Campaign Contributions: How the Banks Control US Policy
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16 October 2009. One of the memes running through EconomyWatch.com, in this age of financial crisis, is how the bankers seem to control the political process in the US, and therefore indirectly for the world at large. [br]
16 October 2009. One of the memes running through EconomyWatch.com, in this age of financial crisis, is how the bankers seem to control the political process in the US, and therefore indirectly for the world at large. [br]
Some would argue that this is the most important dynamic to understand. Although the history we were mostly taught at school was about kings and armies, the interests that funded those kings and armies often held the real power. That is why Thomas Jefferson, third President of the United States and chief author of the Declaration of Independence, famously said I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
Fast forward to the present day, and influence within the royal courts in London and Paris has been replaced by influence on elected officials. That influence is generally exerted using two tools:[br]
1. Campaign Contributions. Getting elected as a representative, senator or president is an expensive business. With all those ads to run and staffers to pay, campaigns need money. Guess who supplies most of that money?
2. Lobbying. Lobbyists influence political policies and laws enacted either by working their rolodex’s or by running public campaigns of influence, for example by issuing ‘independent’ reports, providing stories to journalists or running ads
The principle is the same, but the tools have changed. And how.
Bankers influence on politics has become an unbelievably lucractive business. In both running and consulting for businesses, I have seen some pretty impressive figures, but I have never seen any activity with remotely the level of ROI as listed below.
How have these figures been derived? The table shows total campaign contributions, lobbying and ROI for TARP recipients, which has been compiled by Barry Ritholtz in his blog, using the excellent data from the good people at OpenSecrets.org. Campaign contributions and lobbying fees have to be declared in the United States, and OpenSecrets.org compiles that information.
To see just how much trouble the US system is in, take a look at Citigroup, number one on the list. If they were a ‘normal’ business, they would have gone bust by now, with several executives probably getting taken to court.
Instead, they have spent $4.8m to help fund both Democrats AND Republicans to get elected, as well as $7.66m on lobbyists, and in return, they have received $50 billion, an ROI of 401,194%.
That is like me spending two hundredths of a cent on you, and you (the taxpayer) giving me one dollar. That is what 401,194% ROI means. And that it is not even the worst case – PNC Financial Services Group got a 1,1060,389% payback, while BB&T Corp got a 1,192,591% return. That is simply obscene.
There are those who would argue the logic is all wrong of this analysis is all wrong. The funding was provided over many years, and was designed to give these businesses a voice in the regulations they would have to work under, not specifically to receive an emergency one-off funding.
In fact, what that tells us is that the ROI that the banks received is even more outrageous. They have funded policy makers in both parties and bought deregulation and changes in accounting rules that have reaped billions of dollars in profits while middle class American wages have stagnated. The TARP money was just the icing on the cake.
You can decide for yourself how to interpret this. For me, three things stand out:
1. I am glad I am not an American taxpayer
2. I feel sorry for you if you are an American taxpayer
3. Banking regulations and US campaign financing laws need to be overhauled and given real teeth.
These kind of activities can’t be stopped entirely, but let the ROI figures come down to, say, a modest $10 for every $1 invested. Wouldn’t you be happy with that?
| Company | 2007-08 Campaign Contributions | 2008 Lobbying Expenditures | TARP Payment | Return on Investment |
|---|---|---|---|---|
| Citigroup Inc. |
$4,799,678 |
$7,660,000 |
$50,000,000,000 |
401,194% |
| Bank of America Corp |
$5,752,630 |
$8,790,000 |
$45,000,000,000 |
309,335% |
| AIG |
$929,774 |
$9,690,000 |
$40,000,000,000 |
376,556% |
| JPMorgan Chase & Co. |
$4,778,638 |
$5,390,000 |
$25,000,000,000 |
245,754% |
| Wells Fargo & Company |
$1,553,471 |
$1,200,740 |
$25,000,000,000 |
907,601% |
| The Goldman Sachs Group, Inc. |
$5,690,351 |
$3,280,000 |
$10,000,000,000 |
111,378% |
| Morgan Stanley |
$3,689,027 |
$3,120,000 |
$10,000,000,000 |
146,764% |
| The PNC Financial Services Group Inc. |
$68,525 |
$0 |
$7,579,200,000 |
1,1060,389% |
| U.S. Bancorp |
$496,461 |
$570,000 |
$6,599,000,000 |
618,676% |
| GMAC LLC |
$72,207 |
$4,620,000 |
$5,000,000,000 |
106,460% |
| SunTrust Banks, Inc. |
$175,903 |
$0 |
$4,850,000,000 |
2,757,101% |
| Capital One Financial Corporation |
$700,161 |
$1,132,000 |
$3,555,199,000 |
193,944% |
| Regions Financial Corp. |
$161,775 |
$180,000 |
$3,500,000,000 |
1,023,966% |
| Fifth Third Bancorp |
$149,550 |
$80,000 |
$3,408,000,000 |
1,484,544% |
| American Express Company |
$1,028,038 |
$3,790,000 |
$3,389,000,000 |
70240% |
| BB&T Corp. |
$262,737 |
$0 |
$3,133,640,000 |
1,192,591% |
Hosni Afleck, Guest Post, EconomyWatch.com
