Take Wall Street out of Congress
Financiers are major campaign contributors
February 7, 2009
When Treasury Secretary Timothy Geithner last week announced plans to limit financial institutions in receipt of taxpayer bailouts from using that money to lobby the federal government, he signaled an important commitment to preserving public integrity. The picture of Wall Street firms accepting billions in government bailouts under the Troubled Asset Relief Program and then spending millions to pressure the government for additional taxpayer aid is unsavory, to say the least.
But Geithner misses the underlying point. At issue is America's longstanding system of special interest funding of political campaigns - a fundamental conflict of interest for elected officials charged with protecting the public interest. While lobbyists are famous for attracting public ire, their business is constitutionally protected and rightly so. It is rather the reliance of politicians on millions of dollars in funding from a private interests that undermines public trust and accountability.
In a year of bad investments, Wall Street struck gold by investing in Washington, D.C.
The numbers speak for themselves: $146 million in campaign contributions from the securities and investment industry in 2008, coupled with $34 million from commercial banks, helped to ensure that the interests of Wall Street firms were well represented in Congress while taxpayers footed the bill.
Analysis of campaign contributions from individuals and political action committees in the finance, real estate and insurance industry reveals more than $2 billion in total contributions to candidates for federal office from 1990-2008, making it the largest contributing sector to federal campaigns in the past 20 years. Members of the U.S. House and Senate raised an average of $191,152 and $1,297,681, respectively, in industry contributions for 2008, according to the Center for Responsive Politics.
Contributions were targeted at key members of Congress from both political parties involved in industry regulation: in eight out of 10 elections between 1990-2008, the industry directed more money to members of the party in power, with three quarters of total campaign funds given to incumbents. Meanwhile, nine of the top 10 House recipients of industry contributions in 2008 served on the House Financial Services or Ways and Means committees chiefly responsible for financial regulation and tax policy. The average $1.5 million in top-10 contributions exceeded by a factor of 10 the average industry contributions to other members of the House. These contributions are meant to ensure a favorable view of Wall Street's agenda and keep officials who share its views in office.
While recent actions to bring greater transparency and accountability to the use of taxpayer bailouts are required, they are not sufficient. When politicians responsible for writing America's financial regulations rely on substantial campaign contributions from affected industry groups, their independence as regulators is undermined. Surely this contributed to the current crisis in the financial system.
Only by severing the link between special interest money and elected officials through campaign finance reform can we restore integrity to policymaking.
Introduced by Sens. Dick Durbin of Illinois and Arlen Specter of Pennsylvania, the Fair Elections Now Act would establish a citizen-driven alternative to federal campaign finance. Under the proposal, qualifying candidates who raise only small donations from their constituents would receive competitive matching funds to run for public office. A similar measure introduced by Sens. Russ Feingold of Wisconsin and Susan Collins of Maine would update the longstanding public funding system for presidential elections.
While the president and Congress are understandably consumed with the economic rescue at hand, they would do well to consider the relationship of the financial crisis - and the corresponding failure to regulate Wall Street-to the financing of political campaigns. So long as politicians continue to rely on a wealthy few to win and keep their seats, the integrity of our politics and the quality of our policies will remain in doubt.
White House Chief of Staff Rahm Emanuel once advised that, "You never want a serious crisis to go to waste." Tough times these may be, but the chance to meaningfully reform the way business gets done in Washington through citizen-funded elections is real. It's time we hacked at the root.
John Rauh and Dan Weeks are the founder and president, respectively, of Americans for Campaign Reform a nonpartisan organization headquartered in Concord whose mission is to mobilize support for public funding of all federal elections.