On a wintry mid-March afternoon at a sparsely attended meeting of a House Financial Services subcommittee, a handful of legislators heard testimony on five bills that would repeal or replace parts of last year’s sweeping financial services reform legislation, better known as Dodd-Frank after its chief congressional sponsors. Each bill had a different goal: One would release some derivatives transactions from margin rules; one would exempt private equity advisers from registration requirements; another would void an executive compensation disclosure regulation contained in the new law.
The commonality among the five bills? They were all sponsored by freshman Republican legislators holding coveted committee spots, who were showered with campaign donations from financial industry groups immediately after the November elections, according to an analysis by The Fiscal Times and the Center for Responsive Politics.
The freshmen – Steve Stivers of Ohio, Robert Hurt of Virginia, Michael Grimm and Nan Hayworth of New York, and David Schweikert of Arizona -- all hail from swing districts. Each won with 54 percent of the vote or less and will likely face tough reelection battles in 2012 when Republicans seek to maintain control of the House.
Long-time Republican operatives say freshmen legislators with scant legislative experience were anointed by GOP leaders and wound up sponsoring bills that would clearly benefit the bottom lines of firms in the financial services industry.
“It’s orchestrated. The leadership is trying to take care of them,” said Ed Rollins, a Republican campaign consultant at The Dilenschneider Group, who rose to national prominence during the Reagan years and most recently ran former Arkansas Gov. Mike Huckabee’s 2008 presidential campaign. “A lot of that bill isn’t popular, and it’s a good way to get close to people who want it repealed.” As expected, both legislators and industry representatives deny any connection between the money and legislative outcomes.
always flowed most generously to members of
committees that consider legislation or regulatory issues.
The sizeable financial industry PAC contributions – Stivers alone raised at least $220,500 since the Nov. 2 election with nearly half coming from the finance, insurance and real estate industries known as FIRE –also illustrate how campaign contributions buy access to senior as well as junior members of key committees. Campaign finance experts say that donations by PACs and individuals associated with special interests have always flowed most generously to members of committees that consider legislation or regulatory issues germane to their interests.
The new chairman, Rep. Spencer Bachus, R-Ala., an avowed critic of Dodd-Frank, took in more than $1.4 million in FIRE-related contributions to his personal and leadership campaign committees over the past two years, with 84 percent of it coming from industry PACs. It was the most of any member of the committee. Yet Rep. Barney Frank, D- Mass., one of the main architects of the legislation spawned by the 2008 financial meltdown, also used his campaign and leadership committees as magnets for financial sector PAC money. He brought in $1.25 million in FIRE-related donations, with 42.4 percent from PACs and 57.6 percent from individuals working in financial services.
Other top-ranking legislators on the committee pulling in more than $600,000 for their campaign and leadership committees during the 2010 election cycle from FIRE-affiliated PACs and individuals included capital markets subcommittee chairman Scott Garrett, R-N.J., and Jeb Hensarling, R-Tex., a fifth-term legislator who also chairs the House Republican Conference. Carolyn Maloney, D-N.Y., and Michael Capuano, D-Mass., the ranking minority members on the financial institutions and oversight and investigations subcommittees, respectively, also pulled in more than $600,000 from companies and employees from industries that their subcommittees oversee. (See chart for top ten FIRE recipients.)
Any suggestion that bill sponsorship is related to campaign finance is flatly rejected by the legislators. Stivers, for instance, said through a spokeswoman that he “is influenced by the people of Ohio’s 15th Congressional District” and that he is “focused on creating jobs and improving the economy in the district.” The banking industry, which has fared poorly in public opinion polls in the wake of the financial crisis and recession, denies their campaign contributions can buy votes or get bills introduced or passed. Their donations only give them access so they can voice their concerns about pressing economic matters. “We believe that it is our responsibility to participate in the political process to ensure that we protect our shareholders’ investment in our firm,” Goldman Sachs says in its annual report to stockholders.
on lobbying in the fourth quarter of last
year in addition to its campaign contributions.
The politically influential investment bank spent more than $1 million on lobbying in the fourth quarter of last year in addition to its campaign contributions. Since the last election, it has stepped up its contributions to freshman Republican legislators in particular, giving at least $8,000 to Stivers, $6,000 to Hayworth, and $1,000 to Grimm. The average member of the Financial Services Committee received more than three quarters as much in contributions from industries under their jurisdiction than the average member of Congress.
The Law that Tipped the Scales
In July 2010, Congress passed a major financial services reform bill, co-sponsored by Frank and Sen. Chris Dodd, D-Conn., that imposed a sweeping overhaul of banking regulations and numerous new disclosure requirements on corporate America and derivatives traders. Almost immediately, the affected industries attempted to water down the new rules by paying millions of dollars to lobbyists, many of whom previously worked on the Hill either as legislators or as staff to key committees, to pressure agencies such as the Treasury Department, the Securities and Exchange Commission and the Commodity Futures Trading Commission, which are writing the new rules.