The Weekly Walk of Shame: Wall Street Lobbyists and Your Money

This Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled today. If something's bugging you, too -- and we suspect it is -- go ahead and unload in the comments section below.

Today's subject: It has been more than two years since taxpayers invested $9 trillion to bail out Wall Street. While our economy is still years away from a full recovery, a combination of low interest rates, a dearth of competition, cheap bailout money, and handsome subsidies have meant that the banks that toppled our economy have returned to making record profits.

And what are they doing with those record profits? So far, they've cut lending to small businesses, paid their executives near-record bonuses, and spent record amounts lobbying Congress -- far more than any other industry has spent, according to the Center for Responsive Politics.

Source: Center for Responsive Politics.

Source: Center for Responsive Politics.

Why you should be indignant: In return for saving these companies from bankruptcy, the deal was (or should have been) that Wall Street would agree to rules reducing the amount of risk it would be allowed to take in the future. When you save companies from their own recklessness, you may not get gratitude; certainly, taxpayers haven't gotten any. But you should expect at least an acceptance that they won't be idiots again.

Instead, Wall Street has been spending an estimated $1.4 million per day lobbying to weaken rules that would limit the ability to imperil the economy, according to Elizabeth Warren, the Harvard professor charged with oversight of the TARP program. In March, Warren noted that Wall Street had hired 54 lobbying firms, and a 55th to do nothing but coordinate the first 54.

In other words, Wall Street is spending our bailout money to make future bailouts more likely.

Here are some of the, um, "winners."

Source

Lobbying Amount, 2009 

JPMorgan Chase (NYSE: JPM  )

$6.2 million

Visa

$6.0 million

Citigroup (NYSE: C  )

$5.5 million

Bank of America (NYSE: BAC  )

$3.6 million

Sallie Mae

$3.5 million

American Express

$3.3 million

MasterCard

$3.1 million

Wells Fargo (NYSE: WFC  )

$2.9 million

Fidelity

$2.9 million

Morgan Stanley (NYSE: MS  )

$2.9 million

Apollo Advisors

$2.9 million

Goldman Sachs (NYSE: GS  )

$2.8 million

Blackstone

$2.8 million

Charles Schwab

$2.4 million

AIG (NYSE: AIG  )

$2.3 million

Source: Center for Responsive Politics.

This much money can buy a lot of influence, influence that is hard at work to make sure that no one curbs banks' risk-taking, because higher risk means higher profits and bonuses in the short term. But it's also what leads to financial pandemics.

At the top of lobbyists' hit list is legislation that would ban bailouts and stop government subsidies for the same derivatives casinos that nearly took down our financial system two years ago.

Currently, Wall Street can use our FDIC-insured bank deposits as cheap funding for its derivatives traders. This practice is not only a government subsidy for risk-taking that torpedoed our economy, but it also puts our savings directly in the line of fire of the next derivatives meltdown, making future bailouts that much more likely.

Ending this government subsidy is a pretty common-sense idea that would do a lot to prevent the next economic crisis.

What now
As the financial crisis and subsequent lobbyist shock-and-awe demonstrates, something ultimately has to be done to address the influence of money in politics. It's necessary for our basic economy to function, much less for our government to represent the 99% of the population who aren't derivatives traders.

In the meantime, the attempt to end government support for derivatives casinos is up in the air. Forty-three members of Congress are deciding its fate today and tomorrow, and it could easily go either way.

This wouldn't even be on the table if it weren't for public outrage, and, given enough outrage today, we could win a rule preventing Wall Street from using our FDIC-insured savings deposits to gamble in derivatives. (You can learn more about the issue here.)

If you want to end bailouts and subsidies for risky derivatives casinos, click here to sign the petition or use the widget below. 

Once you're done, you can amplify your voice by calling one of the critical members of Congress listed underneath the petition.

Petitions by Change.org|Start a Petition »

Thanks! Now, do you have a minute to call one or two of these numbers? Just tell the person who answers the phone that you're calling to comment on the financial reform bill, and that you need the representative or senator to oppose attempts to weaken Section 716 of the Senate derivatives chapter, which ends subsidies and bailouts for derivatives casinos.

Sen. Susan Collins, (202) 224-2523

Sen. Olympia Snowe, (202) 224-5344    

Rep. Barney Frank, (202) 225-5931

Sen. Chris Dodd, (202) 224-2823

Rep. Dennis Moore, (202) 225-2865

Fool editor Ilan Moscovitz doesn't own shares of any company mentioned. American Express is a Motley Fool Inside Value choice and Charles Schwab is a Stock Advisor selection. The Motley Fool is investors writing for investors.


Read/Post Comments (13) | Recommend This Article (43)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 23, 2010, at 6:19 PM, sapereaude1 wrote:

    If it were up to me, the top five officers in each of these companies, along with the top five agents of each corporation's bribery on K Street, and the top five recipients of each corporation's money in Congress, would all be nailed to crossed timbers around the Washington Monument and vivisected by a blind man with a dull hoe. They clearly take any attempt at civilized dialogue as a symptom of weakness and surrender. So execute them all.

  • Report this Comment On June 23, 2010, at 6:40 PM, nofool64 wrote:

    Dear Mr. Moscovitz:

    Thank you for providing the names and numbers for those who I can give feedback to in Washington. I will express my strong opinion to dramtically "water down" the reform.

    Let's look at the situation, the banking system had to be bailed out. There is a lot of blame to go around, from legislators (who were asleep) to rating agencies to yield hungry investors to home owners (who could not afford the homes that they bought) to builders to appraisal companies to anyone who ignored obvious warning signs. Obviously, the banks had their share of responsibility. As a result, bank investors lost billions in the debt and equity of these companies, and many people were completely wiped out.

    The government bailed out the country, which had to include a stabilization of the banking system. God help us if there was no bail out.

    Let's look at one, Bank of America, it paid back all of the Tarp money with almost $4 billion in interest/dividends. Probably one of the best investments that the government has ever made considering the return of capital and the cost of doing nothing. What has Bank of America done for its part? in the last 2 years, they have "bailed out," with no hope of a return of the "bail out," $75 billion worth of individuals and companies in the form of write offs. They took the risk to lend to home owners, individuals and businesses who will never be able to pay them back.

    I suggest you pick up a balance sheet and read it and look past the first domino before rallying your readers against an industry that is essential to the existence of our economy, jobs and the american dream.

    I could say more, Mr. Moscowitz, but you obviously have an agenda. Be careful, when you start attacking things, it feels good until it comes your way.

  • Report this Comment On June 23, 2010, at 8:10 PM, TMFDiogenes wrote:

    nofool,

    Thanks for commenting.

    "God help us if there was no bail out. "

    On that, we're totally agreed. 100%. Completely. Though it could have taken other forms than a black check, doing nothing was not an option.

    Yes the banks have paid back TARP. But the economic fallout from the financial crisis -- 40% increase in debt to GDP, millions of jobs lost, etc. -- is not something that can be paid back. No doubt the banks are not the only ones responsible for the crisis. But it seems to me that if bailouts are necessary whenever Wall Street blows up, as we both agree, taxpayers deserve some restraint to how much risk Wall Street takes

    "Be careful, when you start attacking things, it feels good until it comes your way."

    If you work in commercial banking or something and took this personally, I am sorry. It's not my intention to vilify "an industry that is essential to the existence of our economy, jobs and the american dream." On the contrary, the fact that it's such a vital industry means we can't allow it to be blown up again by risky trading that is tangential to the critical functions our banks serve.

    Thanks again for posting.

    Best,

    Ilan

  • Report this Comment On June 23, 2010, at 8:59 PM, xetn wrote:

    "Today's subject: It has been more than two years since taxpayers invested $9 trillion to bail out Wall Street."

    What investment? This was pure theft at the point of a gun and over the opposition of most of the taxpayers in the US. An investment is a voluntary exchange.

    As a matter of fact, all government actions are theft at the point of a gun. You can contend that paying taxes is a voluntary act, but try not volunteering and see what happens.

  • Report this Comment On June 23, 2010, at 9:22 PM, larbrill wrote:

    Looking at the list and amounts of money spent by JP Morgan Chase, makes me ashamed that I haven't thought of this before.

    As a decade + customer of CHASE bank, I will be withdrawing my accounts and moving them to another bank. And provide a letter of indignation to management to explain why.

    I think as consumers we could collectively influence the actions and CEO payments bonuses of those companies with our business.

    If you bank at one of the "winners" on the list and don't really need a big bank, consider a smaller, regional, local bank and make your disgust known.

    And lobby your friends and neighbors to do the same.

  • Report this Comment On June 23, 2010, at 10:57 PM, MotleyReader wrote:

    None of my deposits or investments are with any of the above listed institutions. I have always used local banking. If you want to support local banking, move your deposits from these reckless derivatives gamblers to local, responsible banking institutions. First, you will help your local community by empowering local banks to lend since their deposit base is higher. Second, since banks have to maintain a certain ratio of assets to liabilities, your deposits will help the local banks remain solvent. You will help reduce the number of FDIC bank seizures. Third, you will in essence be voting with your pocketbook. Just like voting in an election it takes time, energy, and some inconvenience to vote: so let it be like this when voting by moving all your assets to responsible local banking and credit union entities. Send the message by moving your assets. That kind of move, en-masse will help to severely curtail the amount of capital available to gamble in the derivatives cassia by a factor of 10 because of fractional reserve banking principles. Move $100 million of assets out of BoA, and you just removed a potential $1 billion out of the derivatives casino.

    Why should we be so vocal and difficult to these institutions? That's simple: the same institutions that were the reckless underwriters of the financial meltdown of 2008 are the same institutions causing a contraction in the credit supply. A contraction in the credit supply is the same as a contraction in the money supply because banks loan money into existence. A contraction in the money supply is proven to cause recession/depression economies! So, let's see if I got this right... Banks cause the meltdown and suck up taxpayer money to stay afloat. Banks return taxpayer money and then contract the money supply. Contracting the money supply helps perpetuate further defaults and transfer of wealth that is continuing to happen even today.

    Therefore, I implore you to move your money from the large banks that are systematically transferring wealth from the American middle class and siphoning it off... Moving that money to local banks and credit unions. The local banks will then be able to increase the money supply for local businesses and homeowners and will help stimulate local economies. Remember, if you move $1 million of deposits to a local bank, you are empowering that bank to lend up to $10 million into your local economy... And you help achieve something that the legislation may not be able to... And that is forcing the large banks out of the reckless derivatives casino due to lack of deposit capital. For this to work, a national effort is required.

    Then, there will be no profits from reckless investments to pay executives with! Okay, maybe that last part is too utopian, but we really can make a difference my moving our money from the "too big to fail" institutions to our local banks.

  • Report this Comment On June 24, 2010, at 1:43 AM, jomueller1 wrote:

    The US banks are a disease, a contagious disease! But as they have congress in their pockets they keep on infecting everyone. At the same time these banks are a representation of a country that many call "America". Do you "Americans" understand why many people(s) are not much in favor of this country?

    Help me: Who said "We have the best government money can buy"? Best for whom?

  • Report this Comment On June 24, 2010, at 2:05 AM, devans10KK wrote:

    Weaken the reform? I say strengthen the reform! Their collective taxes should be increased to 24.9 % APR until every penny is repaid to reduce the national budget. Enact rules with real penalties to force banks to make their investments transparent. This would allow investors can see what they are really investing in. Then caveat emptor. The practice of buying assets only to book them during accounting periods is fraudulent, allowing hucksters to downplay risks while making banco-styled gambles with investors money.

  • Report this Comment On June 24, 2010, at 4:13 AM, Stonewashed wrote:

    "The practice of buying assets only to book them during accounting periods is fraudulent, allowing hucksters to downplay risks while making banco-styled gambles with investors money."

    ______

    Number one on your list, I know for a fact is not paying the bills for repairs done to their own facilities, meanwhile expecting their vendors to utilize their own lines of credit to pay their own creditors, if they are lucky enough not to have lost their LOC. Legal fees to go after them will tie up the money even longer, and they know it. If this isn't robbery, I don't know what is.

  • Report this Comment On June 24, 2010, at 8:50 AM, MPov wrote:

    Wow. Congress is considering laws to reduce the amount of risk taking on Wall Street. Are they the right laws? Will they have unintended consequences? Who knows? I have little faith in the ability of our Senators and Representatives to grasp complex financial issues. They are experts at quick sound bites, and terrible at deep thought. Any effort at financial overhaul is bound to screw something up - badly.

    Having said that, I see nothing wrong with banks employing lobbyists to try to influence the legislation their way. That's the way Washington works, like it or not. Banks have the same free speech rights as every other business.

    Moreover, the banks know their business better than Congress, and these days there is more of an inclination to simply treat the banks as evil than to actually sit down and talk to them, and listen to their concerns. I think most bankers are in favor of additional regulation, it just has to be the right regulation - designed to control risk without making the banks less competitive or screwing up some other part of the economy. They just have to do something to avoid the conseequences of this bonfire of the vanities that financial reform has become.

  • Report this Comment On June 24, 2010, at 9:50 AM, Shark52 wrote:

    Motley Reader is absolutely correct on several points regarding local banks. Remember when the local bank was devoured by the mega-bank? What was the sales pitch - we have more services for you! Remember this is a bank we are talking about. The local bank can take your deposits, cash your checks, lend you money, provide a credit car if you want. What else should banks do? Sell you options on where the interest rate is going? I think not.

    In reality, the local bank is not contracting credit as suggested by some. There is a substantial amount of cash available to lend; however, the number of qualified borrowers is not very high, unless you want to return to lending money to people/businesses that cannot pay it back under normal conditions. We simply are way out of balance - we over spent (and loaned money to fund the over spending) for far to long. Now we again are faced with re-examining our lending standards that makes it feel like we are not lending to anyone. Painful process, but necessary - if only the government would do the same thing!

  • Report this Comment On June 24, 2010, at 10:30 PM, MotleyReader wrote:

    @Shark52, I carefully researched my facts before writing what I did. One of these facts is that in April, the FOMC stated, "While bank lending continues to contract, financial market conditions remain supportive of economic growth."

    I think that what we are discussing is a symptom of a much larger problem. That core problem is that Congress gave banks, via the Fed, sole agency to expand and contract the money supply. It wasn't always like that if we check our history books. And furthermore, I believe that old legislation is unconstitutional! Congress alone is granted control over our nation's currency so why are secretive institutions with heretofore unknown shareholders controlling our nation's money supply? Where is the transparency? Where is the accountability? That is the $64 trillion question.

    Restore control of our nation's currency and we regain our national pride, independence, and affluence across the board. I find it appalling and egregious that our nation is paying interest on a national debt to an opaque organization that has no constitutional right to collect said interest.

  • Report this Comment On June 29, 2010, at 2:21 PM, 3percenthero wrote:

    For me the answer seems to be simple. I don't use banks and don't need them. I use a non profit credit union which id still FDIC insured and provides me with the same services that all these big banks could. So just pull your money out of the banks and then they would'nt have it to gamble with.

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