The struggling companies whose freewheeling business practices have contributed to the economic woes of the US (nay the world) are getting a lucrative return on at least one of their investments. Beneficiaries of the $700 billion bailout package have spent a total of $114.2 million on lobbying in the past year and contributions toward the 2008 election. These companies' political activities have, in part, yielded them $295.2 billion from the federal government's Troubled Asset Relief Program (TARP), an extraordinary return of 258,449 percent.
"Even in the best economic times, you won't find an investment with a greater payoff than what these companies have been getting," said Sheila Krumholz, the Center's executive director. "Some of the companies and industries that have received payments may now consider their contributions and lobbying to be the smartest investments they've made in years."
While the Treasury Department, not Congress, doles out TARP funds to specific institutions, congressional lawmakers had to authorize that money in the first place, and lawmakers will determine in the future whether to release more funds to prop up the U.S. economy. During the bill-writing process, members of Congress were able to specify to some extent where the money should go, and they have lobbied regulators to urge them to inject funds into specific banks and financial institutions, including those in lawmakers' own districts.
"Taxpayers hope their money is being allocated entirely on the merits, but with Congress controlling how much money the Treasury gets to hand out, it will be impossible to completely exclude politics from this process," Krumholz said.
Some of the top recipients of contributions from companies receiving TARP money are the same members of Congress who chair committees charged with regulating the financial sector and overseeing the effectiveness of this unprecedented government program. They include Sen. Chris Dodd of Connecticut, chairman of the Senate Committee on Banking, Housing and Urban Affairs (he received $854,200 from the companies in the 2008 election cycle, including money to his presidential campaign) and Sen. Max Baucus of Montana, chair of the Senate Finance Committee (he received $279,000). In total, members of the Senate Committee on Banking, Housing and Urban Affairs, Senate Finance Committee and House Financial Services Committee received $5.2 million from TARP recipients in the 2007-2008 election cycle. President Obama collected at least $4.3 million from employees at these companies for his presidential campaign.
In total, 161 companies approved for TARP money gave $37.5 million to federal candidates, parties and committees in the 2007-2008 election cycle, with 57 percent of that going to Democrats (post-election data is not yet available). The employees of these companies, rather than their political action committees, gave the bulk of that, at $26.1 million, or 70 percent. These two groups of donors seem to have differed in their partisan allegiance--individual employees gave 61 percent of their donations to Democrats, while PACs were more evenly divided, giving 51 percent to Republicans. Some of the companies to give the most in contributions, including Goldman Sachs, Citigroup, JPMorgan and Morgan Stanley, are also among the biggest donors of all time to U.S. politics.
The companies giving the most to fund lawmakers' campaigns and spending the most on lobbying efforts were also those that received the most TARP money to help them stay afloat. This includes General Motors, which spent $15 million between campaign contributions and lobbying expenditures and got $10.4 billion (more than all other companies), Bank of America (and the investment company it bought last year, Merrill Lynch), which spent $14.5 million to play politics and received $45 billion from the bailout bill; and American International Group (AIG), which spent $10.6 million and was paid out $40 billion. Citigroup was also one of the largest spenders to see a big result: between lobbying expenditures and campaign contributions, the company spent $12.5 million and got $50 billion.
"TARP needs to be far more transparent," Krumholz of CRP said. "Hundreds of billions of dollars have already been handed out with little more than a one-line announcement. What qualified these companies for the money they're getting? What disqualified other companies? What contact has there been between members of Congress and the Treasury? What contact have lobbyists had with Congress and Treasury? These are reasonable questions, and taxpayers deserve answers."
The finance, insurance and real estate sector, including all companies and trade groups (not just those that qualified for TARP funds), spent $453.5 million on lobbying in 2008, an 8.7 percent increase from the year before. In the last quarter of '08, the sector spent $106.9 million on its influence-peddling efforts. The securities and investment industry spent $20.5 million in the 4th Quarter, insurance companies spent $36.7 million and real estate companies spent $16.5 million. And although this was a decrease from the 3rd Quarter for each of these industries, they had plenty of additional support. Trade associations in the finance, insurance and real estate sector spent $123 million on lobbying last year, more than they spent in each of the three years prior.
So much for orderly economic rehabilitation programme.