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President Barack Obama and members of Congress are promising a lot more government regulatory oversight of the banking industry as part of their continuing bailout of the financial system. But many of those in the financial markets who face these new regulations are also campaign contributors who helped put these politicians in office.
The 2008 presidential and Congressional elections were the most expensive in history, in terms of campaign contributions collected and monies expended by the candidates running for office. Among the big spenders in helping these candidates win high office were the big names in the banking industry.
According to the Center for Responsive Government in Washington, D. C., over 161 financial companies that were approved for money under the $700 billion Troubled Asset Relief Program (TARP) passed by Congress last year also invested lots of money in the 2007-2008 election process. Candidates running for Federal office, as well as the political parties and committees supporting them, received $37.5 million dollars from the banks now on the government TARP gravy train.
In addition, these banks and related financial companies spent a huge amount of money on Washington lobbying activities in 2008. They expended nearly $76.7 million on influencing the politicians who determine how much taxpayers’ money gets redistributed to what favored special interest groups through the legislative process. Over half of these lobbying costs were expended during the second part of 2008 when the decisions were beginning to be made about how much the government would spend on the bank bailout and who would get what amount.
The table, below, lists the top ten recipients of the bank bailout largess in the closing months of 2008 when half of the TARP money was “invested” in these institutions through the Federal government infusing capital into them in return for stock shares. The table also shows the amounts these financial institutions paid in 2007-2008 campaign contributions and in lobbying expenses last year.
| Campaign and Lobbying Cost, and TARP Payments, 2007-2008 | | Company | Campaign Contributions, 07-08 Cycle | | Lobbying Expenditures, 2008 | | TARP Payment | | Bank of America Corp | 5,752,630 | | 8,790,000 | | 45,000,000,000 | | Citigroup Inc. | 4,799,678 | | 7,660,000 | | 50,000,000,000 | | AIG | 929,774 | | 9,690,000 | | 40,000,000,000 | | JPMorgan Chase & Co. | 4,778,638 | | 5,390,000 | | 25,000,000,000 | | Wells Fargo & Company | 1,553,471 | | 1,200,740 | | 25,000,000,000 | | General Motors Corporation | 916,142 | | 14,071,000 | | 10,400,000,000 | | The Goldman Sachs Group, Inc. | 5,690,351 | | 3,280,000 | | 10,000,000,000 | | Morgan Stanley | 3,689,027 | | 3,120,000 | | 10,000,000,000 | | The PNC Financial Services Group Inc. | 68,525 | | 0 | | 7,579,200,000 | | U.S. Bancorp | 496,461 | | 570,000 | | 6,599,000,000 |
Source: www.opensecrets.org
President Obama received $4.3 million in campaign contributions from employees of these financial companies. Senator Chris Dodd of Connecticut, chairman of the Senate Committee on Banking, Housing and Urban Affairs received almost $850,000 in campaign contributions from these banks. Senator Max Baucus of Montana, chairman of the Senate Finance Committee received nearly $270,000 in campaign contributions from those same financial institutions in the 2007-2008-election cycle. All told, Senate members on these two committees were the recipients of $5.2 million in campaign contributions from the banks that ended up receiving TARP money.
Combined, the 161 financial institutions that have received $305 billion, so far, in TARP funds contributed about $37.5 million to candidates in last year’s election, and almost $76.7 million in lobbying expenditures in 2008. In total, therefore, these companies shelled out $114.2 million dollars to gain the ears of those running for or holding political office. In other words, these institutions, as a group, earned a more than 2,500 percent return on their “investment” in influencing the political process that resulted in a third-of-a-trillion dollar bank bailout thus far.
Many of those in the banking industry and in other sectors of the economy that have or will receive infusions of government cash are complaining about various strings that are coming with those dollars – caps on executive salaries, “stress test” examinations of company books, and rules and regulations on how the monies received may be used and spent.
But, inevitably, many of those who have been winning friends and influencing people in the halls of Washington politics will end up coming out on top. Money talks, and it always does when it affects the ability of politicians to run for and stay in office. The "political marketplace" is one in which interest groups are often able to gain large and concentrated economic benefits for themselves at the expense of all of us as taxpayers and consumers. We, the general taxpaying and consumer public, however, usually lack the ability or incentive to fight the individual redistributive schemes that cumulatively impose huge burdens on all of us as a whole. (See, "Why Government Grows: The Modern Democratic Dilemma," AIER Research Reports, August 4, 2008*) But that is usually the outcome when “government-business” partnerships replace free markets and limited government. No doubt it will be the same by the time the entire big bank bailout will have played itself out. *Access to all 2008-2009 archives is exclusively for AIER members. Not a member? Learn more about the benefits of Membership. To subscribe to AIER Research Reports, please become a Sustaining Member of AIER. Membership starts at just $39 per year.
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It is a neglected "classic" that should be more widely known and read. I first read it when it first appeared years ago. And it left a deep impression on me.
May I suggest one other book that traces out the historical trends in Germany that lead to National Socialism. It is Hans Kohn's "The Mind of Germany: The Education of a Nation" (New York: Torch Books, 1965).
It explains the development of German Romanticism in the early decades of the 19th century as a revolt against the Enlightenment and the Age of Reason; how it developed into political and philosophical and economic collectivism by the end of the 19th century; and then became the specific set of ideas that finally resulted in the Nazi counter-revolution against the individualism of Western civilization.
Richard Ebeling
It is true that it was not as thought out as some expositions of Marxian socialism in the context of the Soviet Union in that interwar period, but nonetheless, there was a fascist theory of the economic order.
What they all shared in common was philosophical and political collectivism. The individual counted for nothing and the collective everything. In the case of the Italian fascists, the collective was the "nation." In the case of the National Socialists (Nazis) in Germany the collective was the race. And in the Soviet Union the collective was the "working class" in the context of "class warfare."
In economic terms, the fascists, Nazis and communists all rejected political and economic liberalism (the free market and the concept of individual rights to life, liberty, and property).
The Marxian socialists advocated full nationalization of the means of production with a government central planning agency ordering and arranging the production everything in the society.
The Italian fascists (especially Mussolini in his more detailed expositions of fascist doctrine) argued, instead, that it was unnecessary and undesirable to nationalization most means of production. It was sufficient to organize and compel all branches of business, industry, manufacturing, and professions into government mandated cartels; all workers, in turn, would be compelled to be members of mandatory trade unions.
The government would then oversee the setting of prices, wages, production and the allocation of goods in the economy within an overall central plan designed by the State.
In Nazi Germany the same general outline of the economic order was advocated and enforced -- though the Nazis did not give as much "theoretical" rationales and justifications of the system as their Italian colleagues did in the creating their version of economic collectivism.
After 1936, the Nazis organized all economic activity in Germany in context of "four-year plans," similar to the Soviet system of five-year plans. All business was subservient to the pricing and production dictates of the National Socialist State. The Nazi form of central planning remained in place throughout the war years.
As I mentioned in my previous comment, when FDR came to power in the 1933, his "brains trust" (his political and economic team of advisers) intentionally followed a version of the fascist model in constructing the agenda of the first New Deal.
Under the National Recovery Administration (NRA) all business and industry was forced into those same types of mandatory cartels that then set all prices, wages and production levels under general government oversight. It was a disaster that failed to bring any serious recovery. Indeed, unemployment never fell below the 15 to 20 percent range for virtually the entire 1930s.
Certainly what the government is starting to do in the U.S. economy today is not a simple carbon copy of the fascist-type economy of the 1930s, but there is emerging enough of a family resemblance that it is not too extreme to point out its fascist-like qualities.
Richard Ebeling
Both terms have been thrown around alot in the news lately. In my dictionary socialism is defined more as an econmic term and fascism as a political term. How would you distinguish the two terms?
The name of that economic system is fascism, or corporativism.
It is the Mussolini model that was developed in Fascist Italy, and then applied during FDR's first New Deal. The only thing that ended America's "experiment" with economic fascism were the 1935 decisions of the U.S. Supreme Court that declared many of them -- the National Recovery Administration (NRA) and the Agricultural Adjustment Act (AAA) -- unconstitutional.
One of the Court's "finest hours," in my view.
Richard Ebeling