US Congress Sells Out

US Congress Sells Out

One of the Year’s Most Suppressed Stories 

Federal lawmakers responsible for overseeing the US economy have received millions of dollars from Wall Street firms. Since 2001, eight of the most troubled firms have donated $64.2 million to congressional candidates, presidential candidates and the Republican and Democratic parties. As senators, Barack Obama and John McCain received a combined total of $3.1 million. The donors include investment bankers Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley, insurer American International Group, and mortgage giants Fannie Mae and Freddie Mac. 

Some of the top recipients of contributions from companies receiving Troubled Assets Relief Program (TARP) money are the same members of Congress who chair committees charged with regulating the financial sector and overseeing the effectiveness of this unprecedented government program.  In total, members of the Senate Committee on Banking, Housing and Urban Affairs, Senate Finance Committee and House Financial Services Committee received $5.2 million from TARP recipients in the 2007-2008 election cycle. President Obama collected at least $4.3 million from employees at these companies for his presidential campaign.

Nearly every member of the House Financial Services Committee, who in February 2009 oversaw hearings on how the $700 billion of TARP bailout was being spent, received contributions associated with these financial institutions during the 2008 election cycle. “You could say that the finance industry got their money’s worth by supporting members of Congress who were inclined to look the other way,” said Lawrence Jacobs, the director of the University of Minnesota’s Center for the Study of Politics and Governance.

For instance, in 2004 when the Securities and Exchange Commission adopted a major rule change that freed investment banks to plunge tens of billions of dollars in borrowed money into subprime mortgages and other risky plays, congressional banking committees held no oversight hearings.  Congressional inaction also allowed mortgage agents to earn high fees for peddling loans to unqualified homebuyers and prevented states from toughening regulations on predatory lending practices. 

Author Matt Taibbi writes that some of the most egregious selling of the US government to Wall Street happened in the late nineties, when “Democrats, tired of getting slaughtered in the fundraising arena by Republicans, decided to throw off their old reliance on unions and interest groups and become more ‘business-friendly.’ Wall Street responded by flooding Washington with money, buying allies in both parties.” In the ten-year period beginning in 1998, financial companies spent $1.7 billion on federal campaign contributions and another $3.4 billion on lobbyists. Wise political investments enabled the nation’s top bankers to effectively scrap any meaningful oversight of the financial industry.

In 1999, Texas Senator Phil Gramm co-sponsored the bill that repealed key aspects of the Glass-Steagall Act, which, since the Great Depression, prevented banks from getting into the insurance business. The very next year Gramm wrote sweeping new legislation called the Commodity Futures Modernization Act, which made it impossible to regulate credit swaps as either gambling or securities. Trading in risky credit was thus deregulated.

In 1997 and 1998—the years leading up to Phil Gramm’s act that gutted Glass-Steagall—the banking, brokerage, and insurance industries spent $350 million on political contributions and lobbying. Gramm, then the chairman of the Senate Banking Committee, collected $2.6 million in only five years.  The law passed 90-8 in the Senate, with the support of thirty-eight Democrats, including Joe Biden, John Kerry, Tom Daschle, Dick Durbin and John Edwards.  The act helped create the too-big-to-fail financial behemoths like Citigroup, AIG and Bank of America—and in turn helped those companies slowly crush their smaller competitors, leaving the major Wall Street firms with even more money and power to lobby for further deregulation.

By early 2009, a whole series of new government operations have been invented to inject cash into the economy, most all of them under the completely secretive control of the financial sector. Taibbi points out that “While the rest of America, and most of Congress, have been bugging out about the $700 billion bailout program called TARP, newly created organisms in the Federal Reserve zoo have quietly been pumping not billions, but trillions of dollars into the hands of private companies (at least $3 trillion so far in loans, with as much as $5.7 trillion more in guarantees of private investments).” Taibbi continues, “This new, secretive activity by the Fed completely eclipses the TARP program in terms of its influence on the economy. . . . No one knows who’s getting that money or exactly how much of it is disappearing through these new holes in the hull of America’s credit rating. Moreover, no one can be sure that these new institutions are really temporary, or whether they are being set up as permanent, state-aided crutches to Wall Street, designed to systematically suck bad investments off the ledgers of irresponsible lenders.”

Taibbi concludes, “The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d’état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.”

Fraud and crisis continue to deepen and expand with significant conflicts of interest in Congress and the executive branch of US government. Simon Johnson, former IMF chief economist, says, “The finance industry has effectively captured our government.” 

Update by Lindsay Renick Mayer

Even as the federal government has continued to figure out ways to help the struggling finance sector and give the economy a boost, they’ve been collecting input from the very companies that have accepted taxpayer dollars and are, in part, being held responsible for the current crisis. But that’s not all they’ve collected—Congress has been busy fundraising from the finance sector, including those companies that received billions of dollars from TARP.

Since this story was written in February, the finance sector has, of course, continued to give money to candidates, party committees and political action committees. Since the start of 2009, Wall Street has donated $12.6 million—more than any other sector this year. And 58 percent of that has gone to Democrats, marking a change, perhaps, in political strategy. Not since the 1990 election cycle have finance, insurance and real estate companies given more than 52 percent of its overall donations to Democrats, and from 1991 to 2006 finance gave the majority of its money to Republicans.

Many of the companies that we wrote about in this story that sent their CEOs to testify before the House Financial Services Committee have actually scaled back their overall giving in the first quarter of 2009 compared to the first quarters of 2007 and 2005. This includes JPMorgan Chase, Bank of America, Goldman Sachs (which ranks No. 1 for a decline in contributions this year compared to the start of 2008), Morgan Stanley, Citigroup and Wells Fargo.  However, it is still very early in the cycle, and campaign contributions generally don’t start flowing in until closer to an election. For the most part these companies, like the rest of the industry, targeted Democrats with a majority of their political giving. 

Of course, a big story this year will be whether lawmakers took a hit to their personal finances like much of the rest of the country, or whether they personally benefited by infusing the Wall Street companies with taxpayer cash, especially members of the banking and finance committees. The 2008 personal financial disclosure reports with those answers are now available on OpenSecrets.org at: http://www.opensecrets.org/pfds/search_cid.php.

To read more about how lobbying and influence peddling are shaping legislation, keep up with CRP’s blog at http://www.opensecrets.org/news/.

And to do some investigating yourself, dive into our industry profiles: http://www.opensecrets.org/industries/index.php.

We also follow the cash flow to committees. Check out the Senate Finance Committee data here: http://www.opensecrets.org/cmteprofiles/index.php.

Truthout, October 2, 2008

Title: “Lax Oversight? Maybe $64 Million to DC Pols Explains It”

Author: Greg Gordon

Capitol Eye, February 10, 2009

Title: “Congressmen Hear from TARP Recipients Who Funded Their Campaigns”

Author: Lindsay Renick Mayer

Rolling Stone, March 19, 2009

Title: “The Big Takeover”

Author: Matt Taibbi



Student Researchers: Jocelyn Rapp and Caitlin Ruxton (SSU)

Faculty Evaluator: Samual Mikhail PhD Economics, Chip McAuley, PhD

Indian River State College and Sonoma State University

From http://www.projectcensored.org/

Lobbyists Buy Congress

Suppressed Story of the Year Number Six

According to a study by The Center for Responsive Politics, special interests paid Washington lobbyists $3.2 billion in 2008—more than any other year on record. This was a 13.7 percent increase from 2007 (which broke the record by 7.7 percent over 2006). 

The Center calculates that interest groups spent $17.4 million on lobbying for every day Congress was in session in 2008, or $32,523 per legislator per day. Center director Sheila Krumholz says, “The federal government is handing out billions of dollars by the day, and that translates into job security for lobbyists who can help companies and industries get a piece of the payout.” 

Health interests spent more on Federal lobbying than any other economic sector. Their $478.5 million guaranteed the crown for the third year, with the finance, insurance, real estate sector a runner up, spending $453.5 million. The pharmaceutical/health products industry contributed $230.9 million, raising their last eleven-year total to over $1.6 billion. The second-biggest spender among industries in 2008 was electric utilities, which spent $156.7 million on lobbying, followed by insurance, which spent $153.2 million, and oil and gas, which paid lobbyists $133.2 million. Pro-Israel groups, food processing companies, and the oil and gas industry increased their lobbying expenditures the most (as a percentage) between 2007 and 2008. 

Finance, insurance and real estate companies have been competing to get a piece of the $700 billion bailout package Congress approved late last year. The companies that reduced lobbying the most are those that declared bankruptcy or were taken over by the federal government and stopped their lobbying operations all together. “Even though some financial, insurance and real estate interests pulled back last year, they still managed to spend more than $450 million as a sector to lobby policymakers. That can buy a lot of influence, and it’s a fraction of what the financial sector is reaping in return through the government’s bailout program,” Krumholz said. 

Business and real estate associations and coalitions were among the organizations that ramped up their lobbying expenditures the most last year. The National Association of Realtors increased spending by 25 percent, from $13.9 million to $17.3 million. The American Bankers Association spent $9.1 million in 2008, a 47 percent increase from 2007. Other industry groups that spent more in 2008 include the Private Equity Council, the Mortgage Bankers Association of America and the Financial Services Roundtable. 

The US Chamber of Commerce remained the number one spender on lobbying in 2008, spending nearly $92 million—more than $350,000 every weekday, and a 73 percent increase over 2007—to advocate for its members’ interests. Pro-business associations as a whole increased their lobbying 47 percent between 2007 and 2008. 

With record spending on lobbying, some industries face serious cut backs and have put the brakes on spending, but have not discontinued the practice. Automotive companies decreased the amount they paid lobbyists by 7.6 percent, from $70.9 million to $65.5 million. This is a big change from prior years; auto manufacturers and dealers increased lobbying spending by 21 percent between 2006 and 2007. Between 2007 and 2008 the Alliance of Automobile Manufacturers, which testified before Congress with Detroit’s Big Three last year, decreased its reported lobbying by 43 percent, from $12.8 million to $7.3 million. Of the Big Three, only one company, Ford, increased its efforts, though not by much: it went from $7.1 million to $7.7 million, an 8 percent increase. 

Among Washington lobbing firms, Patton Boggs reported the highest revenues from registered lobbying for the fifth year in a row: 41.9 million dollars, an increase over 2006 of more than 20 percent. The firm’s most lucrative clients included private equity firm Cerberus Capital Management, confection and pet food maker Mars, communication provider Verizon, pharmaceutical manufacturers Bristol-Myers Squibb and Roche, and the American Association for Justice (formerly the Association of Trial Lawyers of America). 

Update by Lindsay Renick Mayer

It seems like this should be a classified ad: “Laid off and looking for work? The lobbying industry wants you!” Since we posted this story on OpenSecrets.org in January, the lobbying industry has only continued to grow, even as industries across the board have continued to shrink, forcing hundreds of thousands of Americans out of work. This growth could be attributed in part to the economy itself—many executives are looking for some help from the government to keep their businesses afloat. Others are simply taking advantage of the opportunities that a spate of government handouts has presented. But as long as there’s a federal government calling the shots, lobbyists will be paid more and more each year to hold their clients’ fire to lawmakers’ feet. 

Year after year we see increases in lobbying expenditures—in fact, 100 percent over the last decade—and the flurry of activity during the first three months of 2009 indicates that the trend won’t come to an end any time soon. Based on records from the Senate Office of Public Records, the nonpartisan Center for Responsive Politics found that from January through March, lobbying increased slightly compared to the same period of time last year, by at least $2.4 million. Unions, organizations and companies spent at least $799.7 million so far this year on sending influence peddlers to Capitol Hill, compared to $797.2 million during the same time in 2008. That might seem like a small increase compared to the billions spent each year on this activity, but in a time of economic turmoil, that’s a hefty revenue stream for a single industry. 

That said, the industries that have made the most headlines for the help they’ve asked for or received from the federal government actually decreased the amount they spent on lobbying in the first three months of 2009 compared to 2008. Recipients of cash from the federal government’s Troubled Asset Relief Program (TARP) handed out less money to lobbyists than they had in any quarter of 2008, in part, perhaps, because they faced new rules restricting their lobbying contact with officials in connection with the bailout program. CRP found that TARP recipients have spent $13.9 million on lobbying so far this year, compared to $20.2 million in January through March of last year and $17.8 million in the last three months of 2008. With the government doling out billions of dollars, these sums pale in comparison to the benefit the companies are reaping. 

To read more about how lobbying and influence peddling are shaping legislation, keep up with CRP’s blog at http://www.opensecrets.org/news/.

Source:

Open Secrets.org

Title: “Washington Lobbying Grew to $3.2 Billion Last Year, Despite Economy”

Authors: Center for Responsive Politics

Student Researchers: Alan Grady and Leora Johnson

Faculty Evaluator: John Kramer, PhD

Sonoma State University

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