Nineteen banks taking taxpayer money from the Treasury Department have spent $32.4 million lobbying the federal government during the first nine months of this year, their lobbying disclosure reports show.
Combined, the Treasury is investing in the banks $159 billion from the $700 billion financial rescue package approved by Congress last month. None of the banks has indicated it plans to stop lobbying.
Lobbying by the financial industry before and during the financial crisis has come under criticism from consumer groups, members of Congress and President-elect Barack Obama.
“It’s ridiculous that the perpetrators of this mess should be the people dictating to Congress how to get out of it,” says Kathleen Day of the non-profit Center for Responsible Lending.
Sen. Dianne Feinstein, D-Calif., began drafting a bill to ban recipients of government help from lobbying with taxpayer funds after learning that insurance giant American International Group continued to lobby after it received $123 billion in government-backed loans. AIG suspended its lobbying Oct. 20, company spokesman Joe Norton says.
In a statement, Feinstein said “it would be unconscionable for these companies to misuse taxpayer dollars” on lobbying. Although federal law prohibits federal loan, grant or contract money from being used for lobbying, Feinstein wants to ensure that ban also applies to the investments, loan guarantees and other emergency help offered to financial firms, Feinstein spokesman Gil Duran said.
Financial industry lobbyist Scott Talbott says such restrictions are unnecessary.
“Washington is watching. The world is watching. Companies will be able to show how they’re using the money,” said Talbott, a senior vice president of the Financial Services Roundtable, a trade group that represents 21 large banks getting government investments. “Lobbyist money will come out of other income.”
Feinstein and others criticized AIG last month for sending executives on a $440,000 retreat after getting government help. AIG so far has spent $9.5 million on lobbying this year, records show.
Norton said AIG stopped working to influence legislation and regulations, but its lobbyists “continue to monitor policy and have general discussions” with lawmakers and regulators. He said AIG has no plans to fire its lobbyists or lobbying firms.
THE BALANCE OF INFLUENCE
|Lobbying expenses for first 9 months of 2008|
|By banks receiving government help:
* — Merrill Lynch is being taken over by Bank of America, and the merged bank will receive $25 billion
Sources: Lobbying disclosure reports, U.S. Senate Office of Public Records, Financial Services Roundtable
Despite crisis, Merrill Lynch still lobbying
By Matt Kelley
Brokerage giant Merrill Lynch, a victim of the financial crisis, is merging with Bank of America and expects to share in the $25 billion the Treasury Department is spending to help the merged bank.
Despite its crumbling financial foundation and organizational upheaval, one thing at Merrill hasn’t changing: It has continued to lobby the federal government, including on the $700 billion financial rescue package that provided the money for the government investments in Merrill and other major banks.
President-elect Barack Obama and members of Congress have blamed lobbying by the financial industry in part for the current financial crisis. Last month, Obama said the crisis developed “when speculators gamed the system, regulators looked the other way, and lobbyists bought their way into our government.”
Jeff Peck, a lobbyist whose clients include Merrill Lynch, says financial companies will “take their lumps” before a skeptical Congress but have a right to lobby Washington policymakers.
Merrill Lynch hired the firm April 1 and paid it $160,000 through September to lobby Congress on a “blueprint for regulatory and mortgage reform,” the firm’s disclosure reports say. Merrill Lynch has spent $4.6 million in lobbying in the first nine months of the year, records show.
“When you have this kind of scrutiny and this kind of seismic change happening … everyone wants to make sure they’re part of the process that affects their business,” Peck said.
Bank of America also has no plans to quit lobbying, spokesman Scott Silvestri said.
“We continue to talk to Congress and regulators about issues of interest and concern to our company,” Silvestri said.
Lobbyists play a key role in keeping lawmakers and government decision-makers informed about how their decisions affect the lobbyists’ clients, says Scott Talbott of the Financial Services Roundtable, a group representing large banks, insurance companies and other financial institutions.
“Lobbyists provide information, and that role is more important than ever right now,” Talbott says. “You have a very complicated industry, and we’re trying to find the best solutions. … Now is not the time to be cutting back on information flow.”
Banks and other financial firms lobbied Congress for the financial rescue package, but the idea for direct government investment in financial institutions came from the Treasury Department. The American Bankers Association wrote to Treasury Secretary Henry Paulson last week to complain that healthy banks without toxic debt on their books were being pressured to take part.
“This is not a program the banking industry sought,” wrote Ed Yingling, CEO of the bankers’ group. He said some banks are worried that being coerced into taking government money will make them appear to be financially weak and that the government may decide to restrict dividend payments to shareholders.
Unlike the banks, in which the government is buying minority stakes, the feds completely took over Fannie Mae and Freddie Mac, the giant home mortgage financing companies brought down by the foreclosure crisis.
Fannie Mae and Freddie Mac spent $14.3 million on lobbying before the government halted it in September after taking over the companies at a cost of as much as $200 billion.
Lobbying by Fannie and Freddie has been bipartisan. Freddie Mac’s internal lobbyists included Kirsten Johnson-Obey, the daughter-in-law of House Appropriations Committee Chairman Dave Obey, D-Wis. Fannie Mae paid $115,000 in lobbying fees this year to a lobbying firm headed by Steve Farber, the co-chairman of the host committee for Democratic Party convention held in August in Denver.
On the Republican side, Freddie Mac paid $260,000 this year to Timmons & Co. — a lobbying firm founded by Bill Timmons, who worked in the Nixon and Ford administrations and was a top campaign aide or adviser to every presidential candidate since Richard Nixon.
Kathleen Day of the Center for Responsible Lending says financial companies’ clout should be on the decline because their mistakes led to the current crisis.
“It shouldn’t be the industry getting its way all the time,” Day said. “Look where that got us.”