Averting the next crisis
Submitted by Adam_Smith on Wed, 10/01/2008 - 18:48
To: Editorial writers and interested journalists
From: Public Campaign
Subject: Congress helped create this mess, reform can keep it from happening again
Date: Wednesday, October 1, 2008
Bankers do not invest $5 billion thinking that the money will go to waste.
Investment firms on Monday began to call in their debts on Capitol Hill, asking Congress to create a $700 billion fund that the firms can draw upon to fix their failed loans.
But the U.S. House of Representative did the unusual when it said no to the Wall Street bankers that have pumped about $2 billion in campaign donations to federal candidates since the election cycle of 1990, according to research by the non-partisan Center for Responsive Politics.
The vote was all the more remarkable considering the finance industry, including investment, insurance and real estate firms, has spent another $3 billion on lobbying Congress since 1998*, for a grand total of more than $5 billion devoted to influencing decisions in Washington, D.C.
Whether you agree with them or not, give members on the left and right credit for voting their consciences on this bill. But don't forget that big money donors almost always get their way when working with Congress. That may be why Wall Street investors sent the stock market up nearly 500 points the day after the vote. By the end of this week, there may well some form of bailout paid for by U.S. taxpayers.
Indeed, there was an interesting twist to the vote this week, a twist that links all the more the connection between money and power in Congress.
Members that voted against the bailout have received on average 51 percent less in donations from the finance sector than members that voted for the bailout, according to the Center's research. In hard numbers, the House members voting against the measure received an average of $587,000 in donations from the finance sector, compared with $883,000 for members that voted for the bailout.
You couldn't ask for a better example of the pay-to-play system that dominates Congress. That's why we must change the way that candidates campaign for political office and move to a more democratic program modeled on the successful Clean Elections programs that have been passed in seven states and two cities.
The finance sector is easily the biggest spender in Washington, D.C. when combining lobbying and campaign donations. Its $5 billion in spending beats out such heavyweight sectors as lawyers/lobbyists with $1.4 billion, defense firms with about $1.1 billion, and even the healthcare industry, with $3.9 billion, the Center found.
The pinstripe bankers ask, the money rolls in, and Congress responds.
For example, during the 1990 to 1998 election cycles, the finance sector gave $611.1 million to federal candidates and in 1998 Congress voted to repeal the Depression-era Glass Steagall Act, effectively knocking down the walls between banks, insurers and investment houses.
From 2000 to the present, the finance sector has given nearly $1.5 billion to federal candidates, a jump of nearly 130 percent from 1990 through 1998.
Consider some of these laws that went the finance sectors way.
Voter disgust over the Enron and WorldCom accounting scandals led to the 2002 Sarbanes Oxley bill banning accounting firms from consulting for the firms they audited. With Sarbanes Oxley, Congress created a board to oversee accounting practices and required that any investigations by the board be coordinated with the Securities and Exchange Commission. This is one of the regulators that many say have been asleep for years, including Sen. John McCain (R-Ariz.) who railed in September that he would fire SEC Chairman Christopher Cox for failing to adequately regulate the markets.
The 2005 change in bankruptcy law made it tougher for consumers to write off their debts through Chapter 7 bankruptcy. This was a major victory for credit card companies who also successfully blocked efforts to add greater disclosure of card interest rates and the various penalties and fees tacked on to bills every month.
And late last year, the banking industry shot down a proposal that would give bankruptcy judges greater authority over the terms of mortgages in foreclosure, designed to give qualified homeowners breathing room to get back on their feet.
The public is tired of this favored treatment. A recent Zogby poll found that 82 percent of likely voters believe that political parties, presidential candidates, and candidates for the U.S. Congress should be banned from receiving financial contributions from lobbyists or other representatives from those industries that are vital to the financial and national security of the country.
The voters are right. They should know that there is an alternative to the current dollar-driven system of elections. It's called Clean Elections and it gets candidates talking with citizens, not the big-money contributors.
Candidates running a Clean Elections campaign must go out and get a set number of modest donations-usually $5-from people in their community. Once qualified, the Clean Elections candidate adheres to strict spending limits and stops accepting private contributions. That means the donation from the teacher and factory worker is as important as the one from the corporate CEO.
Clean Elections call for the public financing of elections, roughly $2 billion for Congress, a modest investment compared with a $700 billion bailout for favored Wall Street interests.
Hindsight is 20-20, and there's no way to know if a Clean Elections-based political system would have averted the financial crisis we face today. But officials that are not beholden to big-money donors are less likely to ease regulations and pass laws that benefit those donors at the expense of the majority of voters.
Clean Elections have been adopted in seven states and two cities. Arizona Gov. Janet Napolitano ran and won under this new approach. Maine implemented the system in 2000 and today 84 percent of its legislature is elected using the Clean Elections rules.
The U.S. Senate is considering the bipartisan Fair Elections Now Act introduced by Assistant Majority Leader Dick Durbin (D-Ill.) and Sen. Arlen Specter (R-Penn.). Reps. John Larson (D-Conn.) and Walter Jones, Jr. (R-N.C.) introduced a companion bill in the House. The Fair Elections Now Act is modeled on the successful Clean Elections programs.
We must do more than just throw money at Wall Street's latest debacle. It's time to end the expensive cycle of money for votes that runs policy in Washington, D.C.
*Footnote. The Center's figures for campaign donations are to the 1990 election cycle. It's lobbying records cover 1998 to the present.
From: Public Campaign
Subject: Congress helped create this mess, reform can keep it from happening again
Date: Wednesday, October 1, 2008
Bankers do not invest $5 billion thinking that the money will go to waste.
Investment firms on Monday began to call in their debts on Capitol Hill, asking Congress to create a $700 billion fund that the firms can draw upon to fix their failed loans.
But the U.S. House of Representative did the unusual when it said no to the Wall Street bankers that have pumped about $2 billion in campaign donations to federal candidates since the election cycle of 1990, according to research by the non-partisan Center for Responsive Politics.
The vote was all the more remarkable considering the finance industry, including investment, insurance and real estate firms, has spent another $3 billion on lobbying Congress since 1998*, for a grand total of more than $5 billion devoted to influencing decisions in Washington, D.C.
Whether you agree with them or not, give members on the left and right credit for voting their consciences on this bill. But don't forget that big money donors almost always get their way when working with Congress. That may be why Wall Street investors sent the stock market up nearly 500 points the day after the vote. By the end of this week, there may well some form of bailout paid for by U.S. taxpayers.
Indeed, there was an interesting twist to the vote this week, a twist that links all the more the connection between money and power in Congress.
Members that voted against the bailout have received on average 51 percent less in donations from the finance sector than members that voted for the bailout, according to the Center's research. In hard numbers, the House members voting against the measure received an average of $587,000 in donations from the finance sector, compared with $883,000 for members that voted for the bailout.
You couldn't ask for a better example of the pay-to-play system that dominates Congress. That's why we must change the way that candidates campaign for political office and move to a more democratic program modeled on the successful Clean Elections programs that have been passed in seven states and two cities.
The finance sector is easily the biggest spender in Washington, D.C. when combining lobbying and campaign donations. Its $5 billion in spending beats out such heavyweight sectors as lawyers/lobbyists with $1.4 billion, defense firms with about $1.1 billion, and even the healthcare industry, with $3.9 billion, the Center found.
The pinstripe bankers ask, the money rolls in, and Congress responds.
For example, during the 1990 to 1998 election cycles, the finance sector gave $611.1 million to federal candidates and in 1998 Congress voted to repeal the Depression-era Glass Steagall Act, effectively knocking down the walls between banks, insurers and investment houses.
From 2000 to the present, the finance sector has given nearly $1.5 billion to federal candidates, a jump of nearly 130 percent from 1990 through 1998.
Consider some of these laws that went the finance sectors way.
Voter disgust over the Enron and WorldCom accounting scandals led to the 2002 Sarbanes Oxley bill banning accounting firms from consulting for the firms they audited. With Sarbanes Oxley, Congress created a board to oversee accounting practices and required that any investigations by the board be coordinated with the Securities and Exchange Commission. This is one of the regulators that many say have been asleep for years, including Sen. John McCain (R-Ariz.) who railed in September that he would fire SEC Chairman Christopher Cox for failing to adequately regulate the markets.
The 2005 change in bankruptcy law made it tougher for consumers to write off their debts through Chapter 7 bankruptcy. This was a major victory for credit card companies who also successfully blocked efforts to add greater disclosure of card interest rates and the various penalties and fees tacked on to bills every month.
And late last year, the banking industry shot down a proposal that would give bankruptcy judges greater authority over the terms of mortgages in foreclosure, designed to give qualified homeowners breathing room to get back on their feet.
The public is tired of this favored treatment. A recent Zogby poll found that 82 percent of likely voters believe that political parties, presidential candidates, and candidates for the U.S. Congress should be banned from receiving financial contributions from lobbyists or other representatives from those industries that are vital to the financial and national security of the country.
The voters are right. They should know that there is an alternative to the current dollar-driven system of elections. It's called Clean Elections and it gets candidates talking with citizens, not the big-money contributors.
Candidates running a Clean Elections campaign must go out and get a set number of modest donations-usually $5-from people in their community. Once qualified, the Clean Elections candidate adheres to strict spending limits and stops accepting private contributions. That means the donation from the teacher and factory worker is as important as the one from the corporate CEO.
Clean Elections call for the public financing of elections, roughly $2 billion for Congress, a modest investment compared with a $700 billion bailout for favored Wall Street interests.
Hindsight is 20-20, and there's no way to know if a Clean Elections-based political system would have averted the financial crisis we face today. But officials that are not beholden to big-money donors are less likely to ease regulations and pass laws that benefit those donors at the expense of the majority of voters.
Clean Elections have been adopted in seven states and two cities. Arizona Gov. Janet Napolitano ran and won under this new approach. Maine implemented the system in 2000 and today 84 percent of its legislature is elected using the Clean Elections rules.
The U.S. Senate is considering the bipartisan Fair Elections Now Act introduced by Assistant Majority Leader Dick Durbin (D-Ill.) and Sen. Arlen Specter (R-Penn.). Reps. John Larson (D-Conn.) and Walter Jones, Jr. (R-N.C.) introduced a companion bill in the House. The Fair Elections Now Act is modeled on the successful Clean Elections programs.
We must do more than just throw money at Wall Street's latest debacle. It's time to end the expensive cycle of money for votes that runs policy in Washington, D.C.
*Footnote. The Center's figures for campaign donations are to the 1990 election cycle. It's lobbying records cover 1998 to the present.