Outrage over lobbying and corruption in Washington has spurred calls for campaign finance reform and played a role in the defeat of many Republican incumbents in the 2006 and 2008 elections. Yet the size of government keeps growing, which inevitably means more lobbying and more campaign spending.
We’re seeing this once again with the bailouts and the planned stimulus bill. The $700 billion Troubled Asset Relief Program (TARP), better known as the Wall Street bailout, was cooked up mostly in secret by the Treasury Department and the Federal Reserve Board. But the bill was no sooner proposed than lobbyists started flooding Capitol Hill and the Treasury to get a piece of it.
Every company and industry wanted to be sure that it would be eligible for some of the money, and members of Congress worked to slip their constituents and campaign donors into the bill’s 451 pages. By the time it passed, it included special provisions for Puerto Rican rum producers, auto race tracks, and corporations operating in American Samoa (such as Starkist, which is headquartered in House Speaker Nancy Pelosi’s district). It required that insurance companies pay for mental health benefits and granted tax benefits for victims of the 1989 Exxon Valdez oil spill and makers of children’s wooden arrows.
Once the bill passed, the lobbying frenzy only accelerated. Banks and other companies focused their attention on the Treasury Department regulators. A Treasury spokesman told the Wall Street Journal that political influence played no role in the department’s decisions: “The decisions are made by a committee of officials at Treasury based on recommendations and data provided by the regulators through the application process.”
That’s always the official answer. Put the government in charge of handing out money, and the decisions will be made by highly trained, public‐spirited economists or lawyers, irrespective of political considerations.
The reality is reflected in a few headlines we’ve seen in the past two months: “Lobbyists Swarm the Treasury for Piece of Bailout Pie.” “Bailout Debate Spawns High‐Stakes Lobbying Scramble.” “Political Interference Seen in Bank Bailout Decisions.”
According to a Wall Street Journal report, several Ohio banks also got TARP funds after Ohio’s congressional delegation contacted Treasury Secretary Henry Paulson and other regulators. Arizona’s banking superintendent says she’s going to lobby the state’s members of Congress to make sure that banks in other states don’t get “better treatment.” “I think it’s just a question of advocacy,” she says. “It has to be a congressional voice.”