May 24, 2010
Kevin Connor
Co-founder, Public Accountability Initiative
Posted: March 24, 2010 04:06 PM
The Bank Lobbyists Behind the Senators Voting "No" on Reconciliation
As the Senate takes up health care under the reconciliation process, the fight to block reform continues -- for the banks and their minions in the Senate, at least.
The health care fix-it bill approved by the House on Sunday night includes student loan reform legislation that would end wasteful subsidies to lenders like Sallie Mae, Citigroup, and JP Morgan. The banks are extraneous middlemen in the student loan business, skimming profits by originating government-backed loans and charging high interest rates. The reconciliation bill would eliminate the program that subsidizes these activities and switch to a more efficient and equitable system of direct lending.
Despite the common-sense nature of the reform, Senators Blanche Lincoln and Ben Nelson have decided that they will vote no on the reconciliation bill due to the inclusion of student loan reform legislation. Two weeks ago, they were part of a coalition of six Democratic Senators -- including Mark Warner, Tom Carper, Bill Nelson, and Jim Webb -- that wrote a letter to Senate majority leader Harry Reid raising concerns about the student reform legislation.
Why would these Senators step forward to defend a wasteful, inefficient system that pads bank profits at the expense of college students?
That's the question I attempted to answer in a report released on Tuesday by the Campaign for America's Future, titled "Money-Changers in the Senate: How the Student Loan Industry Enlisted Senators to Fight Reform and Protect Profits."
The report estimates that the industry has spent $15 million fighting the Student Aid and Fiscal Responsibility Act (SAFRA). It details how the banks have mounted a massive political campaign to fight legislative reform and preserve the status quo: billions in profits, company jets, private golf courses -- and predatory interest rates for America's college students.
As part of the campaign, the industry developed a sophisticated political strategy that targeted potential sympathizers in the Senate, including the six Senators who signed the letter to Reid. The industry showered them with campaign contributions and made a number of key lobbying hires in order to open lines of communication with their offices.
Among their hires: Kelly Bingel. Bingel is Senator Blanche Lincoln's former chief of staff and a longtime aide to the Senator. She is lobbying on behalf of an obscure group called the "Student Loan Coalition" and John Dean, a lobbyist for the Consumer Bankers Association. The CBA's membership includes Citigroup, Chase, Wells Fargo, and a number of other large student lenders.
A recent Roll Call article described Bingel as Lincoln's "alter ego."
Student loan lobbyist Kelly Bingel and Sen Blanche Lincoln.
Their ties also extend beyond the professional sphere: Lincoln is the godmother of Bingel's son, according to this interview Bingel gave to her old sorority. Ironically, considering the matter at hand, Senator and lobbyist were brought together by their college ties. Lincoln and Bingel were both members of the same sorority, Chi Omega (at different schools, however).
Lobbyists like Bingel have used their relationships with their old bosses to ensure that the Senate looks out for the student loan industry's agenda, even if it comes at the expense of millions of students.
The industry's other key Democratic defender, Senator Ben Nelson, also has strong ties to the industry through his former legislative director, Amy Tejral. Tejral lobbies for Nelnet, a major lender based in Nelson's home state of Nebraska.
Amy Tejral - Ben Nelson(2)
Student loan lobbyist Amy Tejral and Sen Ben Nelson.
At least six student loan lobbyists once worked for the six Senators who rose to the defense of the student loan industry in the letter to Reid.
The report also notes that the industry has used a number of industry associations and shadow groups to fight reform. The Consumer Bankers Association, the Business Roundtable, the American Bankers Association, and the Chamber of Commerce have all lobbied against student loan reform. The groups enlisted lobbyists on behalf of their members, which include Sallie Mae, JP Morgan, Citigroup, and other major lenders.
Even Chamber CEO Tom Donohue got in the act, personally lobbying against SAFRA, according to the business lobby's disclosure reports.
The industry has also funneled tens of thousands of dollars to these Senators. Nelson, for one, is a top recipient of Nelnet cash. The company's PAC has given him $19,000 over the years, and executives Jay and Mike Dunlap gave him $3,000 late last year. Sallie Mae's PAC maxed out to Senator Blanche Lincoln's primary account in 2009. Two of Tom Carper's top three career contributors are JP Morgan and Citigroup, both major lenders, and Sallie Mae's PAC has given him $13,500 over the past ten years.
To get an idea of the firepower behind the industry's campaign, check out the full report.
In a hopeful sign for American college students, the original coalition of Senators that rallied around the student loan industry now appears to be splintering. Ben Nelson and Blanche Lincoln have announced that they will vote no on reconciliation, but Tom Carper, Bill Nelson, and Jim Webb appear to be signaling that they will support the legislation. Mark Warner's stance is still unknown.
When the Democrats first re-gained the Senate majority in 2006, the late Senator Ted Kennedy made student loan reform a major legislative goal, saying that "it's time to throw the money-changers out of the temple of higher education." Despite the student lenders' multi-million dollar campaign to preserve the status quo -- billions in bank profits while college students get stuck with the bill -- the Senate may finally stand up and give the money-changers the boot.
Kevin Connor is a fellow at the Institute for America's Future. A version of this post first appeared at OurFuture.org.
http://www.huffingtonpost.com/kevin-connor/the-bank-lobbyists-behind_b_512049.html
Monday, May 24, 2010
Saturday, May 8, 2010
Senate Votes For Wall Street; Megabanks To Remain Behemoths
Ryan Grim and Shahien Nasiripour
The Huffington Post
A move to break up major Wall Street banks failed Thursday night by a vote of 61 to 33.
Three Republicans, Richard Shelby of Alabama, Tom Coburn of Oklahoma and John Ensign of Nevada, voted with 30 Democrats, including Senate Majority Leader Harry Reid of Nevada, in support of the provision. The author of the pending overall financial reform bill in the Senate, Banking Committee Chairman Christopher Dodd, voted against it. (See the full roll call.)
The amendment, sponsored by Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.), would have required megabanks to be broken down in size and capped so that their individual failure would not bring down the entire system.
Under Brown-Kaufman, no bank could hold more than 10 percent of the total amount of insured deposits, and a limit would have been placed on liabilities of a single bank to two percent of GDP.
In practice, the amendment required the six biggest banks -- Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley -- to significantly scale down their size. It was touted as a way to end Too Big To Fail.
Though top Obama administration officials have not publicly opposed the amendment, its leading economists have opposed ending Too Big To Fail simply by breaking up the nation's financial behemoths. Austan Goolsbee and Larry Summers have both fought back against this idea, as has Treasury Secretary Timothy Geithner.
"This is certainly a defeat for those who are concerned about the dangers of financial concentration in this country," Kaufman said in a statement after the vote. "Some causes are worth fighting for, and for me, the concern about the risks 'too big to fail' banks pose to the American economy and people is deep and profound given the economic tragedy millions of American have endured. I believe the debate itself -- though failing to gain a majority of votes -- has helped to change attitudes about the degree of financial concentration and power these megabanks now represent."
Story continues below
The banks owned by the four largest financial firms in the U.S. collectively account for about 45 percent of all assets in the U.S. banking system, according to a HuffPost analysis of Federal Deposit Insurance Corporation data.
Those four megabanks collectively hold about $7.4 trillion in assets, according to the most recent regulatory filings with the Federal Reserve. That's equal to about 52 percent of the nation's estimated total output last year.
The top 12 banks in the U.S. control half the country's deposits. By comparison, it took 25 banks to accomplish this feat in 2003 and 42 banks in 1998, according to a Jan. 4 research note by Jason M. Goldberg of Barclays Capital.
There are 23 bank-holding companies in the U.S. with more than $100 billion in assets, according to Federal Reserve data.
Richard W. Fisher, president and chief executive of the Federal Reserve Bank of Dallas, is among a group of at least three current regional Fed presidents that have called for the nation's megabanks to be broken up, joining Kansas City Fed president Thomas M. Hoenig and St. Louis Fed president James Bullard.
Fisher has suggested a ceiling on bank assets placed at $100 billion.
"In the past two decades, the biggest banks have grown significantly bigger," Fisher said last month. "The average size of U.S. banks relative to gross domestic product has risen threefold. The share of industry assets for the 10 largest banks climbed from almost 25 percent in 1990 to almost 60 percent in 2009."
Of course, size is not the only danger -- Lehman Brothers, whose crash rocked the financial system, would have been under the size caps proposed by the amendment. To that end, the Brown-Kaufman amendment limited the amount of leverage an institution can take at about 16-to-1. Hoenig has suggested a 15-to-1 ratio. Leverage is the use of debt to increase assets without a corresponding increase in capital.
The amendment began as a wild longshot, backed by the junior senator from Ohio, Brown, and a longtime aide to Joe Biden, Kaufman, appointed to keep his seat warm for two years until the 2010 election. That the amendment gained as much support as it did is an indication of the depth of the populist anger.
Sen. Mark Warner (D-Va.) and Dodd of Connecticut spoke against the amendment.
Sen. Judd Gregg (R-N.H.) was indignant. "I don't understand this Brown-Kaufman amendment. Basically, what it says is if you're successful...you're going to break them up? I mean, where does this stop? Do we take McDonald's on?"
"It really doesn't make any sense to me," he said.
After the vote, Kaufman defended the provision.
"I believe this idea was sound policy -- and I further believe that a mainstream consensus will continue to grow that these megabanks are too large, too complex and too internally conflicted to regulate successfully," he said, echoing a position voiced by regional Fed presidents, former top Fed officials, and former top bankers on Wall Street.
The Senate will resume voting on amendments to the legislation next week.
The 27 Democrats who voted against the amendment:
* Akaka (D-HI)
* Baucus (D-MT)
* Bayh (D-IN)
* Bennet (D-CO)
* Carper (D-DE)
* Conrad (D-ND)
* Dodd (D-CT)
* Feinstein (D-CA)
* Gillibrand (D-NY)
* Hagan (D-NC)
* Inouye (D-HI)
* Johnson (D-SD)
* Kerry (D-MA)
* Klobuchar (D-MN)
* Kohl (D-WI)
* Landrieu (D-LA)
* Lautenberg (D-NJ)
* McCaskill (D-MO)
* Menendez (D-NJ)
* Nelson (D-FL)
* Nelson (D-NE)
* Reed (D-RI)
* Schumer (D-NY)
* Shaheen (D-NH)
* Tester (D-MT)
* Udall (D-CO)
* Warner (D-VA)
http://www.huffingtonpost.com/2010/05/06/senate-votes-for-wall-str_n_567063.html
The Huffington Post
A move to break up major Wall Street banks failed Thursday night by a vote of 61 to 33.
Three Republicans, Richard Shelby of Alabama, Tom Coburn of Oklahoma and John Ensign of Nevada, voted with 30 Democrats, including Senate Majority Leader Harry Reid of Nevada, in support of the provision. The author of the pending overall financial reform bill in the Senate, Banking Committee Chairman Christopher Dodd, voted against it. (See the full roll call.)
The amendment, sponsored by Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.), would have required megabanks to be broken down in size and capped so that their individual failure would not bring down the entire system.
Under Brown-Kaufman, no bank could hold more than 10 percent of the total amount of insured deposits, and a limit would have been placed on liabilities of a single bank to two percent of GDP.
In practice, the amendment required the six biggest banks -- Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley -- to significantly scale down their size. It was touted as a way to end Too Big To Fail.
Though top Obama administration officials have not publicly opposed the amendment, its leading economists have opposed ending Too Big To Fail simply by breaking up the nation's financial behemoths. Austan Goolsbee and Larry Summers have both fought back against this idea, as has Treasury Secretary Timothy Geithner.
"This is certainly a defeat for those who are concerned about the dangers of financial concentration in this country," Kaufman said in a statement after the vote. "Some causes are worth fighting for, and for me, the concern about the risks 'too big to fail' banks pose to the American economy and people is deep and profound given the economic tragedy millions of American have endured. I believe the debate itself -- though failing to gain a majority of votes -- has helped to change attitudes about the degree of financial concentration and power these megabanks now represent."
Story continues below
The banks owned by the four largest financial firms in the U.S. collectively account for about 45 percent of all assets in the U.S. banking system, according to a HuffPost analysis of Federal Deposit Insurance Corporation data.
Those four megabanks collectively hold about $7.4 trillion in assets, according to the most recent regulatory filings with the Federal Reserve. That's equal to about 52 percent of the nation's estimated total output last year.
The top 12 banks in the U.S. control half the country's deposits. By comparison, it took 25 banks to accomplish this feat in 2003 and 42 banks in 1998, according to a Jan. 4 research note by Jason M. Goldberg of Barclays Capital.
There are 23 bank-holding companies in the U.S. with more than $100 billion in assets, according to Federal Reserve data.
Richard W. Fisher, president and chief executive of the Federal Reserve Bank of Dallas, is among a group of at least three current regional Fed presidents that have called for the nation's megabanks to be broken up, joining Kansas City Fed president Thomas M. Hoenig and St. Louis Fed president James Bullard.
Fisher has suggested a ceiling on bank assets placed at $100 billion.
"In the past two decades, the biggest banks have grown significantly bigger," Fisher said last month. "The average size of U.S. banks relative to gross domestic product has risen threefold. The share of industry assets for the 10 largest banks climbed from almost 25 percent in 1990 to almost 60 percent in 2009."
Of course, size is not the only danger -- Lehman Brothers, whose crash rocked the financial system, would have been under the size caps proposed by the amendment. To that end, the Brown-Kaufman amendment limited the amount of leverage an institution can take at about 16-to-1. Hoenig has suggested a 15-to-1 ratio. Leverage is the use of debt to increase assets without a corresponding increase in capital.
The amendment began as a wild longshot, backed by the junior senator from Ohio, Brown, and a longtime aide to Joe Biden, Kaufman, appointed to keep his seat warm for two years until the 2010 election. That the amendment gained as much support as it did is an indication of the depth of the populist anger.
Sen. Mark Warner (D-Va.) and Dodd of Connecticut spoke against the amendment.
Sen. Judd Gregg (R-N.H.) was indignant. "I don't understand this Brown-Kaufman amendment. Basically, what it says is if you're successful...you're going to break them up? I mean, where does this stop? Do we take McDonald's on?"
"It really doesn't make any sense to me," he said.
After the vote, Kaufman defended the provision.
"I believe this idea was sound policy -- and I further believe that a mainstream consensus will continue to grow that these megabanks are too large, too complex and too internally conflicted to regulate successfully," he said, echoing a position voiced by regional Fed presidents, former top Fed officials, and former top bankers on Wall Street.
The Senate will resume voting on amendments to the legislation next week.
The 27 Democrats who voted against the amendment:
* Akaka (D-HI)
* Baucus (D-MT)
* Bayh (D-IN)
* Bennet (D-CO)
* Carper (D-DE)
* Conrad (D-ND)
* Dodd (D-CT)
* Feinstein (D-CA)
* Gillibrand (D-NY)
* Hagan (D-NC)
* Inouye (D-HI)
* Johnson (D-SD)
* Kerry (D-MA)
* Klobuchar (D-MN)
* Kohl (D-WI)
* Landrieu (D-LA)
* Lautenberg (D-NJ)
* McCaskill (D-MO)
* Menendez (D-NJ)
* Nelson (D-FL)
* Nelson (D-NE)
* Reed (D-RI)
* Schumer (D-NY)
* Shaheen (D-NH)
* Tester (D-MT)
* Udall (D-CO)
* Warner (D-VA)
http://www.huffingtonpost.com/2010/05/06/senate-votes-for-wall-str_n_567063.html
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