AIG says it won’t spend bailout funds on lobbying, as other financial services welfare recipients acknowledge that lobbying expenses will need to be scaled back. That and Sen. Stevens does himself a disservice on the stand.

The Wall Street Journal and the Politico report that AIG, in the face of withering criticism, will suspend all lobbying activities while it is majority owned by the federal government. AIG initially refused to halt lobbying even after it had received a $120 billion bailout from the government. Sens. Dianne Feinstein and Mel Martinez sent a letter to AIG demanding that they not spend taxpayer dollars on lobbying activities. Sen. Feinstein also told the Politico that she will introduce legislation that would ban all bailout recipients from using taxpayer money on lobbying expenses. Feinstein’s efforts signal of new lobbying backlash in Congress. Perhaps, instead of this targeted, temporary response Congress insisted that all lobbyists file full disclosures that list the official lobbied, the issue or bill lobbied on, and all other activities related to lobbying within 24 hours of any contact. If we are trying to get to the root of the problem in the economic crisis, we need to get to the root of the governmental crisis that prevented action from being taken earlier.

Up until yesterday, the trial of Sen. Ted Stevens had been wholly unremarkable, except for the apparently pathetic effort by the prosecution. Yesterday, however, Sen. Stevens did himself no favors by redefining words in the dictionary that are key to his trial - words like “gift.” On the stand, Stevens insisted that a $2,695 chair given to him by Alaska restauranteur Bob Persons and that he has kept at his Virginia residence for seven years was not a gift. Stevens told the jury, “He bought that chair as a gift, but I refused it as a gift. He put it there and said it was my chair. I told him I would not accept it as a gift.” The prosecutor asked Stevens where the chair is now, to which the senator replied, “In our house. We have lots of things in our house that don’t belong to us, ma’am.” This trial was probably headed towards acquital before Stevens took the stand and said this. A gift isn’t a gift if you say it isn’t a gift; and we sure do have a lot of those at our home. That is not what the defense was hoping for. Also troubling for Sen. Stevens is the apparent admission that he misused Senate staff by having them handle his and his wife’s finances.

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Just like on Elm Street, Freddie killed bills in Congress. The Ted Stevens trial is set to wrap up today amidst cross examination of the Alaska senator. Lawmakers pressure AIG to stop lobbying. A look inside lawmaker insider trading. All of that in today’s news:

In 2005, when Republicans still ruled Washington, Freddie Mac deployed a stealth lobbying effort targeting 17 Republican senators in an effort to beat back a reform effort pushed by Sen. Chuck Hagel. The lobbying firm employed, DCI, never filed a lobbying disclosure form as they avoided direct contacts with lawmakers and staff. Instead, the firm, whose lobbying effort Freddie Mac chief Hollis McLoughlin wanted to stay on the down-low, deployed high-profile constituents - businessmen, trade associations, etc… - to push back against the regulation effort to their senators. Freddie Mac was very happy with DCI’s efforts as they kept 9 of the 17 targeted senators from signing a letter to then-Majority Leader Bill Frist asking that the bill be brought to the floor for a vote.

Sens. Dianne Feinstein and Mel Martinez responded to the appalling revelation that AIG is using taxpayer money to lobby against already enacted regulations by calling for the partially privatized insurer to stop its lobbying activities. AIG exists solely because of a $120 billion loan from the federal government, making the United States taxpayer the majority shareholder of the insurance giant.

Final fireworks are expected to fly as the fast moving ethics trial of Sen. Ted Stevens comes to a close today. Stevens is expected to face further cross examination today. The cross has already brought out the Incredible Hulk in Sen. Stevens as he showed his temper in court the other day. The defense attorneys are likely hoping that Stevens can better control himself. They don’t want to see him when he’s mad.

Open Secrets points to ProCon.org and their look into the issue of insider stock trading in Congress. Earlier this year, Rep. Brian Baird proposed the STOCK Act, which would make it illegal for lawmakers, staff, and executive branch officials to trade stocks with the benefit of nonpublic information obtained through the status of their official position. Another bill proposed by Rep. Baird would require “political intelligence” firms to publicly disclose their activities in the same way lobbyists do. In case you were wondering whether there is an actual insider trading positive effect on Congress’ stock sheets, check out this graph:

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A month ago, at the advent of the global economic crisis, the federal government loaned the nation’s largest insurer, AIG, $120 billion to keep it from collapsing, effectively giving the U.S. taxpayer an 80% equity stake in the company. Questions have been thrown around about whether or not the company will continue its lobbying practice despite being 80% owned by the government. Yesterday, ProPublica reported that AIG will continue to lobby. Today, the Wall Street Journal reports that the lobbying will be aimed at reducing regulations and easing oversight of mortgage lenders:

AIG is currently working to ease some provisions in a new federal law establishing strict oversight of mortgage originators, according to state regulators. The law requires that originators be licensed by the states, and that they supply comprehensive information so state regulators can track their activities.

The goal of the new rules is to hold originators accountable if they engage in the sorts of improper or fraudulent lending that ultimately contributed to AIG’s downfall. The law was passed by Congress in July as part of a sweeping housing-industry rescue package.

In the second quarter lobbying filings of 2008, AIG spent $3 million, much of that to block these efforts at oversight. Overall, this year AIG spent $6.7 million on lobbying expenses.

It seems absolutely inappropriate for a company kept alive by the federal government to continue to influence lawmakers and executive branch employees, especially as it concerns oversight that appears intended to stop the type of abusive behaviors that led not only to the near collapse of AIG itself, but to the global economic crisis.

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Sometimes congressional seats come fixed with a superstitious quality; a curse, perhaps. North Carolina’s Class 3 Senate seat is famous for only electing one-term senators. No senator has served for more than one-term since Sam Ervin retired in 1974. Now, a spooky air covers Florida’s 16th congressional district as a sex scandal, unearthed by ABC News, has hit freshman Rep. Tim Mahoney. This marks two elections in a row where the incumbent in Florida’s 16th is hit with a sex scandal reported by ABC News just weeks before an election.

During the 2006 elections, ABC News reported that incumbent Rep. Mark Foley was engaged in improper relationships, both on- and off-line, with teenage male congressional pages. Foley resigned his seat immediately. Mahoney’s scandal is a bit different from Foley’s attempts to sleep with teenagers. Mahoney is accused of paying hush money, to the tune of $121,000, to a former mistress and ex-employee who is suing him for wrongful termination after she was fired soon after their affair went sour. Mahoney is also accused of arranging a $50,000 a year job for the woman with a public affairs firm that his reelection committee pays to do advertisements.

For the guy challenging Mahoney this cycle, watch out, ABC News has their eye on you.

What could be more annoying than tens of billions of taxpayer dollars used to bail out a huge, irresponisble corporation, essentially nationalizing the company? That corporation spending that money to lobby the very government that owns a majority stake in it. And that, children, is the story of AIG as told by AIG spokesman Joseph Norton, “We are not a GSE [government-sponsored entity] and are therefore not restricted. We remain a share-holder owned entity and continue advocacy activities.” That is correct, the only problem being that the majority share-holder is the United States government.

Members of Congress are still looking to party for campaign contributions and Party Time is still tracking the fund raising events in Washington. This week we have a Janet Jackson concert, a Browns-Skins game, and a pheasant hunt. I hope that there are no wardrobe malfunctions, Redskins losses, or friends shot in the face at any of these events.

And our friends at Open Congress were profiled on local New York show Brian Lehrer Live. Watch the interview with OC’s David Moore:

OpenCongress.org with David Moore from Brian Lehrer Live on Vimeo.

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The complete meltdown in subprime mortgages has caused a total makeover of the investment industry. The effect of the makeover on Wall Street will trickle down to Washington, with diminished campaign contributions, lobbyists out of work, and new bills and regulations to wrangle over.

First came the government takeover of Fannie Mae and Freddie Mac. The home loan giants were two of the biggest names in the Washington influence game over the past decade. The two organizations spent a combined $200 million on lobbying over the last ten years and, since 1990, have contributed $19.5 million to political campaigns. It is no wonder that Fannie and Freddie avoided the crucial scrutiny that they needed over the last ten years. And now, Fannie and Freddie’s lobbying shops are shuttered, their political contributions are cut off, and they will no longer throw extravagant fetes for lawmakers and cabinet secretaries.

Yesterday’s collapse of Lehman Brothers, the Bank of America takeover of Merrill Lynch, and today’s AIG firesale, will cause similar aftershocks in Washington. Since 1989, these companies have contributed millions to federal candidates for election:

Merrill Lynch - $14.7 million

Lehman Brothers - $9.2 million

AIG - $9.7 million

The fall-off in campaign contributions from these companies will likely spread to the entire securities and investment industry. The Wall Street Journal points out that during the 2008 election cycle securities and investment contributions are the 2nd largest source of money for Democratic candidates and the 3rd largest source for Republicans. Already those contributions have slowed over the summer months preceding this crisis.

Lobbying spending is likely to shift, but probably not drop-off. Since 1998, Merrill Lynch spent $39.3 million on lobbying in Washington. That account will likely be wiped out for now, as Bank of America takes over for them. Lehman Brothers, which was denied help during their collapse, is a smaller player in Washington with $6.3 million in lobbying expenses since 1998. The events of the past few days have completely wiped out the lobbying enterprises of two companies that spent over $45 million over the decade.

The securities and investment industry is one of the biggest spenders on lobbying Washington. Since 1998, this industry has pumped $551 million into influencing decision makers in Washington. Over the past two years, 2007-2008, the industry spent over $132 million on lobbying.

With the raft of new legislation and regulations about to break through like storm surge over New Orleans levees, the industry, despite its massive financial problems, can’t afford to cut their lobbying expenses. Some lobbyists may wind up out of a job, but there will always be new ones to take their place.

(All totals calculated from data available at OpenSecrets.org.)

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