subsidiary. He also bought a stake in Covanta (4.6 million shares), a clean-energy company and federal grant recipient. Covanta also received money through earmarks from members of Congress.
Again, to be clear, it is not necessarily the case that Soros had specific insider tips about any government grants. You might argue that any smart investor would have guessed that economic stimulus funds would be used to promote infrastructure improvements, green energy, and certain high-tech ventures. Yet the list of specific investment decisions by Soros is closely aligned with the list of grant recipients. In addition to the examples above:
In the first quarter of 2009, Soros made an initial purchase of more than 1.5 million shares in American Electric Power, a utility that had invested heavily in an energy project called FutureGen. FutureGen was a government-backed zero-emissions electric power project launched by the Bush administration in 2003, which at first focused on a coal-fueled electric plant in Illinois, but had been subsequently canceled before the 2008 election. President Obama revived the project in June 2009 and poured $1 billion of taxpayer money into it. Soros bought his shares just in time for the revival.25 Months later, the company received another grant, this one for a coal plant in West Virginia.
Soros scooped up shares in Ameren, a Midwest utility company that was given a $540 million clean-energy grant from the Department of Energy in conjunction with NextGen.
Soros for the first time bought shares in Entergy, an energy utility company, to the tune of almost one million shares. Entergy would go on to get numerous grants from the Department of Energy, for smart grids, smart meters, and other federal stimulus programs.
He also bought NRG Energy, more than half a million shares' worth. The company owns power-generating facilities and was a recipient of Department of Energy grants, including one for $154 million, announced by Energy Secretary Steven Chu.26
Soros bought a quarter of a million shares of Public Service Enterprise Group, another recipient of Department of Energy federal stimulus grants.27
Soros held a stake in Allegheny Energy (250,000 shares) and PPL (175,000 shares), which also won lucrative grants from the Department of Energy. He bought shares in Edison International, yet another utility company that cashed in on DOE grants.
Soros also invested in a small ethanol-producing company called BioFuel Energy, which had created a new gasoline containing 15% ethanol. At the time, the EPA had approved a limit of 10% ethanol in gasoline. BioFuel Energy owns and operates two of the largest dry-mill ethanol production facilities in the United States. Getting
