Bailed-Out Banks Spending Big—on Lobbyists
As Congress spent much of the last three months looking at ways to tighten regulations on financial institutions, some of the biggest recipients of the government's $700 billion bailout increased their spending on influencing legislators.
"While these companies continue to count their taxpayer cash, they're using their lobbying against critical financial reform," said Ed Mierzwinski, consumer program director at Public Interest Research Group. "Anywhere but Washington, you would think this was the Saturday morning cartoons."
Trade groups also have ramped up their lobbying and the consequences already are being felt. House Financial Services Committee Chairman Barney Frank, D-Mass., has delayed a panel vote on legislation that would create a consumer finance protection agency widely opposed in the financial sector.
Committee spokesman Steve Adamske said Tuesday the delay until September would give consumer groups time to "get their ground work going and push back on some of the lobbying."
The delay came a day after the U.S. Chamber of Commerce and 19 other industry groups raised objections to the legislation and also pressed Frank for a delay.
The lobbying has been widespread and expensive.
Among recipients of government rescue funds, Bank of America , which received $45 billion, spent $800,000 in the April-June quarter, up from $660,000 in the first quarter though still below the nearly $1.2 million paid out in the year-ago period.
Citigroup , another banking behemoth that got $45 billion in bailout funds, upped its lobbying spending to $1.7 million in the second quarter from nearly $1.3 million in the January-March period and $1.4 million in the second quarter of 2008. Like Bank of America, New York-based Citigroup last week reported strong second-quarter earnings. Citigroup's $3 billion profit was driven largely by the gain on the sale of its Smith Barney unit and the increasing values of some of its riskier assets that had plunged during the credit crisis.
JPMorgan Chase has reaped benefits to its investment banking business from a shrunken playing field of competitors, posting a 36 percent jump in second-quarter profit to $2.72 billion. The Wall Street powerhouse repaid the $25 billion in bailout loans it received.
JPMorgan Chase spent nearly $1.8 million on lobbying in the latest quarter, up from $1.3 million in the first quarter and $1.1 million in the second quarter of 2008.
Goldman Sachs also profited handsomely from Wall Street's rally and the recovering credit markets to post $2.7 billion in earnings — even as it repaid $10 billion in bailout money. Goldman pared back its lobbying outlays in the quarter to $630,000 from $670,000 in the first quarter and $980,000 in last year's second quarter.
Morgan Stanley's lobbying costs jumped to $830,000 from $540,000 in the first three months of the year, and $690,000 in the second quarter of 2008. The company last month repaid the $10 billion in aid it had received.
Bailed-out automaker General Motors again was one of the biggest spenders, according to the mandatory disclosure reports filed with Congress covering the April-June period. GM spent about $2.8 million on lobbying Congress and the federal government, about the same as in the first quarter but down from $3 million in the second quarter of 2008.
GM made an unusually swift exit from bankruptcy protection on July 10, with what once was the world's biggest and most powerful automaker emerging leaner and cleansed of massive debt and burdensome contracts that would have sunk it — if not for $50 billion in federal aid. The government now holds a 61-percent controlling interest in the automaker.
"At any given time, GM is engaged with policymakers on a variety of complex policy issues with significant economic and competitive consequences to individual automotive companies," GM spokesman Greg Martin said. "We believe we have an obligation to remain engaged at the federal and state levels and to have our voice heard in the policymaking process."
GM, perennially one of the biggest spenders in Washington on lobbying, recently said it had terminated contracts with a dozen lobbying firms it has used to help make its case in the capital. The automaker retained its in-house lobbyists, who work on health care, tax, trade, safety, environmental and other issues.
Chrysler, which received about $12 billion in federal aid and also recently emerged from bankruptcy court, reported spending $697,500 on lobbying in the second quarter — down from $720,600 in the first quarter and $1.4 million in last year's second quarter.
Insurance conglomerate American International Group , which became a lightning rod for public outrage over its payment of millions in bonuses to employees, trimmed its lobbying spending in the second quarter to $950,000 from nearly $1.3 million in the first quarter and about $2.8 million in the year-earlier quarter.
President Barack Obama last month sent Congress a plan to tighten oversight of U.S. banks and other financial institutions, designed to fill in supervision gaps believed to have contributed to the housing and financial crises. Among other things it calls for creation of the consumer-protection agency that would police the market for deceptive business practices in financial products like credit cards and mortgages.
In addition to lobbying on financial regulation — including consumer banking, mortgage and credit card rules — the second-quarter disclosure reports show that banks pressed lawmakers and regulators on issues such as taxes and trade.
Ten of the big banks that received aid last fall under the Treasury Department's Troubled Assets Relief Program, known as TARP, repaid a total $68 billion in bailout funds earlier this month. They are: American Express , Goldman Sachs, JPMorgan, Morgan Stanley, Bank of New York Mellon , U.S. Bancorp , Northern Trust , State Street , BB&T and Capital One Financial .
Boston-based State Street, which received $2 billion in bailout support reported lobbying spending of $220,000 in the second quarter. That was up slightly from $210,000 in January-March and $180,000 in the second quarter of 2008.
Bank of New York Mellon, which repaid $3 billion, spent $193,000 in April-June, down from $302,000 in the first quarter but an increase from $114,543 in the second quarter of 2008.
Charlotte, N.C.-based Bank of America last week reported a better-than-expected profit for the second quarter of $2.42 billion even as losses from failed loans rose. The results included $713 million of dividend payments tied to the federal bailout; that compared with profits after preferred dividends of $3.22 billion in the second quarter of 2008.
Unlike the other ten, Bank of America has not said when it will repay the government.