It doesn’t take a rocket scientist to deduce that the banking and financial services industry has an outsized influence in Congress.
Wells Fargo, Citigroup and JP Morgan Chase each got bailouts of $25 billion in government bailouts last year. Morgan Stanley and Goldman Sachs got $10 billion apiece. And AIG, the mammoth insurer that lost billions in bad derivatives bets, has sucked in more than $170 billion.
Meanwhile, President Barack Obama is reticent about bailing out an American state — California.
Collin Peterson, Democratic Chairman of the Agriculture Committee, says he knows who to blame.
“The banks run the place,” Peterson told the New York Times in Monday’s editions. “I will tell you what the problem is — they give three times more money than the next biggest group. It’s huge the amount of money they put into politics.”
Peterson has introduced a bill to regulate derivatives trading — the pesky financial instruments that nearly brought down the US financial system. Derivatives involve writing insurance on various complex financial transactions, such as providing insurance to investors in the event of massive defaults on home mortgages.
But he says that Republicans have watered down his bill. He wants derivatives trading to take place on public exchanges — much like the New York Stock Exchange — rather than through private clearinghouses, which are managed by banks.
Obama Treasury Secretary Timothy Geithner, meanwhile, would prefer the transactions be monitored by the New York branch of the Federal Reserve. Bankers appear to prefer this option, given that the New York Fed has been lenient on them in the past.
Geithner has been criticized for his close relationships with banking industry executives. His proposal to regular derivatives traded through private clearinghouses mirrors that of the bank’s own proposals.
How much did President Barack Obama receive in contributions from those employed in the financial sector?
$69,823,872 if you include real estate, according to the Center for Responsive Politics. (Sen. John McCain got $60,605,254, with the total between the two exceeding $130 million).
The biggest donor to the presidential campaigns? The banks. Followed by lawyers and lobbyists, at $95 million. The banking and financial services industry have their own lobbyists, so the total donations of the industry are undercounted.
All told, according to the New York Times, financial sector employees gave $152 million in political donations from 2007 to 2008. Goldman Sachs, Citigroup, JP Morgan Chase, Bank of America and Credit Suisse gave $22.7 million and spent a combined total of $25 million on lobbying activities — in a single year.
And President George W. Bush’s largest individual donor employer in 2004? MBNA, the credit card behemoth that was bought up by — Bank of America.
Remarkably, though, it’s the secretive, private trading of derivatives — where those buying insurance have no idea what others are paying, and those buying bank stocks have no idea what they’re actually buying — that nearly brought the US financial markets to their knees.
“Peterson’s bill specifically bars derivatives trading in a clearinghouse regulated by the New York Federal Reserve, which he said in an interview ‘is a tool of the big banks’ that ‘wouldn’t do much’ to regulate the contracts,” the Times wrote. “Because the banks’ lobbyists persuaded some of his Republican colleagues to resist more sweeping changes, Mr. Peterson said, he has had to modify a bill he introduced that is similar to Mr. Harkin’s in calling for wide-ranging limits on derivatives.”
The banks have had their heyday in Congress in recent years. This year, they succeeded in preventing the Senate from passing a provision that would have allowed bankruptcy judges to unilaterally reduce the principal amount on mortgages. And in 2005, the massive “Bankruptcy Abuse Prevention” bill passed by Congress made it harder for consumers to file for bankruptcy.
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