Robert L. Borosage
240 former legislators, bank committee staffers, and Treasury officials deployed to lobby. $600 million spent in lobbying, trade association activity and political contributions since March 2008. And that is just from the six biggest banks. The entire financial industry is spending an estimated $1.4 million a day, hiring 70 former members of Congress to make their case.
These figures, drawn from a new report released by the Campaign for America's Future (which I co-direct), would be shocking if they weren't so sad and predictable. As the Senate moves towards passing financial reform legislation, it is worth focusing on how the lobby works.
Bailed out by taxpayers, the big banks -- Goldman Sachs, Bank of America, JPMorgan Chase, Citigroup, Morgan Stanley and Well Fargo -- are emerging from the financial crisis larger and more concentrated than ever. Their very size offends market competition. Entities that are too big to fail cannot be disciplined by the market.
Worse, as former IMF economist Simon Johnson has emphasized, their size and wealth also undermine democratic accountability. As the report shows, they exercise immense political power which they use not only to fend off reforms that might curb their excesses, but to sculpt laws and regulations that consolidate their privilege and profits. So despite popular anger at the banks, the Senate last week voted down the Kaufman-Brown amendment that would have put a lid on the size of banks, forcing the break-up of the big six.
The report, written by Kevin Connor of the Public Accountability Initiative and Lil Sis, highlights the corrupting revolving door that Washington insiders view as a sensible career path. The banks heavily rely on hiring retired legislators, former committee staffers and legislative aides. Although these are salad days for Democratic lobbyists, bipartisanship reigns. The banking lobby includes Dick Gephardt, former leader of the House Democrats, Trent Lott, former leader of the Senate Republicans, and former Republican House leader Dick Armey, and putative leader of one branch of the Tea Partiers. Connor names names of the major players of over 240 former government insiders now on the banks' payroll.
Needless to say, former legislators and staffers are masters of the back rooms. They gain easy access to sitting legislators. They help draft legislation. They know how to slip in key amendments and loopholes in dead of night. They know the players and the process.
More corrosively, the players -- the sitting legislators and current staffers -- know that after leaving Congress, they can comfortably make the family fortune by joining the lobbying profession. Not surprisingly, many seek to curry the favor of those who might later employ them. The revolving door doesn't just give special access to the bank lobby; it compromises sitting legislators and staffers looking out for their own futures.
How this backroom influence works is illustrated in the most recent "Financial Services Bulletin" of Concept Capital's Washington Research Group. (Concept Capital bills itself as a "total solutions provider" to hedge funds and other investors).
The bulletin (not available on the web) details amendments still to be considered to the financial reform bill and the timeline for moving to a vote. It highlights for its clients Senate Banking Chair Chris Dodd's "manager's amendment" likely to be unveiled this week.
"This is by far the most important amendment as it represents all of the deals that he has cut to find 60 votes for the bill. This is the most likely spot for many of the small changes to the bill to find their way into law," (emphasis added) including such bank favorites as pre-empting state attorneys general enforcement powers. The deals in the backrooms are getting cut as the debates on the floor drone on.
Ironically, the Washington Post recently reported on the distress of bank lobbyists faced with a financial reform bill that was being debated on the floor of the Senate in the light of day rather than in quiet of the banking committee. Speaking anonymously, they groused at a process that was "out of control," "populist," "irrational." It is "time for grownups to step in," wrote JPMorgan analyst James Glassman. The Post reported that the lobbyists were pinning their hopes on the House-Senate conference process where "adults" could sit together and work things out.
Clearly, the only thing that limits the power of the banking lobby is the rage of American voters that the very banks that drove the economy over the cliff and were bailed out by taxpayers are now spending lavishly to block reforms needed to insure this doesn't happen again. That popular anger makes legislators reluctant to appear in the banks' pockets in public.
That is why National People's Action, SEIU, the AFLCIO and other groups are bringing citizens to a Showdown on K Street on May 17. Citizens from across the country will "visit" with lobbyists in their offices and haunts, exposing them to some of the human pain caused by their clients -- families that have lost their homes, the retired who lost their savings, workers who lost their jobs. And in doing so, they'll help educate Americans about the scope of this lobby.
That is why the Campaign for America's Future will join with dozens of groups to support House Financial Services Chair Barney Frank's call to televise the conference committee between the House and Senate on financial reform, assuming there is one. We can't control what happens in the cloakrooms. But as the banking insiders seek to weaken the legislation in conference, we can at least give Americans a chance to see exactly what side their legislators are on.
That is why legislators should be on notice that they will be held accountable this fall for how they voted on Wall Street reform. Steps will be taken to insure that voters are told the truth.
And that is why the current financial reform legislation should be seen as a first step, not an answer. We'll need a lot more revelations, scandals, prosecutions and investigations. We'll need action to tax financial speculation, curb credit card company fees and interest rates, wage another fight to limit the size of the big banks, and more. The Washington Research Group predicts for investors that the Congress "will enact a moderate financial reform bill that ... will not destroy[read impact] the industry's business model." But changing the industry's business model and breaking up the banks that are too big to fail are vital steps towards the new economy that we build out of the ruins of the old. This fight must go on.
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