My friend A, as well as many others, are complaining about former President Obama taking $400,000 for giving a speech (his first paid speech since retiring from office).  He complained that Obama should be “more discerning as to who he should receive it from regarding topic.  Wall Street has no business funding a healthcare talk.”

So, here’s Bob’s opinion on that.

President Obama is indeed giving this speech to “Wall Street” in the context of there being only two parts to America, Wall Street and Main Street.  But that’s not really a valid context to use.  There are many parts to Wall Street, as well as many to Main Street.  In fact, it is not very beneficial for us to think only in this binary way about the economy.

As stated, Obama is being paid $400,000 to give a speech about healthcare.  But who, exactly, is he giving this speech to, and who is paying him to do it.  And why would you pay an ex-President that much money to speechify?

The speech is to be given at a Cantor Fitzgerald healthcare conference.  Cantor Fitzgerald is a medium-sized investment bank (medium-sized only in the context of investment banks, which can be huge, e.g. Goldman Sachs, etc).  Some will remember it as having many of its executives and staff killed in the 9/11 attack.

My friend A seems to think that Obama will be speaking to a group of healthcare executives, either telling them “secret ways” they can make more profit from their nefarious businesses, or patting them on the back and telling them how wonderful they are.  But he will actually be doing neither.

A conference, such as this one, is an event sponsored (generally) by a bank or brokerage firm, open either to their clients, current or prospective, or to anyone willing to pay for admission to it, or to any combination of the above.  This may be a one-day affair or it may go on for days.

In this case, its subject is healthcare.  Typically, this means that there will be representatives of various healthcare companies present to give prospective investors information about their companies.  They may man booths, such as you would see at the kind of convention we’ve all been to, or they may only be available for panel discussions or one-on-one meetings with potential investors.  The exact setup depends on a few variables, including the size of the investment required to attend the conference.  In other words, if the conference is restricted to investors with large amounts to invest, it is more likely that top executives of the healthcare companies will attend, and more likely that meetings will be more personally directed.

Additionally, there will be speakers, either solo or in the panels, who are analysts in the healthcare field.  They may come only from the firm sponsoring the conference (Cantor in this case) or they may be from agencies or “think-tanks” that study the field.  Outside analysts will probably be paid for giving their opinions in the panels, etc, although obviously not a fraction of what Obama gets.

The attendees at the conference will be considering investing in the healthcare field.  Or, possibly, DIS-investing in it, if they don’t like what they hear.  Who are these people?  They may be high-net-worth people, i.e. so-called “fatcats” who have good-sized fortunes to invest.  They may be analysts or executives of mutual funds (possibly some contained in your 401(k) or IRA), trying to decide where to put their clients’ money.  They may be from pension funds, representing teachers or firemen or mineworkers or you.  If it’s a wide-open paid conference, they may be analysts from other banks or investment firms getting the latest scoop on the industry.

The executives or other representatives of the healthcare companies are there to encourage the attendees to invest in them, either as initial investments that go right to the company, or as current market stock investments that help support the price of the stock.

So why does Cantor Fitzgerald spend its own money to host this conference, typically at an expensive hotel or meeting site?  It is simply to encourage the investors, whoever they may be, to do their investing through Cantor.  The conferences are held to provide investment guidance, which is a valuable quantity to the attendees.  Cantor is willing to spend large sums, quite simply in the hope that they will keep their current clients happy, as well as attract new clients.  An investment bank or brokerage earns a large portion of its earnings from fees and commissions charged to clients for handling their investments.

One important thing to remember here is that, by and large, Cantor Fitzgerald doesn’t care much whether the resulting decisions of the attendees after the conference are positive towards investing in healthcare or negative. Cantor simply wants to provide that valuable quantity, Information.  They know that the attendees have to invest their money in something.  Funds have to keep generating returns on their investments if they want to keep their investors or if they want to keep paying their pensions.  As to large individual investors, well, think of yourself (even if you only have a little spare cash to your name):  do you want to leave your money in a bank account paying less than 1% or do you want to put it in something that will produce higher returns?  So Cantor will have other conferences covering other fields, and will provide investor advice to its clients at all times about all industries.

The healthcare executives at the conference, of course, would like to have the impression of their field be positive.

Now we come to our primary topic, the $400,000 speech being given by former President Obama. That’s a lot of money.  Why would Cantor pay him that much to speak?  They want people with high recognition, who have something to say that’s important in the field of the conference.  That’s because they want to attract people to this conference, thus earning themselves new customers and greater commissions and fees.  You can’t get much higher recognition (in someone who’s not currently holding political office) than the President who’s just left office.  Especially one who has been responsible for so much change in the healthcare field.

Former Presidents command high speaking fees.  Bill Clinton earns anywhere from $150,000 to $450,000 for his speeches.  Ronald Reagan once got $1,000,000 (in 1989 dollars!) each for two speeches given in Japan  Rudy Giuliani’s highest-paid speech earned him $270,000. Donald Trump was paid $1.5 million per speech for The Learning Annex’s Real Estate Wealth Expos.  So President Obama, giving his very first paid speech after leaving office, on a subject he knows well, seems like a relative bargain.

Now here’s the really interesting part.  He’s being paid to talk about the future of healthcare.  For all we know, he will stride up to the dais, say “Healthcare in the US will be socialized in two years, all your companies will be bankrupt, don’t invest a penny in them, thank you and good night.”  He probably won’t, but he could.  Cantor Fitzgerald is paying him to give his honest opinion about the subject.  That what the attendees want also.  They’re not interested in some BS about how great everything is.  They want real information about it,because they’re investing real money.  Oh, Cantor will probably be happy if he says what a great investment bank they are, and maybe tells a joke or two, but that’s not what they’re really paying for.

President Obama is a DRAW, especially this early in his retirement.  He’s worth every penny they pay him, just for attracting people to this conference.

As for his motives, they’re probably pretty simple.  He’s worked in academia and politics his entire life.  For someone of his qualifications, those are low-paying jobs.  Even the Presidency.  It’s time for him to make some money for himself and his family, as is anyone’s right.

And that’s Bob’s opinion.