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Today's Top News
Revolving Door, Bailout Edition
In late March, as public outrage over
bonuses paid to executives of bailed-out financial firms exploded,
Citigroup CEO Vikram Pandit met with Senate majority leader Harry Reid.
Accompanying the under-fire CEO to the meeting was Jimmy Ryan, one of
the banking conglomerate's top in-house lobbyists. Ryan was a familiar
face to Reid and his staff. Up until 2003, he was the Nevada senator's
chief counsel, and since then he has remained close to Reid. The
senator, according to Reid spokesman Jim Manley, merely discussed with
Pandit the financial state of Citigroup and the economy in general. If
Pandit and Ryan had hoped that Reid would take action to benefit their
company, Manley maintained, this effort was unsuccessful.
Whether or not Ryan was able to win any sympathy (or anything else) from his old boss, the episode highlights one aspect of Washington bailout politics: Financial firms seeking big bucks and favorable terms from Congress and the White House are deploying Capitol Hill aides turned lobbyists to win favorable treatment from the congressional lawmakers who are managing various aspects of the financial recovery—overseeing or appropriating nearly $3 trillion in spending and lending. And some lawmakers—including Sen. Chris Dodd (D-Conn.), the chairman of the Senate banking committee—have declined to disclose whether they have had contact with former aides now lobbying for the financial sector.
hiring departed congressional staffers as lobbyists is a ho-hum
practice on K Street. But the stakes are particularly high when these
Capitol Hill vets are sicced on programs and legislation that are
crucial to the country's financial recovery and that involve massive
amounts of government spending. In the past year, top bailout
recipients, from Goldman Sachs to Bank of America to JPMorgan Chase,
have dispatched more than 100 past congressional staffers and
ex-government officials to shape the bailouts to their liking. This
crew of well-connected lobbyists includes ex-employees of the
congressional committees on banking, finance, and commerce; one-time
aides to Democratic and Republican leaders; former Treasury officials;
and a past aide to Rahm Emanuel, now the White House chief of staff.
At least one former lawmaker has also gotten in on the action. Goldman Sachs, which has more than 30 ex-government officials registered to lobby on its behalf, tapped one-time House Majority Leader Richard Gephardt (D-Mo.) to lobby his former colleagues in Congress on issues related to the Treasury Department's Troubled Assets Relief Program. Goldman, which paid Gephardt's firm $70,000 in the last quarter of 2008, received $10 billion in TARP funds. (As a counterparty to AIG's disastrous credit default swaps, Goldman pocketed an additional $12.9 billion in bailout money given to the insurance firm.) Other insiders lobbying for Goldman include former SEC commissioner Richard Roberts and Faryar Shirzad, once a top economic aide to President George W. Bush.
Ex-staffers for at least 10 members of the Senate finance committee—including the committee's chairman, Sen. Max Baucus (D-Mont.), and senior Republican member Sen. Charles Grassley (R-Iowa)—have lobbied lawmakers on behalf of big financial firms receiving billions of dollars of government assistance. And at least five members of the Senate banking committee have former aides lobbying Congress on financial matters. These include Dodd and ranking Republican Sen. Richard Shelby of Alabama.
Several leading lawmakers with ex-aides lobbying for bailed-out financial titans were not eager to discuss contacts between their offices or committees and those lobbyists. The offices of both Dodd and Shelby refused to respond to requests for information about any interactions with former staffers now on the payroll of financial firms. (Ditto for Dodd's banking committee.) A spokesperson for Baucus would not comment directly on whether the Senate finance committee chairman has been lobbied by his past aides. He only noted, "Over the past six months Sen. Baucus and his staff have been providing aggressive oversight of the TARP funds, and fought to protect American taxpayers." Baucus' office brushed aside Mother Jones' questions about two former chiefs of staff: David Castagnetti, a lobbyist for Credit Suisse (an AIG counterparty), and Jeff Forbes, who lobbies for Capitol One, which received $3.56 billion in TARP funds. The office of Sen. Jim Bunning, a Kentucky Republican who sits on both the Senate banking and finance committees, did not respond to a request for comment regarding any contacts between Bunning's staff and Jon Deuser, who lobbied for Bank of America and Bank of New York Mellon, recipients of $45 billion and $3 billion in TARP money, respectively. Until 2005, Deuser was Bunning's chief of staff.
A Grassley aide did acknowledge that the senator's office has been lobbied by John O'Neill and Chris Javens—ex-tax policy advisers to the Iowa Republican who now lobby for State Street Corp ($2 billion in TARP funds) and Goldman Sachs, respectively—but she maintained that these lobbying contacts concerned tax matters unrelated to economic recovery or stimulus efforts. A spokesman for Sen. Chuck Schumer (D-N.Y.), a member of both the banking and finance committees, insisted that Carmencita Whonder, once a top Schumer aide on economic matters and now a lobbyist with a number of clients in the financial industry, had not lobbied the New York senator or his staff for rescued financial firms. Manley, Reid's spokesman, says the senator's staff is "not aware" of any lobbying contacts with Kevin Kayes, a registered lobbyist for Bank of America through 2008, who was once the Nevada senator's chief counsel.
"What people are buying when they hire a lobbyist is access," says Bill Allison, a senior fellow at the Sunlight Foundation, "and if you hire somebody who used to sit across the room from a member of Congress or committee staff of a powerful committee, you're going to get better access."
A revolving-door case study is Alexander Sternhell. In 2008, fresh
from his stint as the deputy staff director of Dodd's banking
committee, he became a lobbyist for the Cypress Group. A 14-year
Capitol Hill veteran, Sternhell boasts on his Cypress bio that he
"played a key role in drafting and negotiating nearly every major piece
of financial services legislation in the past decade." At Cypress, he
works with J. Patrick Cave, a former deputy assistant treasury
secretary, to influence the same types of bills. Their recent clients
include bailout recipients US Bank and Citigroup, firms that have
received $6.6 billion and $45 billion in TARP funds, respectively.
Sternhell and Cave are also registered lobbyists for the International
Swaps and Derivatives Association, an industry group that has
championed the types of transactions that have upended the economy.
Sternhell, who declined to comment for this story, is not the only Senate banking committee alum on the bailout beat. His former colleague, Sheryl Cohen—Dodd's longtime chief of staff and the campaign manager of his 2008 presidential bid—joined the lobbying ranks last spring, and bagged as clients a handful of financial firms including Sovereign Bank, a bailout recipient. There's also Kristina Kennedy, who lobbies for Citigroup and other finance industry clients. Kennedy worked as a senior aide to former Sen. Paul Sarbanes of Maryland during his years as the committee's chairman and ranking member.
Citigroup, which spent nearly $8 million on lobbying in 2008, has been especially active in retaining former congressional staffers and other government insiders. The company has hired more than a half-dozen firms, amassing a small lobbying army of more than 40 former veterans of the legislative and executive branches. Among them is Robert Getzoff, who until 2007 served as senior counsel to then-Rep. Rahm Emanuel. He is currently a vice president for federal government affairs at Citigroup. "To the best of our knowledge there has not been direct contact between Getzoff and Rahm in several months," an Emanuel aide said.
Robert Cogorno, a Citigroup lobbyist who works for Elmendorf Strategies, is a former Gephardt aide and one-time floor director for Steny Hoyer (D-Md.), the No. 2 House Democrat. (Cogorno also lobbies for Goldman Sachs, as does his boss, Steven Elmendorf, Gephardt's former chief of staff.) A Hoyer spokeswoman said Cogorno has not lobbied the House majority leader on banking matters. Also on Citigroup's lobbying team is DC attorney Robert Barnett, the chairman of the Federal Deposit Insurance Corporation (FDIC) during the late 1970s. New to the company's lobbying roster is DC Navigators, which, in January, registered to lobby for Citigroup on TARP issues. At this lobbying outfit, Cesar Conda, former Vice President Dick Cheney's one-time domestic policy chief, is one of the lobbyists on the Citigroup account. Cheney's daughter, Mary, is a principal at the firm.
Previously, DC Navigators was one of AIG's go-to firms—until the insurance company halted its lobbying efforts last fall under congressional pressure. AIG, which has received $182 billion from the government, including $40 billion in TARP funds, spent more than $9 million on lobbying in 2008. At DC Navigators, GOP lobbyists Ronald Christie and Chris Cox, both former aides to George W. Bush, tended to AIG's interests. And AIG also signed up Hazen Marshall, a 17-year Hill veteran who had been the staff director for the Senate budget committee's Republican majority. In 2005, Marshall helped start the Nickles Group, a lobby shop set up by former Sen. Don Nickles, an Oklahoma Republican. (Nickles, once the chairman of the Senate budget committee and a member of the finance committee, is not registered to lobby for financial firms, but one of his clients is embattled automaker GM, which has received more than $13 billion in government rescue funds.) AIG also retained Moses Mercado, once a deputy chief of staff for Richard Gephardt and a former Democratic Party official. Last year, Mercado was an unpaid adviser to the Obama campaign.
Under current lobbying rules, lobbyists are only required to disclose if they lobby the House, the Senate, or the executive branch, and they must describe in general terms which bills or issue areas they lobbied on. They don't have to identify the legislators or aides they contacted, or what they discussed with lawmakers. The Honest Leadership and Open Government Act of 2007, passed shortly after the Democrats regained control of Congress, strengthens some limitations on aides-turned-lobbyists, but former congressional staffers still need only wait a year before returning to the Hill to lobby their former bosses and colleagues.
On taking office, President Barack Obama, who had championed government accountability and transparency as a candidate, signed an executive order imposing tough ethics standards on his administration. If an Obama appointee leaves government and becomes a lobbyist, he or she will be banned from lobbying executive branch officials for the duration of the administration. Similarly, in late March, the president announced stringent lobbying rules related to the $787 billion stimulus package. The restrictions, which outraged K Street, direct executive branch agencies to disclose lobbying contacts related to projects funded by the stimulus legislation. The order also forces lobbyists to communicate in writing if they are seeking to influence any specific stimulus-related project, and these communications must be made public.
But Obama's tough new rules apply only to the executive branch and hold no power over Congress. This week, the Sunlight Foundation proposed an online lobbying disclosure system that would require congressional lobbyists to divulge far more detailed information about their contacts on Capitol Hill; they would have to reveal whom they met and what they discussed. Congressional action would be required for a system like this to become a reality. And the lobbying crowd in Washington is hardly likely to embrace such reform. In the meantime, though, there is certainly nothing that prevents lawmakers from voluntarily disclosing their interactions with lobbyists, including those with whom they share history. With many Americans already suspicious about behind-the-scenes dealmaking involving Wall Street, this could help to ease the trepidations of Main Street.