The Truth About the Big Banks' Unprecedented Lobbying Avalanche
- By Kevin Connor, AlterNet
(Folks,
In any other country in the world this would be labelled as "organized corruption" however, in America it is simply called "lobbying" in 'God's greatest land of democracy' where 'opportunities exits' for anyone who wants "to make it." No matter, what means you use.
K.)
The Truth About the Big Banks' Unprecedented Lobbying Avalanche
By Kevin Connor, AlterNet
Posted on May 13, 2010, Printed on May 15, 2010
http://www.alternet.org/story/146856/
Over the course of the financial reform process, the six biggest banks and their murky trade associations have waged an historic assault on democracy, hiring hundreds of revolving door lobbyists and spending hundreds of millions of dollars to push their legislative agenda. I've detailed this all in a comprehensive report for Campaign for America's Future and SEIU, which you ought read because it shows the extent to which these too-big-to-fail bank behemoths own Congress.
The report details how the Big Six banks hired 243 lobbyists who once worked in the federal government, including 202 who used to work in Congress, as well as others who worked at the Treasury, the White House, or a relevant federal agency like the SEC. This is at best a conflict of interest, and at worst, a takeover of all checks-and-balances on the financial industry. All of this translates into an average of 40 revolving door lobbyists per big bank.
Previous studies, including one by Public Citizen, have shown that the finance industry is spending $1 million dollars a day to fight financial reform and employing 940 former federal government employees. “Big Bank Takeover” shows that the six biggest banks -- JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America, and Wells Fargo -- account for a disproportionate share of this activity. The revolving door lobbyist number includes 54 former staffers to the Senate Banking Committee and the House Financial Services committee (or a current member of that committee), 33 former chiefs of staff, and 28 former legislative directors. Citigroup leads the big banks with 55 revolving door lobbyists, though the federal government was its largest shareholder for much of this period (2009-2010).
These lobbyists left their old jobs for a simple reason: there is a fortune to be made working the halls of Congress on behalf of too-big-to-fail banks. Steve Bartlett, a former member of the House Banking Committee (now the Financial Services Committee), brought home $1.6 million in 2008 as head of the Financial Services Roundtable. SIFMA, another lobby, paid its top official, Timothy Ryan, $2 million in 2008. Ryan is a former JPMorgan executive and former director of the Office of Thrift Supervision. SIFMA recently hired former Representative Ken Bentsen as head of its DC lobbying operation. Bentsen keeps a framed photograph of a landmark deregulatory bill, Gramm-Leach-Bliley, on the desk of his office, and for good reason: that bill helped spur the growth of megabanks like Citigroup, JPMorgan Chase, and Bank of America that fund SIFMA and pay his salary. Bentsen was on the other side of the revolving door when that bill was passed, in 1999 — as a member of the House Financial Services Committee. He has a lot of company in that respect: Big Bank Takeover shows that many of these lobbyists worked in government during the 1990s when the too-big-to-fail banking sector got a big boost from bipartisan efforts to deregulate the financial sector.
Former House minority leader Dick Gephardt and Senate majority leader Trent Lott have a combined 16 former staffers who are now working for big banks, including Citigroup and Goldman Sachs. Lott and Gephardt are also lobbying for the banks. Senator Chris Dodd leads current members of Congress with five former staffers now working as big bank lobbyists. One big bank lobbying firm, Porterfield, Lowenthal & Fettig has ties to the Banking committee chair, Chris Dodd, the ranking member, Richard Shelby, and Dodd’s rumored successor as chair, Tim Johnson. Big money buys this kind of mercenary army. Between campaign contributions, lobbying spending, and trade association activity at SIFMA, the ABA, and elsewhere, the big banks and their main lobbies have spent close to $600 million since the first major federal bailout of the financial sector happened with Bear Stearns in March 2008.
Of course, that’s a drop in the bucket compared to the $160 billion these banks have received from the US Treasury, and the trillions in free money they’ve received from the Federal Reserve. But these investments are more than enough to buy their way in Washington. (Spending millions on lobbying scores you billions in bailouts, see?)
And Wall Street’s lobbying operation is actually much more concentrated than the healthcare lobby. For the healthcare lobby, LittleSis.org put together a similar list of revolving door lobbyists and we found over 500 healthcare lobbyists who used to be Congressional staffers. But that was for literally hundreds of companies in the healthcare sector. The 240 we came up with this time around primarily work for the Big Six banks.
These big bank lobbyists want to operate in the shadows. The banks are hiding much of their lobbying activity in a stealth lobby of generic business associations like the Chamber of Commerce. The report points to several instances of how banks are routing their political spending through these organizations, but there are likely many more examples.
In 2008, economist Nouriel Roubini popularized the term “shadow banking system” to describe the non-bank financial institutions that eventually helped spur the collapse of the financial system: highly-leveraged hedge funds, investment banks, and the like. "Shadow banks" are financial firms that act like banks, but evade bank regulations. Meanwhile, a "shadow bank lobby" are lobbyists who go to bat for bankers' interests, but aren't directly hired by banks. These days, a shadow bank lobby has played a prominent role in shaping the financial reform process, pushing amendments that will weaken consumer protections, water down regulation of the Wall Street casino, and increase the likelihood of continuing fraud and future bailouts. I discuss this shadow bank lobby in the report.
Just as the shadow banking system threatens the integrity of financial markets, the shadow bank lobby threatens the integrity of the financial reform process). Both are designed to help Wall Street avoid oversight and accountability for its actions.
Two of the principal players in the shadow bank lobby are large business associations: the US Chamber of Commerce and the Business Roundtable. As Big Bank Takeover details, each institution has morphed into an aggressive financial industry lobby over the bailout period of the past two years. During the bailout period of the past two years, as Wall Street influence has come to be seen as toxic, big banks appear to have directed significant portions of their political budget to these institutions, rather than hiring more lobbyists to lobby directly on their behalf. Last year, the Chamber, the Business Roundtable, and several other groups partnered to set up the Coalition for Derivatives End Users. The group is supposed to be representing businesses that use derivatives to hedge against risk. But yesterday, a hedge fund manager working with Americans for Financial Reform called on businesses to leave the “sham coalition,” which he said was a creation of the big banks: “Today, there is no legitimate reason that non-financial businesses should be lobbying to weaken legislation that would prevent the next AIG collapse and taxpayer bailout,” said hedge fund manager Michael Masters. “The only explanation is that these companies are being duped by the big banks, who are desperate to escape accountability for the reckless gambling that crashed the economy and know they are not politically popular these days. It’s time for these companies to wake up to the fact they are being used.
The Coalition claims that it hasn’t coordinated with the big banks, but a closer look at the team of financial reform lobbyists working for the Business Roundtable and the Chamber reveals some evidence that it was created as a front group to push Wall Street’s policy agenda. There was only one lobbying firm working for both the Chamber and the Business Roundtable on financial reform issues during 2009: Peck, Madigan, Jones & Stewart, a firm with rich connections to centrist Democrats. Peck, Madigan has lobbied for each Coalition parent around derivatives reform. At the same time, the firm has also lobbied for Deutsche Bank and the International Swaps and Derivatives Association — in other words, for big banks with a healthy appetite for derivatives trading. Since derivatives lobbyists for the Chamber and the Business Roundtable have so much in common with big bank lobbyists — in fact, they’re the same people — it’s not a giant leap to suspect that this “derivatives end-users” coalition has actually just been set up by big bank executives who are afraid of their own toxicity.
Then there’s the fact that Bill Daley, JPMorgan’s in-house Democratic rainmaker, was a recent chair of the Chamber’s Center on Capital Markets Competitiveness, a big bank-driven effort to shape the financial reform debate. Peck Madigan also lobbied for that group. ThinkProgress has also exposed how the Chamber is working with big banks to kill reform. And JPMorgan CEO Jamie Dimon is on the board of the Business Roundtable, which has hired a number of Goldman Sachs lobbyists. Unfortunately, the shadow bank lobby is a force to be reckoned with, and has won substantial victories for big banks throughout the financial reform process. In December, for instance, Representative Melissa Bean forced a negotiation with House leadership over federal preemption language in the financial reform bill. Bean succeeded in winning a major concession for the big banks, behind closed doors. Bean was taking her cues from the shadow bank lobby. Her former chief of staff, John Michael Gonzalez, went through the revolving door in 2009 to become a bank lobbyist. Gonzalez works at the Chamber’s favorite lobbying firm on financial reform issues: Peck, Madigan. Here’s one issue his team was lobbying around on behalf of the Chamber, according to a recent disclosure filing: H.R. 4173, the Wall Street Reform and Consumer Protection Act; Preemption provisions; Rep. Bean preemption amendment. (emphasis mine)
These days, Democratic Senator Tom Carper is the new Melissa Bean. He is sponsoring a preemption amendment that will keep states from being able to implement stronger consumer protections than the federal government. The amendment is clearly big bank-driven. But why Carper? Plenty of other Senators could have gone to bat for the big banks on this issue. The answer is once again found in the revolving door data we compiled for Big Bank Takeover: Carper’s former chief of staff, Jonathon Jones, is a partner at Peck, Madigan — the same firm that lobbied for the Bean preemption amendment, and the same firm where John Michael Gonzalez, Bean’s ex-chief of staff, now works. Carper and Jones are extremely close, to the point where the Senator has “gushed” to Politico about how much he likes his former chief of staff. This is how the seeds of financial destruction are sown: with real people leveraging real relationships to win major policy concessions for big banks.
If final negotiations around financial reform happen behind closed doors, as they did when Bean won her preemption fight with House leadership in December, the big bank lobby and its army of well-connected insiders will continue to win on the Hill. Today’s Congress will once again facilitate reckless gambling and predatory behavior by too-big-to-fail banks.
Transparency and openness are the only antidote to a big bank lobby that prefers to operate in the shadows; will Congressional leaders embrace these principles, and negotiate the final elements of the bill out in the open?
Next: (I’ll have more on the big banks and their influence army throughout the week. In the meantime, all this data also exists in an open format at LittleSis.org, so if you’d like to take a closer look you can check it out there. Special thanks to Priscilla for helping compile it, as well as Matthew, co-founder of LittleSis.org. OpenSecrets.org was also an invaluable resource in putting it together.)
America's Ten Most Corrupt Capitalists
By Zach Carter, AlterNet
Posted on May 13, 2010, Printed on May 15, 2010
http://www.alternet.org/story/146819/
The financial crisis has unveiled a new set of public villains—corrupt corporate capitalists who leveraged their connections in government for their own personal profit. During the Clinton and Bush administrations, many of these schemers were worshiped as geniuses, heroes or icons of American progress. But today we know these opportunists for what they are: Deregulatory hacks hellbent on making a profit at any cost. Without further ado, here are the 10 most corrupt capitalists in the U.S. economy.
1. Robert Rubin
Where to start with a man like Robert Rubin? A Goldman Sachs chairman who wormed his way into the Treasury Secretary post under President Bill Clinton, Rubin presided over one of the most radical deregulatory eras in the history of finance. Rubin's influence within the Democratic Party marked the final stage in the Democrats' transformation from the concerned citizens who fought Wall Street and won during the 1930s to a coalition of Republican-lite financial elites.
Rubin's most stunning deregulatory accomplishment in office was also his greatest act of corruption. Rubin helped repeal Glass-Steagall, the Depression-era law that banned economically essential banks from gambling with taxpayer money in the securities markets. In 1998, Citibank inked a merger with the Travelers Insurance group. The deal was illegal under Glass-Steagall, but with Rubin's help, the law was repealed in 1999, and the Citi-Travelers merger approved, creating too-big-to-fail behemoth Citigroup.
That same year, Rubin left the government to work for Citi, where he made $120 million as the company piled up risk after crazy risk. In 2008, the company collapsed spectacularly, necessitating a $45 billion direct government bailout, and hundreds of billions more in other government guarantees. Rubin is now attempting to rebuild his disgraced public image by warning about the dangers of government spending and Social Security. Bob, if you're worried about the deficit, the problem isn't old people trying to get by, it's corrupt bankers running amok.
2. Alan Greenspan
The officially apolitical, independent Federal Reserve chairman backed all of Rubin's favorite deregulatory plans, and helped crush an effort by Brooksley Born to regulate derivatives in 1998, after the hedge fund Long-Term Capital Management went bust. By the time Greenspan left office in 2006, the derivatives market had ballooned into a multi-trillion dollar casino, and Greenspan wanted his cut. He took a job with bond kings PIMCO and then with the hedge fund Paulson & Co.—yeah, that Paulson and Co., the one that colluded with Goldman Sachs to sabotage the company's own clients with unregulated derivatives.
Incidentally, this isn't the first time Greenspan has been a close associate of alleged fraudsters. Back in the 1980s, Greenspan went to bat for politically connected Savings & Loan titan Charles Keating, urging regulators to exempt his bank from a key rule. Keating later went to jail for fraud, after, among other things, putting out a hit on regulator William Black. ("Get Black – kill him dead.") Nice friends you've got, Alan. 3. Larry Summers
During the 1990s, Larry Summers was a top Treasury official tasked with overseeing the economic rehabilitation of Russia after the fall of the Soviet Union. This project, was, of course, a complete disaster that resulted in decades of horrific poverty. But that didn't stop top advisers to the program, notably Harvard economist Andrei Shleifer, from getting massively rich by investing his own money in Russian projects while advising both the Treasury and the Russian government. This is called "fraud," and a federal judge slapped both Shleifer and Harvard itself with hefty fines for their looting of the Russian economy. But somehow, after defrauding two governments while working for Summers, Shleifer managed to keep his job at Harvard, even after courts ruled against him.
That's because after the Clinton administration, Summers became president of Harvard, where he protected Shleifer. This wasn't the only crazy thing Summers did at Harvard—he also ran the school like a giant hedge fund, which went very well until markets crashed in 2008. By then, of course, Summers had left Harvard for a real hedge fund, D.E. Shaw, where he raked in $5.2 million working part-time. The next year, he joined the the Obama administration as the president's top economic adviser. Interestingly, the Wall Street reform bill currently circulating through Congress essentially leaves hedge funds untouched. 4. Phil and Wendy Gramm
Summers, Rubin and Greenspan weren't the only people who thought it was a good idea to let banks gamble in the derivatives casinos. In 2000, Republican Senator from Texas Phil Gramm pushed through the Commodity Futures Modernization Act, which not only banned federal regulation of these toxic poker chips, it also banned states from enforcing anti-gambling laws against derivatives trading. The bill was lobbied for heavily by energy/finance hybrid Enron, which would later implode under fraudulent derivatives trades. In 2000, when Phil Gramm pushed the bill through, his wife Wendy Gramm was serving on Enron's board of directors, where she made millions before the company went belly-up. When Phil Gramm left the Senate, he took a job peddling political influence at Swiss banking giant UBS as vice chairman. Since Gramm's arrival, UBS has been embroiled in just about every scandal you can think of, from securities fraud to tax fraud to diamond smuggling. Interestingly, both UBS shareholders and their executives have gotten off rather lightly for these acts. The only person jailed thus far has been the tax fraud whistleblower. Looks like Phil's earning his keep.
5. Jamie Dimon
J.P. Morgan Chase CEO Jamie Dimon has done a lot of scummy things as head of one of the world's most powerful banks, but his most grotesque act of corruption actually took place at the Federal Reserve. At each of the Fed's 12 regional offices, the board of directors is staffed by officials from the region's top banks. So while it's certainly galling that the CEO of J.P. Morgan would be on the board of the New York Fed, one of J.P. Morgan's regulators, it's not all that uncommon. But it is quite uncommon for a banker to be negotiating a bailout package for his bank with the New York Fed, while simultaneously serving on the New York Fed board. That's what happened in March 2008, when J.P. Morgan agreed to buy up Bear Stearns, on the condition that the Fed kick in $29 billion to cushion the company from any losses. Dimon-- CEO of J.P. Morgan and board member of the New York Fed-- was negotiating with Timothy Geithner, who was president of the New York Fed-- about how much money the New York Fed was going to give J.P. Morgan. On Wall Street, that's called being a savvy businessman. Everywhere else, it's called a conflict of interest. 6. Stephen Friedman
The New York Fed is just full of corruption. Consider the case of Stephen Friedman (expertly presented by Greg Kaufmann for the Nation). As the financial crisis exploded in the fall of 2008, Friedman was serving both as chairman of the New York Fed and on the board of directors at Goldman Sachs. The Fed stepped in to prevent AIG from collapsing in September 2008, and by November, the New York Fed had decided to pay all of AIG's counterparties 100 cents on the dollar for AIG's bets—even though these companies would have taken dramatic losses in bankruptcy. The public wouldn't learn which banks received this money until March 2009, but Friedman bought 52,600 shares of Goldman stock in December 2008 and January 2009, more than doubling his holdings. As it turns out, Goldman was the top beneficiary of the AIG bailout, to the tune of $12.9 billion. Friedman made millions on the Goldman stock purchase, and is yet to disclose what he knew about where the AIG money was going, or when he knew it. Either way, it's pretty bad—if he knew Goldman benefited from the bailout, then he belongs in jail. If he didn't know, then what exactly was he doing as chairman of the New York Fed, or on Goldman's board?
7. Robert Steel
Like better-known corruptocrats Robert Rubin and Henry Paulson, Steel joined the Treasury after spending several years as a top executive with Goldman Sachs. Steel joined the Treasury in 2006 as Under Secretary for Domestic Finance, and proceeded to do, well, nothing much until financial markets went into free-fall in 2008. When Wachovia ousted CEO Ken Thompson, the company named Steel as its new CEO. Steel promptly bought one million Wachovia shares to demonstrate his commitment to the firm, but by September, Wachovia was in dire straits. The FDIC wanted to put the company through receivership—shutting it down and wiping out its shareholders.
But Steel's buddies at Treasury and the Fed intervened, and instead of closing Wachovia, they arranged a merger with Wells Fargo at $7 a share—saving Steel himself $7 million. He now serves on Wells Fargo's board of directors.
8. Henry Paulson
His time at Goldman Sachs made Henry Paulson one of the richest men in the world. Under Paulson's leadership, Goldman transformed from a private company ruled by client relationships into a public company operating as a giant global casino. As Treasury Secretary during the height of the financial crisis, Paulson personally approved a direct $10 billion capital injection into his former firm.
But even before that bailout, Paulson had been playing fast and loose with ethics rules. In June 2008, Paulson held a secret meeting in Moscow with Goldman's board of directors, where they discussed economic prognostications, market conditions and Treasury rescue plans. Not okay, Hank. 9. Warren Buffett
Warren Buffett used to be a reasonable guy, blasting the rich for waging "class warfare" against the rest of us and deriding derivatives as "financial weapons of mass destruction." These days, he's just another financier crony, lobbying Congress against Wall Street reform, and demanding a light touch on—get this—derivatives! Buffet even went so far as to buy the support of Sen. Ben Nelson, D-Nebraska, for a filibuster on reform. Buffett has also been an outspoken defender of Goldman Sachs against the recent SEC fraud allegations, allegations that stem from fancy products called "synthetic collateralized debt obligations"—the financial weapons of mass destruction Buffett once criticized. See, it just so happens that both Buffet's reputation and his bottom line are tied to an investment he made in Goldman Sachs in 2008, when he put $10 billion of his money into the bank. Buffett has acknowledged that he only made the deal because he believed Goldman would be bailed out by the U.S. government. Which, in fact, turned out to be the case, multiple times. When the government rescued AIG, the $12.9 billion it funneled to Goldman was to cover derivatives bets Goldman had placed with the mega-insurer. Buffett was right about derivatives—they are WMD so far as the real economy is concerned. But they've enabled Warren Buffett to get even richer with taxpayer help, and now he's fighting to make sure we don't shut down his own casino.
10. Goldman Sachs
No company exemplifies the revolving door between Wall Street and Washington more than Goldman Sachs. The four people on this list are some of the worst offenders, but Goldman's D.C. army has includes many other top officials in this administration and the last.
White House:
Joshua Bolton, chief of staff for George W. Bush, was a Goldman man
Regulators:
Current New York Fed President William Dudley is a Goldman man
Current Commodity Futures Trading Commission Chairman Gary Gensler has been a responsible regulator under Obama, but he was a deregulatory hawk during the Clinton years, and worked at Goldman for nearly two decades before that.
A top aide to Timothy Geithner, Gene Sperling, is a Goldman man
Current Treasury Undersecretary Robert Hormats is a Goldman man
Current Treasury Chief of Staff Mark Patterson is a former Goldman lobbyist
Former SEC Chairman Arthur Levitt is now a Goldman adviser
Neel Kashkari, Henry Paulson's deputy on TARP, was a Goldman man
COO of the SEC Enforcement Division Adam Storch is a Goldman man
Congress:
Former Sen. John Corzine, D-N.J., was Goldman's CEO before Henry Paulson
Rep. Jim Himes, D-Conn., was a Goldman Vice President before he ran for Congress
Former House Minority Leader Dick Gephardt, D-Mo., now lobbies for Goldman
And the list goes on. Zach Carter is an economics editor at AlterNet and a fellow at Campaign for America's Future. He writes a weekly blog on the economy for the Media Consortium and his work has appeared in the Nation, Mother Jones, the American Prospect and Salon.
© 2010 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/146819/
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