Failed firms di­rected mil­lions to politi­cians

The Washington Times Weekly - - Politics - BY JIM MCELHATTON AND JEN­NIFER HABERKORN

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.

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