Sunday, May 31, 2009

Dealergate: Zero Hedge understated 'The Clinton Effect'

Few doubt that Zero Hedge is among the finest quant blogs on the planet. Its amazing work in analyzing the relationships between campaign contributions and Chrysler dealership closings resulted in a stunning conclusion: "a noticeable and highly positive correlation between dealer survival and Clinton donors" (87% confidence interval).

Put simply, Zero Hedge found that dealer owners who contributed to Hillary Clinton had a far-better-than-expected "survival rate" than any other set of donors.

And, oddly enough, "car czar" Steven Rattner's wife (Maureen White) is described on her own website as the "National Finance Chair of the Hillary Clinton for President Campaign".

Now, analysts will point to 90% or 95% as a "gold standard" confidence interval and the ZH data is stuck at 87%. But there's a simple reason that the Zero Hedge correlation is (perhaps dramatically) understated: the database of dealership owners lists only a single party in each record. But many dealerships are owned by multiple parties.

And, in some cases, those parties are billionaires who do not want their names listed as primary owners in these types of documents.

Who owns RLJ?

The RLJ dealer group, first identified by Joey Smith, is reported to have three owners:
  • Steve Landers - a long-time car dealer who is listed as the primary owner;
  • Thomas "Mack" McLarty - former Chief of Staff for President Clinton
  • Robert Johnson - founder of Black Entertainment Television
It is important to note that neither McLarty's nor Johnson's name appear as owners in the database utilized by ZH.

Landers, who would have appeared in most of the RLJ records during the Zero Hedge analysis, donated a modest sum to GOP candidates (a few thousand dollars).

McLarty, on the other hand, is a huge Democratic donor. The search I performed showed dozens of contributions, approaching a hundred thousand dollars. And not a dime to a Republican cause or candidate.

Johnson, on the other hand, makes McLarty look like a piker. The Washington Post reports on Johnson's largesse when it comes to Democrat causes:

Since 1990, Johnson has donated $2 million to congressional and presidential candidates, and 99 percent of that has gone to Democrats, according to the Center for Responsive Politics. He has given $14,800 to Hillary Clinton since she first ran for the Senate in 2000. He gave $4,500 total to Obama during the 2004 and 2006 cycles...

So, in fact, a half dozen -- or more -- records appear to be non-Democrat donors in the Zero Hedge database, but actually mask millions in Democrat donations.

How did RLJ fare?

Thanks to Joey Smith's work, we have an excellent picture of how RLJ fared when the smoke cleared.

Bentonville, Arkansas

The two Springdale dealerships gave no money to any political candidates since 2004. The two dealerships will close in June while the RLJ-owned dealership in Bentonville will remain open. The Landers-McLarty dealership will have no other Chrysler dealers within a 20-mile radius of the dealership.
Huntsville, Alabama

The dealerships in Athens and Decatur gave no money to any political candidates since 2004. Landers-McCarty and the Athens dealership will remain open while the Decatur dealership will close in June.
Branson, Missouri

The RLJ-owned dealership in Branson will remain open while the other three dealerships will be forced to close in June. Tri-Lakes Motors in Branson (RLJ owned) will have no other Chrysler dealers within a 30-mile radius of its dealership.
Lee's Summit, Missouri

The RLJ-owened dealership will remain open while the other four in Raytown and Harrisonville will close. The RLJ dealership will have no other Chrysler dealerships located within at least a 20-mile radius. All of the local competition will be wiped out due to the Chrysler closings.
Shreveport, Louisiana

The Bossier City dealership owned by RLJ-McCarty-Landers and the Shreveport dealership owned by Marshall Hebert will stay open. The Shreveport dealership owned by Stinson (a major GOP donor) will be forced to close.
Kansas City, Missouri(Olathe area)

Olathe DCJ (RLJ-owned dealership) will remain open. Bud Brown Chrysler and Keystone Chrysler will both close their doors. It looks like Olathe DCJ will not have any competition from other Chrysler dealers within at least 15 miles of their dealership.

Suffice it to say that none of these selective closings -- that provided dramatic improvements in the competitive landscape for McLarty and Johnson -- showed up in the Zero Hedge analysis.


Though Zero Hedge found a "eyebrow-raising" correlation between Clinton donors and dealerships that remained open, instances like these show that the effect is understated. Perhaps dramatically understated.

More analysis is needed and will be forthcoming, but until then, the Obama administration's vaunted "transparency" pledge appears as empty as a promise that Michael Moore will pass the potato chips "in a minute".

Update: Red State, Libertarian Republican and Disenfranchised 6909 have the crucial coverage.