The Big Sick Six (666) and Lobbying
I’ve never been a big fan of lobbying Congress. I’m behind the people’s right to petition government for redress of grievances but there’s petitioning and then there’s using a bullhorn directly in the ear of elected leadership.
Chris Frates wrote for the Politico about the six big banks screaming down any legislator willing to do something that might put banks in their place:
The report cites 243 government insiders turned lobbyists working for the industry. Of those, 202 used to work in Congress, and the rest served in the White House, Treasury Department or government agencies. The list includes 33 former chiefs of staff, 54 former staffers to the House Financial Services Committee or Senate Banking Committee and 28 former legislative directors.
The report also estimates that six banks – Goldman Sachs, Bank of America, JPMorgan Chase, Citigroup, Morgan Stanley and Wells Fargo – and their trade organizations have spent about $600 million since the first major federal bailout of Bear Sterns in March 2008. Between 2008 and 2009, the six big banks spent about $69 million on campaign contributions and lobbying, according to the report.
The American Bankers Association, the Securities Industry and Financial Markets Association, the Financial Services Roundtable, the Financial Services Forum, the Futures Industry Association, the International Swaps and Derivatives Association and the Consumers Bankers Association spent $263 million on lobbying, policy work, salaries and conferences in 2008. The report assumes the same spending in 2009.
Talk about drowning congress in money. It’s worse, actually:
Throughout the financial reform debate, the finance industry has waged an unprecedented assault on the democratic process, spending an estimated $1.4 million per day to influence Congress and hiring 70 members of Congress and 940 former federal employees to lobby on their behalf.
The six biggest banks—Goldman Sachs, Bank of America, JPMorgan Chase, Citigroup, Morgan Stanley, and Wells Fargo—account for a disproportionate share of this activity. In the two years since the first federal bailout of a big bank (Bear Stearns), these banks and their principal trade associations have hired over 240 former government insiders as lobbyists and spent hundreds of millions of dollars on an influence game designed to thwart reform, shape bailout programs and maintain their status as “too-big-to-fail” institutions….
The lobbying spree is taxpayer-funded—it follows $160 billion in bailouts from Congress and trillions in cheap loans from the Federal Reserve. And as their influence has come to be viewed as increasingly toxic in Washington, the banks have shifted segments of their political activity to a “shadow lobby” that includes such front groups as the U.S. Chamber of Commerce….
Did you catch that? These organizations wouldn’t have so much financial clout to throw around if it wasn’t for the tax payers’ money in their pockets. These corporations are trying to change the face of financial reform, if not cut the legs from under it, using easy, undeserved money.
- It’s argued that banks don’t or shouldn’t be broken up because it would not really fix anything. It’s argued that instead of one or two large institutions falling apart, there would be hundreds of smaller institutions falling apart during the next crisis if these large corporations are broken up. I don’t think this should really be the point. Recessions and financial crises will come regardless of the face of the financial industry. The point should be that it would take a much larger concerted effort for a hundred banks to invest $1.4 million per day lobbying congress to do their bidding. Instead of six large corporations managing to have more power to petition, a hundred separate corporations would make a more reasonable consensus.
- Lobbying needs some serious change. This is getting beyond ridiculous. Notice that these organizations are hiring former federal employees. These people have a lot of sway over the senators, congressmen and women and their aides due to having experience working with them. Imagine the persuasive power an ex-coworker you’ve worked with has concerning the work you do. These are the heavy artillery when it comes to lobbying.
Wikipedia defines rent seeking as occurring “when an individual, organization or firm seeks to earn income by capturing economic rent through manipulation or exploitation of the economic or political environment, rather than by earning profits through economic transactions and the production of added wealth.” The financial industry has been playing hard to stack the deck in their favor and it’s shown in their practically unmitigated winnings.
The lack of trading losses could add to the perception that Goldman Sachs has an unfair advantage in the markets, one shareholder said.
“It will reinforce the heads we win, tails you lose mentality that people think actually exists and promotes the concept of an unfair advantage,” said Douglas Ciocca, a managing director at Renaissance Financial Corp. in Leawood, Kan. “It’s too politically charged not to. How is that possible that they only make money?”
Niklas Blanchard pretty much agrees:
Does Goldman Sachs have an ‘unfair advantage’ in the market, or an ‘unfair advantage’ in rent seeking through the government? I lean toward the latter.
This isn’t limited to big bad-ass corporations like the big sick six mentioned above, either. Unions and telecommunication corporations have been twisting and distorting the market in their favor just the same. This is a disease that’s becoming worse and worse as the wealth gap increases.
As the wealth gap increases, so does the power of speech gap. With all this money and networking power at hand, how can the typical Jim Bob ever manage to get proper representation from their elected leaders? Jim Bob with a stack of papers baring the signatures of a few thousand people will never have the weight of $1.4 million.
Not only do we need to break up the big six to diminish their lobbying clout but we also need to reform lobbying policies to ensure no organization or group of organizations has this much ability to distort the political climate in congress.
I wonder how many of these financiers believe in the free market.