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The Truth About the Big Banks' Unprecedented Lobbying Avalanche

The six biggest banks have hired at least 243 lobbyists to infiltrate and buy out the regulatory framework that's supposed to keep the financial industry in check.

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Of course, that’s a drop in the bucket compared to the $160 billion these banks have received from the US Treasury, and the trillions in free money they’ve received from the Federal Reserve. But these investments are more than enough to buy their way in Washington. (Spending millions on lobbying scores you billions in bailouts, see?)

And Wall Street’s lobbying operation is actually much more concentrated than the healthcare lobby. For the healthcare lobby, LittleSis.org put together a similar list of revolving door lobbyists and we found over 500 healthcare lobbyists who used to be Congressional staffers. But that was for literally hundreds of companies in the healthcare sector.

The 240 we came up with this time around primarily work for the Big Six banks.

These big bank lobbyists want to operate in the shadows. The banks are hiding much of their lobbying activity in a stealth lobby of generic business associations like the Chamber of Commerce. The report points to several instances of how banks are routing their political spending through these organizations, but there are likely many more examples.

In 2008, economist Nouriel Roubini popularized the term “shadow banking system” to describe the non-bank financial institutions that eventually helped spur the collapse of the financial system: highly-leveraged hedge funds, investment banks, and the like. "Shadow banks" are financial firms that act like banks, but evade bank regulations. Meanwhile, a "shadow bank lobby" are lobbyists who go to bat for bankers' interests, but aren't directly hired by banks.

These days, a shadow bank lobby has played a prominent role in shaping the financial reform process, pushing amendments that will weaken consumer protections, water down regulation of the Wall Street casino, and increase the likelihood of continuing fraud and future bailouts. I discuss this shadow bank lobby in the report.

 

Just as the shadow banking system threatens the integrity of financial markets, the shadow bank lobby threatens the integrity of the financial reform process). Both are designed to help Wall Street avoid oversight and accountability for its actions.

Two of the principal players in the shadow bank lobby are large business associations: the US Chamber of Commerce and the Business Roundtable. As Big Bank Takeover details, each institution has morphed into an aggressive financial industry lobby over the bailout period of the past two years. During the bailout period of the past two years, as Wall Street influence has come to be seen as toxic, big banks appear to have directed significant portions of their political budget to these institutions, rather than hiring more lobbyists to lobby directly on their behalf.

Last year, the Chamber, the Business Roundtable, and several other groups partnered to set up the Coalition for Derivatives End Users. The group is supposed to be representing businesses that use derivatives to hedge against risk. But yesterday, a hedge fund manager working with Americans for Financial Reform called on businesses to leave the “sham coalition,” which he said was a creation of the big banks:

“Today, there is no legitimate reason that non-financial businesses should be lobbying to weaken legislation that would prevent the next AIG collapse and taxpayer bailout,” said hedge fund manager Michael Masters. “The only explanation is that these companies are being duped by the big banks, who are desperate to escape accountability for the reckless gambling that crashed the economy and know they are not politically popular these days. It’s time for these companies to wake up to the fact they are being used.

The Coalition claims that it hasn’t coordinated with the big banks, but a closer look at the team of financial reform lobbyists working for the Business Roundtable and the Chamber reveals some evidence that it was created as a front group to push Wall Street’s policy agenda.

 
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