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latest example: Goldman Sachs says it has set aside $16.7 billion so
far this year for compensation or about $530 ,000 per employee. Not
bad for a company that a year ago received $10 billion in federal
money as well as $12.9 billion from the government's bailout of
American International Group Inc. Maddening? Sure. But forcing Goldman
or any other Wall Street firm to pay employees less won't help a
single unemployed American find a job. It won't help a single
homeowner who can't afford his mortgage. It won't help a single
credit card user whose fees keep getting jacked up. If you want
something to really make you angry, though, consider this number:
$224 million. It's a lot less than $16.7 billion but it could pack
far more punch. That's the amount the financial industry spent in the
first half of this year to lobby Congress to water down regulations
aimed at preventing another financial meltdown. And more money is
expected to be on the way. "There is so much happening in the
financial sector to be upset about. The bonuses are the least of
it," said Barry Ritholtz, who writes the popular financial blog "The
Big Picture" and is the author of the new book "Bailout Nation." "
More importantly, we can't let the banks own Congress." The worry is
that the money used for lobbying could lead lawmakers to back down on
their promises for reform. The Obama administration and many members
of Congress have told the public repeatedly over the last year that a
regulatory overhaul was needed to protect us from another financial
disaster, and their constituents back home are counting on them.
Trillions of dollars in taxpayer funds have been pumped into the
financial system to stabilize markets and prevent big institutions
from failing. But the lobbyists' influence can already be seen. Some
potential powers have been stripped from the proposed Consumer
Financial Protection Agency, which would be a federal watchdog to
oversee areas such as mortgages and credit cards. One requirement
that was dropped would have forced banks to make standardized and
straightforward "plain vanilla" mortgages available to customers
along with other products. For instance, lenders would have had to
offer borrowers mortgages with 30- year fixed rates if they also were
going to sell adjustable-rate or interest-only loans. Lenders also
would have had to take additional measures to ensure that their
communications with customers are not deceptive. The House Financial
Services Committee is overseeing the creation of the consumer agency.
It also has made certain exemptions in a bill focused on tougher
oversight of derivatives. Derivatives are contracts between two or
more parties, the value of which is determined by fluctuations in
underlying assets like stocks, bonds, commodities and interest rates.
Companies use derivatives to hedge against risk, such as when airlines
cover themselves against surging fuel prices. But they are also a
means for financial speculation. A form of derivative known as a
credit-default swap was partly blamed for the crisis that hit Wall
Street last year. The House bill would impose restrictions on
derivatives, forcing companies for the first time to conduct what had
been private transactions on regulated exchanges. That's a positive.
But the bill also grants regulatory exemptions to companies that use
derivatives for commercial use, which weakens the transparency of
those transactions. Big industrial associations, including the
Business Roundtable and U.S. Chamber of Commerce, had lobbied for
those kinds of exemptions. The House Financial Services Committee is
one target of financial industry lobbyists, which have given more
than $6 million to its members in 2009. In fact, 27 of that House
committee's 71 members have received more than one-quarter of their
total political contributions from the financial industry, according
to a study by the Sunlight Foundation, a nonpartisan group that
promotes government openness. "It's wrong to draw any cause and effect
from that," said committee spokesman Steven Adamske, who pointed to
other actions taken by the committee this year in areas like
credit-card reform and predatory lending. But there is certainly lots
more lobbying money being put to work in Congress. The pace that the
financial, insurance and real estate industries spent on lobbying
during the first half of the year puts them on pace to meet last
year's record spending of nearly $460 million, according to the
Center for Responsive Politics, a political watchdog group. Employees
and political action committees in those same industries have
contributed more than $53 million this year to members of Congress
and the political parties. Lobbyists for financial industry have
defended their actions, saying it is within their constitutional
right to petition government leaders. That's certainly true. It's
also crucial for lawmakers not to falter when it comes to reforming a
financial system that broke last fall.
