Confidential JPMorgan Chase Memo Predicts Congressional 'Gridlock'
JPMorgan Chase, the $2 trillion bank and financial services firm, predicts that the newly Republican-controlled U.S. House will clash with the still-Democratic-controlled U.S. Senate to the point where progress on large legislation is completely halted, according to a confidential memorandum dated Nov. 3 and obtained by OpenSecrets Blog.
"Many expect the next two years may be heavy on rhetoric but light on legislative achievements," states the 11-page memo, which is authored by the bank's "government relations" department, another term for the lobbying arm of the company. "The 112th Congress could be remembered as a gridlocked one without any landmark legislation."
The memo, marked "confidential JPMC Internal Only," discusses the nation's economic challenges -- high unemployment, national and state budget shortfalls and the fall-out from the housing crisis -- and deciphers what the midterm election means for the company and its clients on both a national and statewide level.
In the memo, the financial giant speculates, for example, that Democrats will jettison both the DREAM Act and "Don't Ask, Don't Tell" repeal from the defense budget during the lame duck session later this month.
It further speculates that the tax cuts signed into law by President George W. Bush will be extended for at least one year, noting that the "biggest question mark" is "whether the administration can find support for extending only the tax breaks for middle-class filers."
Jennifer Zuccarelli, a spokeswoman for JPMorgan Chase, confirmed the document's authenticity to OpenSecrets Blog.
"We believe it's our responsibility not only to encourage our employees to participate in the political process -- however they may vote -- but it is also our duty to keep them informed about issues affecting the firm and the country," Zuccarelli told OpenSecrets Blog. "We're proud of the nonpartisan efforts and resources we offered for our employees this year. We had unprecedented interest this cycle from our 180,000 U.S. employees seeking to better understand the issues and candidates."
The memo generally does not provide point-by-point detail of the company's political or lobbying strategies, but it maintains the company will have "newfound opportunities to play a constructive role in the development of important public policies."
Zuccarelli declined to elaborate on the firm's lobbying strategies for the 112th Congress.
An employee provided the document to OpenSecrets Blog on the condition of anonymity because of possible repercussions.
At the end of 2008, the government injected money into major financial institutions, including JPMorgan Chase. The bank paid back the entire $25 billion it received by the end of last year.
Since January, JPMorgan Chase has spent $5.8 million to lobby the federal government -- the most of any one commercial bank. Its lobbying during the first three quarters of 2010 is up more than a-third compared to its lobbying expenditures during the same period last year, as OpenSecrets Blog recently reported. Between January and September this year, the firm has spent nearly as much as it spent during the entire year of 2009, when it spent $6.1 million, according to a Center for Responsive Politics analysis of lobbying reports.
The company's political action committee and employees have also given more than $1.1 million to federal candidates, parties and committees this election cycle. These donations have benefited Republicans and Democrats about equally.
The top three recipients, however, are all Democrats: two senators -- Sens. Kirsten Gillibrand (N.Y.) and Blanche Lincoln (Ark.) -- and Rep. Scott Murphy (N.Y.), who was elected in a special election in the spring of 2009 but lost re-election last Tuesday. Gillibrand, who represents the heart of Wall Street, has received $108,850 from JPMorgan Chase employees and its PAC since January 2009.
In the new campaign finance landscape with loosened rules for corporate money in elections, JPMorgan Chase has pledged to not use any money from its corporate treasury on political advertisements, which the Supreme Court's Citizens United v. Federal Election Commission ruling permits.
As might be expected, most of JPMorgan's lobbying this year has revolved around the regulations that banks will face following the Democrats' landmark financial reform legislation, which was signed into law in July.
In the memo obtained by OpenSecrets Blog, JPMorgan warns that many of provisions of the Wall Street reform law, authored by Senate Banking Committee Chairman Chris Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) might take time to come to fruition because Republicans may "seek to use the appropriations process to slow implementation of Dodd-Frank by underfunding the new federal agency staff needed to get those programs off the ground."
The memo also notes that Republicans have identified several sections of the law for "oversight hearings and possible repeal," including the "Bureau of Consumer Financial Protection, treatment of derivatives end uses, the Financial Stability Oversight Council and corporate governance provisions."
The memo also speculates that Republicans, angry of a lack of reform regarding "government sponsored enterprises," such as Fannie Mae and Freddie Mac, in the Frank-Dodd financial legislation, will put that at the top of their legislative agenda.
"The GSEs have cost the government $148 billion thus far and that amount may rise considerably," the memo states.
A report is currently in the works about ending the government's conservatorship of Fannie Mae and Freddie Mac, and the Wall Street reform bill requires that report to be submitted to the administration by the end of January. JPMorgan Chase has a financial stake in Fannie Mae and Freddie Mac's ultimate success or failure, as they are legally required to purchase $1 billion worth of faulty mortgages from these two lending organizations.
The JPMorgan Chase memo further suggests Republican may also try to cut funding for the federal agencies and programs tasked with implementing the Democrats' historic health insurance reform law.
The memo also states that one area of spending cuts that might see bipartisan support is ending biofuel subsidies. This, however, would not be the primary thrust of energy-related policy during the new Congress. "The main event in energy policy," the memo states, "is likely to be Republican attempts to prevent the EPA from moving forward with regulation of greenhouse gasses under the Clean Air Act."
Additionally, the memo highlights the shake-up in House leadership, which occurredafter the GOP gained more than 60 seats during Tuesday's election.
The memo mentions rumors that Democratic Speaker of the House Nancy Pelosi (D-Calif.) will retire, leaving Majority Leader Steny Hoyer (D-Md.) to assume the new role as leader of the new minority. Since the memo's publication, Pelosi said she intends to run for Democratic minority leader.
The memo also contains a note of admonition about a potential intra-party fight among the GOP.
"Younger, conservative Republican members will push hard for their brethren to ascend to leadership positions, and will argue that their strategy and energy synchronized with grassroots support to flip control of the House," the memo states.
The memo also describes the landscapes surrounding other substantial legislative areas of interest, including health care, energy, tax policy, debt reduction and international trade.
Complicating the environment for tax policy reform, JPMorgan Chase says is the fact that "incumbent Republicans will want to preempt primary challenges from the right."
For instance, the memo describes the new tension on the Senate Finance Committee, where Sen. Max Baucus (D-Mont.) is the chairman and Sen. Chuck Grassley (R-Iowa) is the ranking member. JPMorgan predicts that Sen. Orrin Hatch (R-Utah) will become the new ranking member of this committee in the new Congress.
"Many times in the past, the Finance Committee has been able to reach bipartisan agreements on tax policy, due to the bipartisan leanings of Chairman Baucus and Senator Grassley," the memo states. "That may be more difficult this year. Given the defeat of his Utah colleague Bob Bennett in the Republican primary earlier this year, Hatch will be keeping his eye on a possible challenge from the right, likely from incumbent Congressman Jason Chaffetz (R)."
The JPMorgan Chase memo offers President Barack Obama some stern criticism, noting Obama will be "under pressure to reach beyond the Congress and appeal directly to the American people for support -- something he has not done very successfully in the last two years."
Going forward with the new 112th Congress, JPMorgan Chase concludes that the Obama administration will "pursue less aggressive legislative goals at the same time it uses its regulatory powers to continue pushing its agenda." Download the full memo here. Or, read the full memo below: