The Truth About the Big Banks' Unprecedented Lobbying Avalanche
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)
(While levels of disclosure are typically woefully lacking in lobbying disclosure filings — and Peck, Madigan has had issues in this area surrounding its work for the Chamber — I applaud the firm for their unusual openness here.)
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.)