Author’s Note: This piece started out as an exposé on Wall Street’s influence over a certain South Florida Congressman that sits on the Financial Services Committee. As our research deepened, we came across startling discoveries: Patrick Murphy is not the only Florida Democrat taking Wall Street cash while voting in favor of their sponsored
and in some cases, bank lobbyist-written bills.
The Democratic Party has a problem. A really big one. One that over time has evolved into an addiction. The addiction has weakened us to the core. It has caused us to abandon our values, our ideals, our vision for the future. It’s hurt us here in Florida, all across the South and all across the country from New York to LA. The addiction has caused our country’s recovery from the deepest recession its ever faced, to stagnate. The addiction has left the economy vulnerable and the job market bleak yet plentiful… if minimum wage jobs with no benefits are what you had in mind. The addiction has led to watered down legislation that has resulted in record levels on our stock market and the highest of corporate profits yet the widest gaps in income and wealth in American history. Thanks to our addiction, Wall Street donations, the subsequent catering to their desires, and our propensity to ignore the problem the US economy suffers, Wall Street continues to bank, stocks continue to rise and nothing ever trickles down.
The Democrats for far too long have given conservative lawmakers passes for bad economic votes just because they vote in favor of other Democratic issues — choice, gay marriage, education, immigration, ending the war on drugs, etc. But we are in trying times. Our economy HAS to be the number one concern for elected officials at all levels of government. And it’s time we hold those Democrats that put their reelections ahead of the economic recovery of our nation accountable. No, this isn’t some mindless rant or exaggeration over Congressman Patrick Murphy’s (D-FL18) voting record. This is the story of how the former Republican, now Democratic member of the powerful U.S. House Committee on Financial Services and also the House Committee on Small Business, took campaign donations from major U.S. Banks and Financial Institutions AFTER he voted in favor of HR 922, a bill written by CitiGroup lobbyists that essentially guts the Dodd-Frank Financial Reform Bill that was supposed to protect the taxpayers from the extraordinary risks taken by Wall Street firms engaging in credit default swaps.
First, an admission. He’s not the only member of the Florida delegation to vote in favor of yay on this bill. Debbie Wasserman-Schulz, Frederica Wilson, and Corrine Brown all voted Yea on HR 922. So why the focus on Patrick Murphy? Patrick Murphy (who is also my Congressman) is the only one who sits on the Financial Services Committee and thus regulates the financial services sector. In other words, he deals with all legislation pertaining to the the big banks, Wall Street firms and their subsidiaries. Given the fact that we supposedly changed the way business is done on Wall Street with the Dodd-Frank Financial Reform bill, it would seem the Financial Services Committee would be extremely busy with proposed changes and tweaks to the law. And they were. This committee, one could say, holds the future of the economy in its hands.
What is HR 922
So what exactly is HR 922 and why am I making such a big deal out of it? Why is Congressman Murphy (and the rest of the other Democrats that voted for it) treacherous for voting for it? Allow me to explain it: HR 922 refers to the a certain section of the already passed and signed Dodd-Frank Financial Reform. The bill, which passed the US House 292-122 guts the section of the 2010 Dodd-Frank Financial Reform that we’ve come know as the “push-out rule.” According to the New York Times, the bill sailed through the House Financial Services Committee over the objections of the Treasury Department. The same New York Times article mentions emails that they had reviewed that shows that the 70 word bill was written by and for Citigroup.
HR 922, also known as the Swaps Regulatory Improvement Act, fixes the Push-Out Rule that banks hate. They hate it because the rule forbids them from trading certain types of derivatives (complicated financial instruments whose values are derived from underlying variables, such as crop prices or interest rates. The Push-Out rule forces banks to move these risky potentially costly trades into separate non-bank affiliates that are not backed by the Federal Deposit Insurance Corporation (FDIC) so they could not be eligible for a taxpayer funded bailout. Five banks — Citigroup, JPMorgan Chase, Goldman Sachs, Bank of America, and Wells Fargo—control more than 90 percent of the $700 trillion derivatives market.
HR 922 reverses that law and allows banks to use government-insured deposits to bet on these derivatives, knowing well that if they lose money the American taxpayer will be on the hook for the losses rather than the bank. In other words, HR 922 allows the bank to receive a pretty hefty public subsidy. Talk about moral hazard.
Mother Jones put together a fantastic chart that analyzed the Citigroup draft of the bill and the final bill that passed the house: Notice they are pretty much EXACTLY THE SAME bill. We can then conclude that Citigroup wrote, lobbied, and passed this legislation:
According to Mother Jones, Citigroup had originally wanted a full repeal of the Push-Out rule, but later gave up that fight as it they learned it would virtually impossible to pass such a measure. So instead, they pitched a different idea: HR 922. Again, from Mother Jones:
Citigroup pitched an alternative: allow banks to use FDIC-insured money to bet on almost anything they wanted. It proposed letting banks keep most types of derivatives trading in-house, requiring only that derivatives based on certain pools of assets, such as mortgages, be moved into separate entities.
Naturally, after the passage of the bill in committee and on the House floor, Citigroup and the rest of the bank institutions across the country were ecstatic. So ecstatic that they wanted to celebrate their hard fought legislative victory by thanking all of the members of Congress that helped them secure another tax funded bailout, and what better way to thank their congressional allies than…. Cold hard campaign cash.
As the banks power in Washington surges, so do the campaign contributions. According to the New York Times, the lawmakers who supported the bills championed by Wall Street received twice as much in contributions from financial institutions compared with those who opposed them.
Maplight, a non-profit group that analyzes “money’s influence in politics” did a study that examined the PAC contributions of the four biggest commercial banks in America (Bank of America, Goldman Sachs, JP Morgan Chase, and of course, Citigroup). These banks collectively hold 93.2% (or $208 trillion of notional value) of all U.S. derivatives.
- On average, House Agriculture Committee members voting for H.R. 992 have received 7.4 times as much money from the top four banks as House Agriculture Committee members voting against the bill.
- House Agriculture Committee members voting in favor of H.R. 992 have received $8,726, on average, from the top four banks, while House Agriculture Committee members voting against the bill have received $1,179, on average, from the top four banks.
In a separate study, Maplight also compared the contributions from the biggest banks (Bank Of America, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Citigroup & Wells Fargo) to those members of Congress that voted FOR Hr 922 versus those who voted AGAINST HR 922.
- House Financial Services Committee members voting ‘YES’ on H.R. 992 received, on average, 2.6 times more money from top banks than committee members voting ‘NO.’
- House Financial Services Committee members voting ‘YES’ on H.R. 992 received, on average, 3 times more money from the Finance, Insurance, and Real Estate (FIRE) sector than committee members voting ‘NO.’
HR 922 is just one vote in a long line of votes that Democrats like Patrick Murphy, Debbie Wasserman-Schultz, and others have taken to cozy up to Wall Street financiers. Some Democratic operatives that I’ve spoken to about this piece tell me “So what?” or “it’s the cost of doing business.” That’s the problem. Democrats have got to stop trading votes on social issues for votes that further hinder our recovery and damage the economy. We need to be able to differentiate ourselves from the Republicans who’ve long since sold their souls to Wall Street- and nominated one of their prized sons for president last cycle (and now, Bernie Madoff’s lobbyist, is the GOP front-runner for 2016).
Not only are these votes hurting the economy, they are preventing progress on the most pressing of economic concerns that people like DWS and Patrick Murphy were elected to fix- poverty, inequality, and ensuring the tax payers are NEVER on the hook again for losses sustained by wall street gamblers. It’s these types of politicians that weigh big money campaign donations, their reelections, and rise on the ladder of power over progress that are unworthy of the D next to their name. Our economy is hurting. Our people are hurting and aligning ourselves with Wall Street and passing bills that favor their business while putting the rest of at risk is exactly the type of action that will ensure, the banks stranglehold of power in Washington. It’s up to us to hold our elected officials accountable for votes that are against the interest of their constituents and the people as a whole.
As you can tell, this story has expanded and will require follow ups as we delve into Wall Street’s strangle hold on Washington DC’s legislative process and our economy. Stay tuned for those stories, my forthcoming weekly column “Not From Concentrate,” and more right here at The Florida Squeeze. Thanks for reading.
Until Next Time,