Financial chief executives lined up for a press conference at the White House. (Photo: Reuters Pictures)
"And the banks - hard to believe in a time when we're facing a banking crisis that many of the banks created - are still the most powerful lobby on Capitol Hill. And they frankly own the place." - Illinois Sen. Richard Durbin
What happens when a powerful senator goes up against an industry which has received roughly four trillion dollars in taxpayer support to stave off complete collapse? The senator loses.
Or at least that seems to be what happened last week when an amendment, which would have given bankruptcy judges the ability to adjust or "cram down" mortgages to help borrowers avoid foreclosure, was not able to garner the 60 votes needed to overcome a self-imposed invisible filibuster, which continues to haunt the Democrats in the Senate.
A procedural step to cut off debate and move to vote on the amendment was defeated by a 45 to 51 vote on the floor of the Senate, with 12 Democrats crossing the isle to vote with a unified Republican Party.
After the vote, Illinois Sen. Richard Durbin, the second highest ranking Democrat and author of the legislation, broke a taboo of the Senate with a charge of institution-wide corruption.
"And the banks - hard to believe in a time when we're facing a banking crisis that many of the banks created - are still the most powerful lobby on Capitol Hill. And they frankly own the place," Durbin said.
Consumer advocates who supported the bill were upset after being outmuscled by industry lobbyists.
"The banking industry, after receiving hundreds of billions of dollars in federal assistance, spent millions of dollars in its campaign against this measure. As a result of today's vote, foreclosures will continue to soar, the value of all homes will be diminished and the entire economy will be worse off," Michael Calhoun, president of the Center for Responsible Lending, said in a statement shortly after the vote.
The 12 Democrats who split from the party to kill the "cram down" amendment were Max Baucus (Montana), Michael Bennet (Colorado), Robert Byrd (West Virginia), Thomas Carper (Delaware), Byron Dorgan (North Dakota), Tim Johnson (South Dakota), Mary Landrieu (Louisianan), Blanche Lincoln (Arkansas), Ben Nelson (Nebraska), Mark Pryor (Arkansas), Arlen Specter (Pennsylvania) and Jon Tester (Montana).
Sen. Evan Bayh (D-Indiana) voted for cloture after previous reports that he was opposed to the legislation.
One notable no-vote came from Chairman of the Senate Committee on Finance Senator Baucus, who is set to play a pivotal role in legislation aimed at the re-regulation of the finance industry. Baucus has come under fire from progressive pundits for publicly pushing back against the Obama administration's recent initiative to investigate corporate tax havens and for suggesting that single-payer government-run health care legislation is not an option.
The Bank Lobby
According to recent reports and organizations that track campaign contributions, financiers spend billions of dollars to help elect members of Congress and pay teams of insider lobbyists to remind politicians of the financial industry's interests every year.
The Center for Public Integrity, a nonprofit investigative reporting organization, released a report on Wednesday examining the subprime mortgage lenders, who lowered lending standards, made millions of risky loans and undermined the foundation of the financial industry - all with the blessing of Washington. Their actions were dangerous and, according to regulation experts, amounted to fraud in many cases. But they were able to avoid regulation and rake in unprecedented profits in part because of a massive lobbying campaign.
The report found that subprime lenders and the major banks which financed their activities spent $370 million on lobbying and direct contributions over the past decade.
Countrywide Financial, the now-defunct infamous subprime lender, issued $97 billion in subprime loans between 2005 and 2007. Countrywide spent roughly $11 million on campaign contributions and lobbying over the last decade.
The financial industry as a whole spent $5 billion on lobbying and campaign funding between 1998 and 2008, according to a report by two consumer groups.
"Sold Out: How Wall Street and Washington Betrayed America", a 231-page report debuted in March by Essential Information and the Consumer Education Foundation, details the lobbying and campaign spending by the financial industry and the legislation they got in return.
The defeat of the mortgage "cram down" amendment was just the latest win for the banks. The report lists numerous anti-regulation steps taken by Washington politicians, who rolled back legal checks and destroyed public oversight.
The lobbying disclosure forms for the second quarter of 2009 are likely to show an increase in lobbying expenditures by bailed-out companies as they ramp up efforts to fight legislation cracking down on anti-consumer lending practices.
"Profit-driven companies wouldn't be making campaign contributions if it didn't buy them influence or access," Dan Newman, the executive director of MAPLight.org told Truthout, adding "It's a question of access. Who's in the room when the laws are being written, the homeowner or the bank lobbyists who collectively give legislators millions of dollars in campaign contributions?"
MAPLight tracks the money trail between industry and politicians in Washington and has been following the "cram down" legislation closely. Newman believes that the way campaigns are financed is the major underlying problem.
"If you have two candidates running for office and one is a finance-industry-friendly candidate and the other is the consumer-friendly candidate, the finance-industry-friendly candidate is going to get tens of thousands of dollars from the financial services industry that the other consumer-friendly candidate is not going to get. So, the finance-industry-friendly candidate is going to have much more money to run for election and is more likely to win. He or she is more likely to stay in office, because candidates that vote in alignment with industry interests have more money to run for re-election. So you have this system where Congress as a whole is bought and biased in favor of industry, even if no individual legislator changes their mind on a vote.
"If you are a member of the Senate and at the end of the day you have 25 messages to return, who are you going to call? A constituent who is losing their home to foreclosure or someone from Citigroup or Goldman Sachs who has given you hundreds of thousands of dollars in campaign contributions?"