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The Sunlight Foundation uses cutting-edge technology and ideas to make government transparent and accountable. Underlying all of our efforts is a fundamental belief that increased transparency will improve the public's confidence in government
The Sunlight Foundation Blog
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REPOST: Next Banking Committee Chair Has Ties to Financial Sector
Note: I wrote this over the summer when the possibility existed that Sen. Chris Dodd would be moving from the Banking Committee to the Health, Education, Labor and Pensions Committee. With Dodd’s retirement announcement, I figured it would be useful to revisit. I have removed some of the introductory text as it is now irrelevant, but can be viewed at the original posting here.
Sen. Tim Johnson of South Dakota is next in line to replace Sen. Dodd and has similarly close ties to the financial sector.
According to Open Secrets from 2003-2008, Sen. Johnson has pulled in $1,407,958 from the finance, insurance and real estate sector. While this pales in comparison to Sen. Dodd’s $9,097,107 over the same period of time, it accounts for 20% of the South Dakota senator’s campaign haul. Sen. Johnson’s finance contributions are aided by the importance of South Dakota to the finance and credit industries. These companies only need to abide by the regulations of the state within which they are incorporated and South Dakota has some of loosest regulations for bank holding and credit card companies. This has led to a large number of credit and banks companies locating in the small plains state, providing for tens of thousands of jobs. (Continue reading…)
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Potential New Banking Committee Chair Has Ties to Financial Sector
With the passing of Sen. Ted Kennedy, the gavel he wielded as chair of the Senate Health, Labor, Education & Pensions Committee must pass as well. The senator next in line to chair the committee is an old Kennedy friend, Sen. Chris Dodd. Sen. Dodd, however, currently chairs the Senate Banking Committee and would have to relinquish that gavel if he were to replace Kennedy and shepherd through the health care reform bill championed by his departed friend. A switch in committees may be just what the Connecticut senator needs right now. As negative feelings have increased about bank bailouts, Sen. Dodd has come under withering criticism for his close ties, and large campaign contributions from, the financial sector. Unfortunately, he may be replaced by another senator with similar conflicts. Sen. Tim Johnson of South Dakota is next in line to replace Sen. Dodd and has similarly close ties to the financial sector.
According to Open Secrets from 2003-2008, Sen. Johnson has pulled in $1,407,958 from the finance, insurance and real estate sector. While this pales in comparison to Sen. Dodd’s $9,097,107 over the same period of time, it accounts for 20% of the South Dakota senator’s campaign haul. Sen. Johnson’s finance contributions are aided by the importance of South Dakota to the finance and credit industries. These companies only need to abide by the regulations of the state within which they are incorporated and South Dakota has some of loosest regulations for bank holding and credit card companies. This has led to a large number of credit and banks companies locating in the small plains state, providing for tens of thousands of jobs.
The support Sen. Johnson receives from the industry, and their importance to his state, is reflected in the senator’s recent voting record. Donny Shaw at Open Congress (Friend of Sunlight) looked at Sen. Johnson’s recent votes and showed that he stands out among Democrats in his support for the credit card industry. The senator was the only Democrat to oppose a recent law, sponsored by Sen. Dodd, to “restrict unfair credit card rate increases, penalties and fees, and bans deceptive and predatory practices.” He was also one of a handful of Democrats to oppose a series of amendments meant to impose tougher regulations on credit card companies.
Sen. Johnson isn’t just connected to the finance sector through his campaign contributions and his votes, but also by his former staffers turned lobbyists. Two of Sen. Johnson’s former staffers currently work for firms representing financial clients or companies in the financial world. In 2005, Naomi Camper left her position as staff director for Sen. Johnson on the Senate Financial Institutions Subcommittee to become co-head of Federal Government Relations at JPMorgan Chase, one the biggest banks in the United States. Dwight Fettig, a former staff director of Sen. Johnson, became a partner in the almost exclusively finance-related lobbying shop, Porterfield, Lowenthal & Fettig. Clients at Fettig’s firm include the American Bankers Association, the Coalition of Private Investment Companies, NASDAQ and the National Association of Mortgage Brokers.
These connections and contributions should be of concern to anyone who is already alarmed by the relationship that Sen. Dodd has with the financial sector. As the government continues to determine it’s role in the financial sector, through bailouts and Federal Reserve lending, it may be better to reserve committee chairs for those without the conflicts that Sen. Johnson may bring with him.
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Dodd, Conrad Cleared of Ethics Violations In Countrywide VIP Case
The Senate Ethics Committee released two letters (Dodd, Conrad) today clearing Sens. Chris Dodd and Kent Conrad of ethics violations in a case where both senators were members of a Countrywide “VIP” loan program. These letters concluded a year-long investigation into the “VIP” program and the loans the senators received.
The Committee found that the two senators did not violate Senate ethics rules prohibiting members from accepting outside gifts. The rule in question does not cover “loans from banks and other financial institutions on terms generally available to the public.” The committee also ruled that while the “VIP” loans did offer “quicker, more efficient loan processing and some discounts,” the discounts provided “were not the best deals that were available at Countrywide or in the marketplace at large.”
The senators did receive a chiding for not exhibiting care in their dealings with Countrywide. The Committee told both senators that they “should have excercised more vigilance in [their] dealings with Countrywide in order to avoid the appearance that [they] were receiving preferential treatment based on [their] status as Senator[s].”
In response to the investigation that Committee declared that it should have issued guidance on the receipt of loans and the involvement of senators in special loan programs. The Committee expects to issue a guidance to members in the future.
The organization that filed the initial ethics complaint, Citizens for Responsibility and Ethics in Washington (CREW), stated in a blog post that this amounts to “battered wife” syndrome.
“Like a battered woman who explains she brought the beating on herself, the committee faulted itself for failing to ‘provide more guidance to the Senate community about issues surrounding mortgage negotiations.’ Over a year has passed since CREW filed its complaint and the committee became aware of this issue. Now would be a good time for the committee to start proactively providing its promised advice.”
The Ethics Committee could also review legislation that has been introduced requiring limited disclosure of home loan information on personal financial disclosure forms (S. 1632).
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Lunch Time Link Round-Up
Local county commissioners in the district of Indiana Rep. Mike Pence passed a resolution requesting that the congressman end his ban on earmarks. The President of Ball State University is also supporting the call for Pence to accept earmarks.
Rep. Darrell Issa is seeking more information on Countrywide’s VIP mortgage deals with lawmakers and political figures like Sens. Chris Dodd and Kent Conrad. Issa is trying to obtain eight years worth of documents relating to the “Friends of Angelo” program. Angelo Mozilo, the CEO of Countrywide, is currently facing multiple indictments brought by the federal government.
The trial of former Rep. William Jefferson is finally getting under way. In case you forgot, Jefferson was caught with $90,000 in cash in his freezer.
And over at Party Time, Nancy Watzman has a post on how a little sunlight can make lawmakers rethink how they fundraise. A common practice in fundraising letters is to list the committee memberships of the lawmaker raising money. For a fundraiser to aid Sen. Dianne Feinstein, Democratic lobbyist Heather Podesta went a little over the line in her solicitation, aligning amounts of money with the committees Feinstein sits on. Feinstein wound up cancelling the fundraiser due to the appearance of impropriety.
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Ethics Link Line-Up
The party may be over, but the investigation is just beginning. The House Ethics Committee confirms that it is investigating lawmakers involved in the PMA Group contributions-cum-earmarks scandal embroiling the House Defense Appropriations Subcommittee.
Lawmakers just filed their personal financial disclosures and we’re already seeing problems. Rep. Marion Berry under reported the value of property he owns in here in Washington. Sen. Chris Dodd, facing serious questions about his personal finances, asked for a 90-day extension to file his report. Nearly one-in-five senators were like Dodd and could not file their report on time. This included serial late-filer Sen. Bob Corker. Has this guy ever filed a report on time?
The Hill reports on one of those personal financial disclosures, those of Rep. Don Young. Apparently, Young has spent $1.3 million defending himself in an investigation into his relationship with the oil services company from Hades, VECO. Has there ever been one company that got so many politicians sent to jail or placed under investigation?
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Bank Employees Stop Giving to Campaigns?
Here’s a man bites dog story. The Washington Independent has reported that banker employees have turned off the cash spigot to federal candidates, with bank employee donations down 97 percent from first quarter 2007. Ninty seven percent! Financial industry employees of the top five banks receiving TARP funds gave less than 3 percent of what they gave during a similar period in the 2008 election cycle.
The Independent notes that the bleak economy is partly to blame, but so may be propriety, of all things. Apparently bankers who received federal bailout money do not want to be seen turning around and funding congressional campaigns. And congressional lawmakers don’t want to be seen receiving it either. Sens. Chris Dodd, chair of the Senate Banking Committee, and Max Baucus, chair of the Senate Finance Committee, have announced they will not accept campaign contributions from the PACs of banks receiving TARP money.
The Independent quotes Bill Allison, Sunlight’s senior fellow, saying that bank employees are trying to keep a low profile. “If you give now, you may be putting a big neon light over your head,” Bill said.
Another likely factor is that bank employees don’t have a lot of extra cash to be throwing around. That, and they fear they may lose their job.
This is quite interesting. Rarely do you see an industry’s campaign giving have such a dramatic drop off.
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Dodd Story Reveals Failure of Senate on Electronic Filing
This excellent Mother Jones article on Sen. Chris Dodd’s panfinancial pay-to-play party contains a hidden problem that we have focused on here for quite some time. Due to the Senate’s lack of electronic filing for campaign finance reports, journalists must sort through copies of campaign finance disclosure as opposed to searching for them in a database to do this type of important research.Research into House campaign finance data is much easier, due to their use of electronic filing, and thus the proliferation of House campaign finance stories over the past few days.
If you want to help change this, we’ve set up a site in support of S. 482, the bill that would mandate electronic filing, that you can go to and make sure your senators hear that you want them to cosponsor the bill.
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Who Can Hedge Funds Lean On?
Treasury Secretary Tim Geithner announced a new regulatory model for the financial system that includes regulating hedge funds for the first time. In the past, hedge funds have largely escaped government oversight in the form of regulation and have been warded off legislative attempts to regulate them by leaning on powerful friends.
During the 2008 cycle, hedge fund campaign giving skyrocketed to $16.8 million–an increase of approximately 400%. Three of the top four recipients are predictable, Barack Obama (1st – $1,316,436), Hillary Clinton (2nd – $760,400), and John McCain (4th – $605,750), all major presidential candidates. The third largest recipient of hedge fund money was Banking Committee chair Chris Dodd, receiving $705,450 from the industry. Recently, Dodd has made overtures towards regulating hedge funds and other financial groups currently outside of the regulatory framework, calling the age of “don’t ask, don’t tell,” in the financial world, over.
The only other significant lawmaker to have received large sums from the hedge fund industry is Sen. Chuck Schumer, the long-time protector of the financial services industry and supporter hedge fund deregulation. Schumer received $344,600 from hedge funds over the course of his career.
The debate over Geithner’s new regulatory framework will be intense and it would be important to keep your eyes on the powerful Senate duo of Dodd and Schumer to see what they support and what they oppose. They have some powerful friends and Dodd might need their financial support in his tought reelection race next year.
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The Revolving Door Spins in CEO Pay Protector
In the back-and-forth regarding who inserted the retroactive bonus immunity provision into the stimulus bill, we were repeatedly treated to on-air dodgeball acrobatics as both Sen. Chris Dodd and Treasury Secretary refused to name the Treasury staffers who could have pressed for this provision. While Geithner has owned up to his role and his support for the bonus immunity provision–on the grounds that a legal challenge could invalidate the entire stimulus bill–it would be worth our time to take a look at one member of Geithner’s staff: his chief of staff. Mark Patterson is a former lobbyist for Goldman Sachs who has lobbied for pretty much every position that the administration is now openly opposing.
David Corn, in Mother Jones, dives into this revolving door drama:
On Wednesday afternoon, as President Barack Obama was leaving the White House for a town hall meeting in California, he spoke for 15 minutes to reporters about the AIG controversy. Responding to the rising rage over the $165 million or so in bonuses paid to executives at the bailed-out insurance firm, Obama noted that he was quickly developing policies to prevent future AIG-like catastrophes. And he slammed Wall Street’s culture of “excess greed, excess compensation, excess risk taking.” To demonstrate that he’s committed to battling such greed, the president cited his work in the Senate to rein in executive compensation. Noting that he and Rep. Barney Frank (D-Mass.) had each introduced legislation on this front in 2007, Obama declared that “there were some people who attacked us, saying government has no business doing that.”
One of Obama’s opponents at that time was Mark Patterson, a lobbyist then for Goldman Sachs, the investment banking firm, which opposed the Frank-Obama initiative. Yet Patterson is now chief of staff to Treasury Secretary Timothy Geithner, the embattled point man in the Obama administration’s endeavor to undo the notorious AIG bonuses. That is, a Washington influence-peddler who worked against Obama’s effort to limit excessive corporate pay is now a key member of the Obama administration team that is supposed to contain excessive compensation in the AIG case and in general.
Corn notes at the end of his post that, according to Treasury spokesmen, Patterson has recused himself from discussion regarding Goldman Sachs and issues he was previously paid to lobby. This still creates a serious conflict for Geithner, as Treasury is being partly managed by a former Goldman lobbyist. Geithner is also placed in a tough position considering that his chief of staff is limited in the areas in which he can work (supposedly).
For those who ask, didn’t Obama plan on not allowing the influence of lobbyists into his administration, here’s a handy chart showing the 30 individuals in his administration who were registered as lobbyists at some point during the past five years. Now not all of these persons are objectionable for their lobbying (lobbying on public interest issues is rather different than private interest), but it clearly flies in the face of a lot of remarks we heard during the campaign trail. National Journal’s Julie Kosterlitz has a good article on this today as well.
Looking at the Dodd-Geithner-AIG-Stimulus secret provision quadrangle, the real problem may be who the decision makers listen to. If their top advisors are former Goldman Sachs lobbyists previously hired to lobby against tame executive compensation bills, then we can begin to assume where their positions come from.
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Read the Bill: Stimulus Bill and Bonus Loopholes
Last night Sen. Chris Dodd admitted on CNN that he was responsible, under administration pressure, for language in the final version of the American Recovery and Reinvestment Act that explicitly permitted the types of retroactive bonuses that A.I.G. is under fire for doling out. The tale of this obscure amendment shows how important it is that Congress provide time for the public to Read the Bill—remember, the 1,000+ page stimulus bill was available to the public for only 13 hours before Congress began debating it, most of that time during the wee hours of the night. If the legislation had been available longer, perhaps this provision would have shriveled in the sunlight.
On February 4, 2009, the Senate approved, by voice vote, an amendment proposed by Sen. Dodd to restrict executive compensation for firms receiving TARP funds. Dodd’s amendment wasn’t the most far reaching executive compensation amendment offered during debate, but it did seek to restrict excessive compensation retroactively–the issue raised by the A.I.G. bonuses– something fiercely opposed by the officials at the Treasury Department and in the Obama Administration. President Obama had earlier released his own set of executive compensation restrictions which did not include retroactivity or the “clawback” provisions in Dodd’s amendment.
One week later and the bill was in conference committee with leaders of the House and Senate, in talks with Obama administration officials, hashing out details for the final bill draft. The administration, including top economic officials Tim Geithner and Larry Summers, remained opposed to the executive compensations restrictions and sought to alter, or eliminate, them. When the final conference report was released on February 13, Dodd’s amendment was altered significantly, including the insertion of a provision provided retroactive protection to all bonuses agreed to prior to February 11, 2009. Contemporary news accounts state that the administration was lobbying against the provision and that they won numerous concessions. The controversial provision was in direct contradiction to Dodd’s original amendment and ultimately provided the justification for approving the ballyhooed A.I.G. bonuses.
On March 17, Dodd refused to acknowledge any part in inserting the retroactive bonus immunity provision. One day later, while dodging questions about who asked him to change the amendment, he admitted that, under pressure, he agreed to changes to the amendment. The text is as follows:
BLITZER: What I hear you saying is that, you personally, you did this in order — at the request of officials at the Treasury Department, Timothy Geithner, among others.
DODD: Well, I didn’t say who it was. But just say this, I wouldn’t have modified my own amendment at my own insistence. I mean, I spent a long time to having people try to be — change it. And obviously they came. And the alternative was losing the amendment. And I didn’t think we should do that at all.
BLITZER: Who asked you at the Treasury Department to do it?
DODD: Well, they were people, obviously, coming and negotiating with the staffs back and forth. And I don’t know their names specifically, it was at a staff level, people were talking about it.
BLITZER: So it — but it wasn’t just your members of your own staff at the Senate Banking Committee who did this, you personally knew about it at the time, is that right?
DODD: No, I didn’t know the exact details. I knew they were coming with modifications to it, and whether or not we’d accept some.
Later on March 18, the Politico reported that a White House official acknowledged that, “Treasury told Congressional aides that trying to place limits on contracts already signed would create legal problems and could lead to lawsuits against the government.”
There are so many things wrong with this situation it is hard to even start. First, Dodd apparently is saying that he didn’t even know what the changes were to his amendment. Could there be any better case for requiring more time for lawmakers to read the bill? If he did know what the changes were, or even still if he didn’t, it is the legislative branch’s responsibility to write the laws. Responsibility falls on Congress for agreeing to the insertion of the retroactive bonus immunity even though the administration was leaning on them, and they should own up. Second, the closed conference committee system is a fraud and a threat to decent legislation. Technically, conference committee reports are supposed to be made publicly available for 48 hours before consideration, but that rule is rarely enforced. In 2006, the Democratic Party ran on making conference committees transparent and requiring 24 hours of public availability before consideration for all reports. That doesn’t appear to be happening, and we’re seeing the results.
To further show that conference committees cause undue, secret distortion to bills, we can take another example that is not the Dodd amendment, as it wasn’t the only amendment changed in the conference committee. Another executive compensation amendment, sponsored by Sen. Ron Wyden and Sen. Olympia Snowe, was completely stripped from the bill in conference committee. The Wyden-Snowe amendment went further than Dodd’s amendment in requiring “bailout recipients to cap their bonuses at $100,000. Any amount paid above that would have been taxed at 35 percent.” Upon seeing the conference report, Wyden saw that his amendment, which was previously agreed to by the whole Senate, was stripped from the bill. No one consulted him, as they consulted Dodd. The fate of the Wyden-Snowe amendment also shows that the administration was the one seeking to protect executive compensation. Wyden told the Huffington Post, “I pulled out all the stops … If the White House economic team had made it clear that this was important, this provision would never have been removed. I don’t believe the president has been well-served on the bonus issue by his economic team.”
As Wyden says, “This lack of transparency — and the lack of accountability that results — is one of the most significant threats to our democracy.” The first thing we can do is make sure that all lawmakers, staff, and citizens have at least 72 hours to read and review all versions of legislation. To stop these loopholes and last minute deletions, we need to mandate more sunlight. To help make that happen, join the Read the Bill campaign.
