Failed firms directed millions to politicians
Before the government committed billions of taxpayer dollars to rescue troubled corporate giants, executives at those firms were directing millions of dollars in lobbying efforts and campaign donations to the very politicians who now blame Wall Street’s excesses and greed for America’s financial crisis.
The political largesse flowed to members of Congress, the political parties, the nominating conventions and the two presidential candidates through the summer, even as many of the companies and their executives were teetering toward collapse.
An analysis by The Washington Times found that both parties cashed in heartily, with Democrats slightly more likely to benefit.
For instance, executives of four companies bailed out by the government — American Insurance Group, Fannie Mae, Freddie Mac and Bear Stearns — donated nearly $2 million to politicians, political action committees and political parties since last year, including nearly $369,000 to the presidential candidates, according to Federal Election Commission data analyzed by the nonpartisan Center for Responsive Politics (CPR).
Democratic Sen. Barack Obama received $226,611 from employees of the failed companies, compared with $142,575 to Republican Sen. John McCain, the campaign reports showed.
Campaign watchdogs said for years that such donations were made by company executives eager to keep government regulation out of their business and that Americans must now be left wondering whether the largesse influenced the decision to rescue the companies when they failed.
“For years, they were giving money to get Washington out of their business, and now they’re very interested in getting Washington involved,” said Massie Ritch of CPR.
Neither campaign immediately returned a call for comment.
Financial, insurance and real estate executives, in fact, have been the leading source of presidential campaign donations in 2008, according to the center. Of the $114.5 million they doled out, $24.8 million went to Mr. Obama and $22.1 million to Mr. McCain. Securities and investment firm employees are the third-largest source of funds for all candidates for federal office.
In total, employees at nine firms in public financial trouble or rumored to be scrambling in recent days — from Fannie and Freddie to Lehman and Bear Stearns — have donated more than $9.1 million to politicians, political action committees and parties, almost a quarter of which went to the presidential candidates.
The failed companies’ own po- litical action committees also have doled out millions. The Fannie Mae PAC spent nearly $726,650 on federal candidates this election cycle, with 55 percent to Democrats and the rest to Republicans. And Freddie Mac’s PAC spent $220,497 almost evenly between the parties.
AIG and Bear Stearns favored Democrats in this election cycle. More than 80 percent of AIG’s $167,700 in PAC donations went to Democrats and 60 percent of Bear Stearns’ $84,000 in PAC donations went to Democrats.
What’s more, these same firms have given out more than $10 million from their dwindling coffers to pay lobbyists to wield influence in Washington, according to Senate lobbying records.
In the case of Fannie and Freddie, these expenditures over the years have discouraged Congress from exercising tough oversight, said Peter J. Wallison, a former general counsel in the Treasury Department who also served as counsel to President Reagan.
“It was a back-scratching system,” Mr. Wallison said. “Not all lobbying is bad and, in fact, it’s necessary to help keep Congress informed. But in the case of Fannie and Freddie, it was part of a system that kept them from being reformed in any way and made it impossible to get strong regulations.
“And in return, Congress got some great benefits, including campaign contributions and [. . . ] the retention of lobbyists who in many ways were old friends of members of Congress.”
In 2005, ousted Fannie Mae chief Daniel Mudd asked the Congressional Black Caucus to help the company as a “friend.”
“I am humbled to come here today to reaffirm the friendship and partnership between Fannie Mae and the Congressional Black Caucus,” he said, according to a video of the speech. “If there are areas where we are missing [. . . ] we’d like to hear it from our friends and I’d be so bold as to say our family first.”
Over the past decade, Fannie Mae spent $79.5 million and Freddie Mac spent $94.8 million to lobby Congress and federal agencies, according to lobbying records.
Freddie Mac had been expected to help sponsor a golf tour- nament this week honoring two members of Congress and raising money for a golf charity.
The golf and politics event, hosted by the First Tee of Washington D.C. charity and honoring House Majority Whip James E. Clyburn, South Carolina Democrat, and Sen. Saxby Chambliss, Georgia Republican, lists Freddie Mac among its six sponsors, according to the Sunlight Foundation, a Washington watchdog group.
Neither Freddie Mac nor First Tee returned a call for comment on Sept. 18. Other financial and mortgage companies contacted for this story also did not return messages or declined to comment.
“The financial sector is always at the top in every single election c ycle,” said Nancy Watzman of the Sunlight Foundation. “It’s a huge source of money for these guys [. . . ] in par ticular in the committees having to do with financing.”
Some are also host to parties, receptions and conventions. Freddie Mac and Lehman Brothers, for instance, made undisclosed donations to the host committees behind the Republican National Convention and Democratic National Convention respectively.
Freddie Mac’s ties with lawmakers have landed the mortgage giant in trouble. In 2006, Freddie Mac paid $3.8 million, the largest civil fine in the history of the Federal Election Commission, to settle charges that it used corporate resources to raise $1.7 million for politicians.
Both presidential campaigns have ties to Fannie Mae, according to the latest Senate lobbying disclosure reports.
Kirk Blalock, a fundraiser for John McCain, and other associates at his firm, Fierce, Isakowitz & Blalock, lobbied the House, Senate and White House on behalf of Fannie Mae this year. The firm has received $100,000 in lobbying fees so far this year.
Jeffrey Peck, another Fannie Mae lobbyist and a partner at Johnson, Madigan, Peck, Boland & Stewart, served as general counsel to the Senate Judiciary Committee from 1987 to 1992, when it was chaired by Mr. Obama’s running mate, Sen. Joseph R. Biden Jr. Mr. Peck’s firm also received $100,000 in fees this year.
In recent days, both presidential candidates have derided Wall Street’s practices and both stressed that they’re going to tighten regulations.
“We’re going to put an end to the reckless conduct, corruption and unbridled greed that has caused the crisis on Wall Street,” Mr. McCain told a Florida audience last week.
Mr. Obama renewed his call for tighter financial regulations and blamed previous administrations — both Republican and Democrat — from letting them go unchecked.
“We know how we got into this mess,” he said.
But that hasn’t stopped either candidate from collecting donations from Wall Street’s employees or political action committees.
Mr. McCain has at least 69 fundraisers who work in the securities industry, including Merrill Lynch chief executive John Thain, according to the Center for Responsive Politics. Merrill employees have given Mr. McCain $299,813, compared with $173,234 for Mr. Obama.
By contrast, Morgan Stanley employees have given $300,594 to Mr. Obama and $217,072 to Mr. McCain.
Mr. Obama’s fundraising ties to Wall Street are more difficult to gauge because his campaign does not disclose the name of the employer of his top fundraisers. However, fundraisers in the finance, real estate and insurance sector have collected more than $13 million for Mr. Obama, more than any other sector, according to the center.
Of the contribution records for the nine firms reviewed by The Times, employees overall have given $9.1 million to federal politicians and political action committees since last year, including $1.1 million for Mr. Obama and $877,647 for Mr. McCain.
Among members of Congress, one of the biggest recipients of Wall Street largesse has been Sen. Christopher J. Dodd, Connecticut Democrat and chairman of the powerful Senate Banking, Housing and Urban Affairs Committee.
Since last year, he collected at least $444,650 from top financial or insurance firms that now find themselves in trouble, including AIG, Bear Stearns, Merrill Lynch and Lehman Brothers, as well as Fannie and Freddie, according to a political donation records from the Center for Responsive Politics.
Since last year, Mr. Dodd collected $188,550 from Bear Stearns, the first of the Wall Street firms to get a government bailout.
Throughout his career, Mr. Dodd has received $281,400 from AIG employees, the most money for any member of Congress. Sen. Charles E. Schumer, New York Democrat, who is also a member of the Senate banking committee, has received $116,400, according to the Center for Responsive Politics.
Sen. Jack Reed, Nevada Democrat and chairman of the securities, insurance and investment subcommittee, has collected $36,000 this year. Sen. Max Baucus, Montana Democrat and chairman of the Senate Finance Committee, collected $33,000 from the nine firms.
Overall, employees in the finance, insurance and real estate sector overall gave $311 million in political contributions to politicians, PACs and par ties this cycle. The giving was nearly even between both parties, with Democrats getting 51 percent and Republicans 49 percent.