Wall Street Bailout Promotes More Washington Corruption

Naive and/or deceptive politicians often claim that sleaze is the enemy of good government, but the real truth is that government is the biggest friend of corruption. Simply stated, when politicians redistribute more than $3 trillion (and more indirectly via regulation), lobbyists and interest groups will line up to stick their snouts in the trough. The Wall Street bailout is an excellent example of this distasteful practice. The headline of a recent New York Times story summarizes the problem, noting “Lobbyists Swarm the Treasury for a Helping of the Bailout Pie.” The excerpt below reveals some of the corruption that is so pervasive in Washington. The most absurd part of the story is the quote from a Treasury Department official who says the government shouldn’t pick winners and losers - a rather strange statement since the bailout exists so that government can pick winners and losers:

When the government said it would spend $700 billion to rescue the nation’s financial industry, it seemed to be an ocean of money. But after one of the biggest lobbying free-for-alls. in memory, it suddenly looks like a dwindling pool. Many new supplicants are lining up for an infusion of capital as billions of dollars are channeled to other beneficiaries like the American International Group, and possibly soon American Express. …The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers – as well as for improbable candidates like a Hispanic business group representing plumbing and home-heating specialists. That last group wants the Treasury to hire its members as contractors to take care of houses that the government may end up owning through buying distressed mortgages. …”Unfortunately, I don’t have a lot of good news for them individually,” said Jeb Mason, who as the Treasury’s liaison to the business community is the first port-of-call for lobbyists. “The government shouldn’t be in the business of picking winners and losers among industries.” Mr. Mason, 32, a lanky Texan in black cowboy boots who once worked in the White House for Karl Rove, shook his head over the dozens of phone calls and e-mail messages he gets every week. “I was telling a friend, ‘this must have been how the Politburo felt,’ ” he said. …The first wave of lobbying came in early October when Mr. Paulson announced the plan to buy troubled mortgage-related assets from banks. The Treasury said it would hire several outside firms to handle the purchases, and would dispense with federal contracting rules. Law and lobbying firms that specialize in government contracting fired off dispatches to clients and potential clients explaining opportunities in the new program. Capitalizing on the surge of interest, several large firms, including Patton Boggs; Akin Gump; P & L Gates; Fried, Frank, Harris, Shriver & Jacobson; and Alston & Bird, have set up financial rescue shops. Alston & Bird, for example, highlights its two biggest stars – former Senator Bob Dole and former Senator Tom Daschle. Mr. Dole “knows Hank Paulson very well” and has been “very helpful” with the financial rescue groups, said David E. Brown, an Alston & Bird partner involved in its effort. “And of course, Senator Daschle is national co-chair of the Obama campaign,” Mr. Brown added, noting that because Mr. Daschle is not a registered lobbyist, his involvement is limited to “high level advisory and strategic advice.” Ambac Financial Group, in the relatively obscure bond insurance business, never needed lobbyists before, said Diana Adams, a managing director. But its clients persuaded the company to hire two Washington veterans – Edward Kutler and John T. O’Rourke – who helped arrange a recent meeting with Phillip L. Swagel, an assistant Treasury secretary. “We haven’t really asked for much in the past,” Ms. Adams said. …Some lobbyists, Mr. Mason said, had called him even though they did not have any clients looking to get into the program or worried about its restrictions. They were merely seeking intelligence on which industries would be deemed eligible for assistance. He suspects they were representing hedge funds that wanted to trade on that information.