By Silla Brush - 06/09/09 08:02 PM EDT
On the eve of a major overhaul of the financial system intended to prevent another crisis from erupting, the financial industry has built a more than $6 million war chest to sway lawmakers.
A survey by The Hill illustrates that the economic recession and hundreds of billions of dollars in government bailout money for the financial industry appear to have done little or nothing to dent the fundraising prowess of many of the largest banking and financial industry interests.
The fundraising takes place as President Obama gets set to unveil wide-ranging proposals on June 17 to remake the financial system, while Congress is ramping up hearings and beginning to draft legislation. House Financial Services Committee Chairman Barney Frank (D-Mass.) said he intends by July to pass through his committee major legislation on “systemic risk,” executive pay, investor protection and resolution authority for non-bank financial institutions.
As a result, financial groups say, it’s more important than ever that their members have a voice in Washington.
“We encourage our members to be active in politics,” said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, which represents 100 large financial players. “As policymakers contemplate major reforms, now more than ever, they need to hear from industry.”
Critics argue that the money will give the industry a heavy hand in shaping legislation to its benefit and threatens to stymie changes that would benefit consumers.
“The industry continues to wield a lot of power because of the money,” said Kathleen Day, spokeswoman for the Center for Responsible Lending. “That’s just the fact.”
Outside critics and some Democratic members, most notably Senate Majority Whip Dick Durbin (D-Ill.), said banking interests have already shown their clout. Financial interests won a major battle earlier this year when the Senate failed to pass a bill that would have allowed bankruptcy judges to modify the terms of primary home mortgages. Industry groups stridently opposed that measure, which they call “cramdown.”
The Hill looked at PACs for six of the largest industry trade associations: the American Bankers Association (ABA), Independent Community Bankers of America (ICBA), Financial Services Roundtable, Securities Industry and Financial Markets Association (SIFMA), Mortgage Bankers Association and the Credit Union National Association (CUNA). In addition, the survey included PACs for six of the biggest banks that file monthly reports with the Federal Election Commission: Citigroup, Bank of America, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Wells Fargo.
In a handful of cases, industry trade associations are raising a similar amount and spending a great deal more than during the same period in 2007, an off-election year, and in 2008, in the run-up to the presidential election.
ICBA, for example, raised $365,000, roughly the same amount as the previous two years. But it spent $306,000 in the period, about 40 percent more than in 2008.
ABA raised roughly $325,000, while spending about $675,000. The association spent 5 percent more than in the same period in 2008 and about 20 percent more than in the same period in 2007.
“This is a critically important time for bankers, and they understand it and that’s why our PAC continues to grow,” said John Hall, spokesman for ABA. “There is so much banking legislation moving now. They realize their PAC is more important now than ever. We anticipate the PAC to grow even more.”
CUNA’s PAC spent about 40 percent less than in each of the last two years, but a spokesman said that the association has had no trouble raising funds so far. “I wouldn’t read really anything into that,” the spokesman said. “We just haven’t given as much to date this year as we did two years ago.”
Of banks surveyed by The Hill, Citigroup and Bank of America are the only ones that made major campaign contributions through the beginning of this year. Still, the PACs for all the banks except Goldman Sachs report receiving anywhere between $120,000 and $330,000. Goldman has not reported any receipts through April.
Some of the banks decided to pull back on campaign contributions to federal lawmakers while they were receiving government bailout money. That could soon change. On Tuesday, the administration announced that 10 banks would be allowed to repay a combined $68 billion in funds from the Troubled Asset Relief Program (TARP), as the $700 billion rescue package passed last fall by Congress is known formally. JPMorgan, Goldman and Morgan Stanley are among the 10 banks.
Bank of America’s PAC shows a nearly threefold jump in receipts because of the bank’s acquisition of Merrill Lynch, which was completed at the beginning of 2009. The outstanding Merrill PAC money was transferred to Bank of America’s PAC in January.
The Charlotte, N.C.-based bank has pulled back in campaign contributions because it is assessing the new crop of House and Senate members up for election in the 2008 cycle.
“We’re doing our research,” said Shirley Norton, Bank of America spokeswoman. “In previous years we knew the people and their track record.”