Revolving Door, Bailout Edition

Published on
by
Mother Jones

Revolving Door, Bailout Edition

by
Daniel Schulman and Jonathan Stein

Corporations 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. (Photo courtesy of flickr user Dan4th.)

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.

Corporations
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.

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