New Horde of Financial Lobbyists Ex-Regulators – What A Surprise !!!
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03 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com
We said it when we came back from a two-month stint in the States last fall:
Obama’s biggest problem is relying too much on self-interested middlemen to do what the Federal government should be doing.
And we said it again when the so-called health “care” revision package was passed:
03 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com
We said it when we came back from a two-month stint in the States last fall:
Obama’s biggest problem is relying too much on self-interested middlemen to do what the Federal government should be doing.
And we said it again when the so-called health “care” revision package was passed:
As for the people, well, who knows – a question that is still far from being adequately addressed, let alone definitively answered.
Then we said it while the so-called / self-styled / alleged financial “reform” was being considered:
whatever else it may be, this is a jobs bill for lobbyists and financially-oriented lawyers.
And we repeated it when this behemoth of a financial “revision” – it’s hard to call it a reform with any degree of seriousness – finally passed Congress:
this gives regulators a LOT of power, and Big Business has shown itself especially adept at manipulating the regulatory process,
as the AIG bailout scandal so clearly revealed.
So are we in any way surprised to find out that nearly 150 lobbyists registered since last year used to work in the executive branch at financial agencies,
from lawyers for the Securities and Exchange Commission to Federal Reserve bankers ???
Gee, not really.
Nor are we surprised that dozens of former lawyers for the government, who are not registered as lobbyists,
are now scouring the financial regulations on behalf of corporate clients.
Sadly, we’re not even shocked – just more than a bit disgusted.
And not just at the participants in this totally predictable / completely unnecessary / and painful to watch – charade of “democracy.”
We’re also not too overwhelmed with the extent to which the mainstream media – with, as always, some notable exceptions –
is basically IGNORING this total farce that continues to be played out between Wall Street and K Street.
Actually, farce isn’t the right word, because it implies something at least a tad humorous.
What’s going on here is more like an absolute scandal –
about which, as usual, no one seems to be making much of a fuss.
But since it’s been going on since at least Black September 2008, if not before,
maybe WE shouldn’t be surprised no one seems to either know nor care this Kabuki-like “theater” is being so brazenly enacted.
“The headhunters are out in force” to recruit former government regulators as lawyers and lobbyists,
said Lawrence Kaplan, who was a senior lawyer at the government’s Office of Thrift Supervision
and now works on banking regulation at the Washington law firm Paul Hastings.
“I get calls practically every day,” he said.
“You want people who know what they’re doing, and the government background builds your bona fides.
It’s a credential that you flaunt.”
How modest – and so revealing.
Lobbying and law firms here have always turned to former regulators to navigate the bureaucracies of Washington.
But the financial regulations passed by Congress and signed into law by President Obama
have left most of the real decision-making to the S.E.C. –
whose insistence on NOT being held publicly accountable we just documented last week –
and other agencies, making these agencies more powerful than ever.
On a scale that analysts say they have never seen,
government regulatory agencies will spend the coming years enacting rules
on everything from the definition of a “systemically important” mega-bank to limits on debit card fees.
Federal agencies will decide the details of at least 243 financial rules and conduct 67 studies,
according to an assessment by the Davis Polk law firm.
The S.E.C. alone is responsible for developing 95 rules on topics like
the trading of derivatives, standards for credit rating agencies and disclosure of executive bonuses.
The Commodity Futures Trading Commission must develop 61 rules,
the Federal Reserve has 54,
and two agencies just created by Congress —
the Consumer Financial Protection Bureau and the Financial Stability Oversight Council —
have 80 rules between them.
Credit card companies will look to maintain higher fees on debit cards.
Derivatives investors will seek to define themselves as “end users”
of a particular product who should be exempted from some restrictions.
Niche industries like payday lenders and check-cashing services will push for less burdensome federal regulation.
And in many, if not most, cases, these industries will rely on former regulators to make their cases to the federal agencies.
Many directives in the Congressional legislation are written so broadly that the agencies have wide discretion in drafting rules.
“It’s 2,300 pages that affect every facet of the financial services industry,”
said Justin Daly, a former counsel at the S.E.C.
“If you look at a lot of the important provisions,
Congress delegates authority to the agencies to make the really tough determinations.
There’s no question that this bill empowers regulators in a way that we’ve never seen before.”
Mr. Daly will now be working those issues from the other side — as a lobbyist.
He left the S.E.C. in February, and joined the lobbying firm of Ogilvy Government Relations.
Although Mr. Daly was a senior lawyer at the S.E.C.,
he was not senior enough to fall under a one-year “cooling off” period that bans lobbying by former employees.
Last week, Ogilvy, fourth among lobbying shops last year with $21.7 million in revenue,
brought in another former government regulator to work with Mr. Daly —
De’Ana Dow, a lawyer at the Commodity Futures Trading Commission for 22 years until 2002.
In announcing Ms. Dow’s hiring, Ogilvy stressed the government résumés that she and Mr. Daly brought to the job
and said the pair had “the experience and expertise to provide tremendous value to our clients as the regulatory agencies implement the legislation.”
According to the analysis done by the Center for Responsive Politics,
nearly 500 officials have gone through the “revolving door” between government financial agencies and the private sector.
Of that group, 148 former regulatory officials were registered to lobby the government last year or this year,
representing virtually every regulatory agency.
Executives at some leading law firms and lobbying shops said in interviews that they began increasing their hiring of former regulators in 2008,
soon after Black September, in anticipation of the current push for tougher regulations.
Like we said, Big Business is WAY ahead of the “professional” politicians, not only when it comes to analyzing trends,
but also, as Hyman Roth so eloquently put it, having the resources to do something about it.
These regulators’ past associations can be influential.
Government officials and lobbyists agree that
former agency officials have a much easier time getting phone calls or e-mail messages returned from their old colleagues,
and that access often extends to greater credibility in arguing their clients’ positions.
One corporate lobbyist who worked as a regulator,
asked whether he believed he had an inside edge in lobbying his ex-colleagues, said:
“The answer is yes, it does.
If it didn’t, I wouldn’t be able to justify getting out of bed in the morning
and charging the outrageous fees that we charge our clients, which they willingly pay.”
The lobbyist, who spoke on condition of anonymity because of concerns about alienating government officials,
added that “you have to work at an agency to understand the culture and the pressure points, and it helps to know the senior staff.”
Indeed.
But that access and familiarity has proved problematic at times for regulators, particularly at the S.E.C.
The issue has received so much attention that the financial legislation approved by Congress
directs the Government Accountability Office to do a review of the revolving-door problem at the S.E.C.
A review – my, how utterly daunting.
Wonder if we’ll ever HEAR anything more than this – let alone get more “regulations” –
to make sure it doesn’t influence the agencies’ “interpretations.”
Don’t bet on it.
In addition, the inspector general for the agency has identified a number of recent investigations
in which ex-agency lawyers appeared to have undue influence with their former colleagues
in matters involving current and former major firms like JPMorgan Chase, Bear Stearns and the Stanford Financial Group,
which was implicated in a multimillion-dollar Ponzi scheme.
Well, isn’t that special, as the Church Lady used to say –
but what are they going to DO about it ???
Our guess is, “not much.”
In one case, an S.E.C. official, asked about the agency’s lenient treatment of an equity firm suspected of fraudulent practices,
said he had probably given the company “the benefit of the doubt” because it was represented by a former S.E.C. official.
Generally, most senior officials at federal regulatory agencies are banned from lobbying their former agencies for a year after leaving the government.
The Obama administration has gone further in imposing restrictions on its political appointees once they leave the government.
Craig Holman, a government affairs lobbyist at Public Citizen, a watchdog group that has studied the revolving door,
said he was hopeful that the new restrictions might help prevent corporate lobbyists “from capturing the agencies that regulate them.”
While it may be necessary to keep hope alive, it’s a thin reed when it comes to, literally, back-door dealings between old colleagues,
several of whom are now representing the interests they used to regulate.
For their part, the regulatory agencies say they are girding for the intense interest their deliberations will draw.
“We believe that hearing from all interested parties leads to better rule-making,”
said John Heine, a spokesman for the S.E.C., in this crucial but largely ignored article from the New York Times.
Of course, John, it all depends on whom you mean by “interested parties” –
and somehow we have the feeling these “outrageously well-paid” ex-regulator lobbyists
aren’t going to have too much trouble getting their past / present /future drinking buddies
to radically limit the range of who has “an interest” in any particular issue.
To ensure transparency, he said the agency would take public comments even before its proposals were issued,
and anyone wanting to meet with staff members would be asked to submit a written agenda that would become part of the public record.
Well, even if we believed the SEC would actually do anything like that – which we don’t –
because of their rather, er, restrictive interpretation of who has a right to see ANYTHING of what they’re doing –
remember, we posted an item just last week in which the SEC claimed it was
[quote]exempt from disclosing records or information derived from
“surveillance, risk assessments, or other regulatory and oversight activities.”
Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say.
Congress and federal agencies can request information, but the public cannot.
[/quote]And given the fact the media is considered part of the public,
that “interpretation” means there’ll be a cozy little “hidden triangle” –
among the regulators / the ex-regulator lobbyists / and the Congress people
who DEPEND on the lobbyists’ employers for campaign contributions –
THAT NO ONE OUTSIDE IT WILL EVER BE ABLE TO PENETRATE.
I never thought the day would come when I would even think, let alone say, something like this,
but I’m beginning to wonder if President Obama is ANY better on issues like this than the Cheney / Bush regime.
And that is a truly frightening thought.
David Caploe PhD
Chief Political Economist
EconomyWatch.com
President / acalaha.com
