On Sunday, Bloomberg News reported on an estimated $13 billion worth of income that banks gained by taking advantage of the Federal Reserve’s below-market interest rates, which were sometimes as low as 0.01 percent.

The six banks that benefited the most from this “subsidy” – Bank of America, Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, and Wells Fargo – reaped a combined $4.8 billion of estimated extra income from the below-market loans.

It’s worth pointing out that all six of these banks were major political players.

All six have also averaged at least $2.7 million in lobbying a year for the period 2008-2010. And all six have averaged at least $2 million in campaign contributions for the last two electoral cycles. Four of the six banks rank among the top 100 political contributor organizations for the last two cycles. Two of the six were in the top 100 political lobbying organizations for the period 2008-2010. (We focus on 2008-2010 because although the bulk of the lending took place in late 2008 and early 2009, continued lobbying by the banks may have contributed to keeping these deals undisclosed until now.)

 

Bank	Contributions 2007-008 & 2009-2010 (Average Per Cycle)	Lobbying 2008-2010 (Average Per Year)	In-house lobbyists 2008-2010 (Average Per Year)	Firms hired 2008-2010 (Average Per Year)
Bank of America	$3,233,745 (rank: 57)	$4,085,333 (rank: 160)	5.0	7.7
Citigroup	$3,746,536 (rank: 70)	$5,846,666 (rank:37)	9.0	13.7
Goldman Sachs	$5,315,836 (rank: 51)	$3,584,333 (rank: 179)	7.7	14.0
JP Morgan	$4,274,232 (rank: 56)	$6,323,333 (rank: 70)	9.3	12
Morgan Stanley	$3,072,767 (rank: 108)	$2,710,000 (rank: 237)	4.0	4.3
Wells Fargo	$2,000,573 (rank: 126)	$3,518,580 (rank: 197)	3.7	3.3

While it’s difficult to infer causality from these numbers, it is fair to say that these companies were no strangers to Washington. And this probably didn’t hurt them when it came to negotiating bail-out deals with the Federal Reserve and keeping these deals undisclosed.

They received billions in help from the federal government to stay afloat during the worst days of the financial crisis and they've--mostly--paid it all back since. Now the top six biggest recipients of money from the Troubled Asset Relief Program--the Treasury Department program adopted in 2008 to shore up troubled banks--are contributing to the campaigns of congressional office seekers across the political spectrum.

Of the top fifteen recipients of campaign contributions from employees and political action committees of Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo, five are running for office in New York state, Wall Street's home base, and five are Republican candidates seeking election to the Senate. This is based on data collected from the Center for Responsive Politics.

These six banks were the biggest recipients of money from the bailout fund created by the Emergency Economic Stabilization Act of 2008. Bank of America and Citigroup each received $45 billion, JPMorgan Chase and Wells Fargo received $25 billion each and Goldman Sachs and Morgan Stanley both received $10 billion. Only Citigroup has failed to fully repay the money to the Treasury Department. Citigroup still owes $14 billion.

While the high number of contributions sent to New York pols and key individual lawmakers may be predictable, the presence of a number of Republican candidates seeking to become freshmen senators in the 112th Congress is not. Republicans have successfully used public anger against the bank bailouts to their advantage during the run-up to this fall's midterm elections.

Rob Portman, a former congressman, U.S. Trade Representative and director of the Office of Management and Budget in the George W. Bush administration running for the Senate in Ohio, is the leading recipient of big bailout bank money among GOP Senate aspirants, having raised $97,592 from the six banks.

Portman, who stated he would have voted for the bailout bill, has not run directly against the bailouts, but has taken a position that the bailout money that has been paid back to Treasury should be used to pay down the deficit.

Other GOP Senate aspirants among the top fifteen recipients of big bailout bank contributions include California's Carly Fiorina ($94,850), Illinois' Mark Kirk ($81,275), Delaware's Mike Castle ($66,000) and Missouri's Roy Blunt ($65,642).

Blunt, Castle and Kirk currently serve in the House of Representatives and all three voted in support of the bailout on October 3, 2008. They also all voted against the financial reform bill in 2010.

Fiorina, as a top advisor in the 2008 presidential campaign of Sen. John McCain, defended McCain's support of the bailout bill, but is now running against the bailout. In a recent debate Fiorina attacked her opponent, Sen. Barbara Boxer, for voting for the bailout and receiving campaign contributions from banking executives. The latter attack came despite the fact that Fiorina received more in contributions over the course of 2009-2010 from the six big bailout banks than Boxer.

The top recipient of contributions from the six big banks is Sen. Kirsten Gillibrand with $241,000. Gillibrand is running in her first Senate election after being appointed to take the seat of Secretary of State Hillary Clinton. Gillibrand has long relied on these big banks to provide funds for her campaigns. All of the banks, save for Bank of America, rank as top career donors to Gillibrand's campaign efforts.

The second-biggest recipient of contributions from these six banks is Sen. Richard Shelby, the ranking member on the Senate Committee on Banking, House and Urban Affairs. Over the 2010 election cycle Shelby received $127,050 from the big bailout banks.

While Shelby voted against the bailout legislation in 2008, he played an instrumental role in opposing the financial regulatory bill advocated for by President Obama, Senate Banking Committee chairman Chris Dodd and House Financial Services Committee chair Barney Frank. Many in the financial sector, particularly the six big banks, opposed pieces of, if not the entirety of, the financial regulatory bill and worked to strip it of as many provisions as possible.

Shelby focused sharply on a provision designed to liquidate firms that were no longer solvent instead of bailing them out with Treasury funds. Shelby declared the liquidation fund to be a proposal for bailout forever and won concessions from the Democrats in the debate over the provision.

The other candidates hailing from New York state include freshman congressmen Scott Murphy ($105,050) and Mike McMahon ($103,350), senior senator and long-time Wall Street booster Chuck Schumer ($99,100) and Reshma Saujani ($88,200), the Democratic primary challenger to Rep. Carolyn Maloney.

Murphy, who won a 2009 special election to the upstate seat formerly occupied by Gillibrand, has long ties to the financial industry having worked for Bankers Trust and Advantage Capital Partners, a venture capital firm. McMahon, whose Staten Island district houses many employees in the financial sector, fought hard for the bank's positions on derivatives during the debate over the Dodd-Frank financial reform bill.

Saujani is the only non-incumbent candidate for the House ranked in the top fifteen recipients of big bailout bank contributions. Earlier this year Saujani, a Wall Street banker, touted her Street cred by stating that she was, "running on my Wall Street record, not from it.” Saujani, in defending Wall Street, said, "Instead of browbeating Wall Street, I want to invite them to help create jobs."

Despite the in flux of contributions from the financial sector that have buoyed her campaign, Saujani suddenly backtracked on her statement that she would not browbeat Wall Street. In a recent debate with Maloney, Saujani attacked the congresswoman for failing to make the financial reform bill tougher and for hosting fundraisers with Wall Street lobbyists during the crafting of the reform bill.

The other four candidates ranking in the top fifteen recipients of big bailout bank contributions include Senate Majority Leader Harry Reid ($74,250), Connecticut congressman and former Goldman Sachs banker Jim Himes ($69,320), Senator Richard Burr ($67,680) and Republican Minority Whip Eric Cantor ($66,100).

Burr, Cantor and Reid voted for the 2008 bailout. Himes was elected to Congress in 2008 after the vote had taken place. Both Reid and Himes supported the financial reform bill, while Burr and Cantor did not.

Concerned about seeing their huge profits cut, six big banks are leading the charge to weaken or block new financial regulations being considered in the United States Senate. To push their cause these banks have hired 145 former government officials--congressmen, staffers and executive branch officials--to lobby on Capitol Hill and in the executive branch.

The top six bank holding companies engaged in lobbying on financial regulation include Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley. According to the Center for Responsive Politics, these banks spent a combined total of $23.8 million lobbying Washington in 2009.

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Former government officials accounted for seventy-one percent of all lobbyists hired in 2009 by these six banking companies. The company with the highest percentage of former government officials working as lobbyists is Goldman Sachs. Eighty-two percent of the lobbyists hired by Goldman Sachs previously worked in government.

Fifty-five of the 145 former government employees previously worked in the Senate, the current point of lobbying in the financial regulation debate. Fourteen of these former staffers turned lobbyists previously worked for the Senate Committee on Banking, Housing and Urban Affairs or members of the committee. The senator with the most former staffers working as lobbyists for these big banks is Sen. Max Baucus with four former staffers who have gone through the revolving door.

One chief concern of the major bank holding companies is the derivatives language introduced by Sen. Blanche Lincoln and passed out of the Senate Agriculture Committee. Lincoln's legislation would require these banks to spin off their derivatives trading desks into separate entities. This would slash the profits that these companies currently make from derivatives trading.

According to the Office of the Comptroller or the Currency, five of these big banks -- JPMorgan, Bank of America, Citigroup, Merrill Lynch and Goldman Sachs -- account for 97% of the derivatives holdings of United States commercial banks. The investment of millions of dollars in lobbying could save the companies billions of dollars in lost revenue.

Jamie Dimon, JPMorgan's chief executive, stated earlier that derivatives reform could cost his company "$700 million or a couple billion dollars," depending on how tough the regulations were. This calculation likely excludes the possibility that banks would spin off their derivatives trading desks, which could, according to some analysts, lead to the banks getting out of derivatives trading entirely.

The former staffers turned big bank lobbyists worked in other parts of government aside from the Senate. Sixty-five of the 145 previously worked in the House of Representatives. Forty-two worked previously in the executive branch in some capacity and of those with executive experience eight previously worked for either the Treasury Department or the Securities and Exchange Commission.

From October 1, 2008 through the end of the year, eighteen companies that had received, or would receive, bailout funds spent money lobbying the government. As the bailout is set to move onto round two, there have been concerns that recipients of funds are improperly lobbying the government after receiving the funds. In the past week there has been an effort by Treasury Secretary Timothy Geithner to restrict lobbying of his department by bailout recipients and a bill introduced by Sens. Dianne Feinstein and Olympia Snowe to ban the use of bailout funds for political influence. Some good government groups are objecting to bailout recipient Bank of America's involvement in organizing opposition to the Employee Free Choice Act.

In total, the eighteen bailout recipients that continued to spend money on lobbying spent $14,810,259 over the three month period of October to December. Of course, many of these companies were lobbying on a variety of issues and did not necessarily spend the full amount listed on their disclosure to lobby on the bailout. All but two of the bailout contracts received by these companies came during the period of which this lobbying spending is the subject. Lobbying on the bailout was determined by whether the lobbyist disclosure forms listed one of the following in the Issue Area provided on the form: H.R. 1424, Emergency Economic Stabilization Act, TARP, and Troubled Asset Relief Program. One bailout recipient that continued to list lobbying expenses, American Internation Group (AIG), has publicly stated that they are no longer lobbying government. The report AIG filed indicates that the expenses were for:

In response to requests and to correct misinformation, AIG provided information about AIG to federal officials in connection with government efforts to address instability and liquidity in the financial markets and congressional oversight of federal programs including the Troubled Asset Relief Program.

Topping the list is the General Motors Corporation with lobbying expenses totalling $3,550,000. The financial arm of the General Motors family, GMAC, a bailout recipient, also spent $,1540,000 on lobbying expenses. Both of these bailout recipients obtained funds at the end of the lobbying disclosure quarter, after Congress rejected a bill granting non-TARP funds for them, suggesting that the majority of the lobbying was done in pursuit of the funds themselves. Four more companies also obtained their bailout funds in the waning days of the year (the end of the disclosure quarter) or in the new year. Those companies are American Express, Chrysler, CIT Group, and PNC Financial Services Group.

Below is the full table of bailout recipients, their lobbying expenses for the 4th quarter, and the first date upon which they were issued bailout funds.

Oct.-Dec. 2008 Lobbying by Bailout Recipients

Bailout Recipient	Lobbying Expenses (Oct.-Dec. 2008)	First receipt of bailout funds
American Express Company	$1,080,000	1/9/09
American International Group	$1,080,000	10/28/08
Bank of America	$880,000	10/28/08
Chrysler LLC	$1,356,589	1/2/09
CIT Group, Inc.	$80,000	12/31/08
Citigroup	$1,480,000	10/28/08
General Motors Corporation	$3,550,000	12/29/08
GMAC LLC	$1,540,000	12/29/08
Goldman Sachs & Co.	$720,000	10/28/08
Huntington Bancshares, Inc.	$43,670	11/14/08
J.P. Morgan Chase Bank	$1,100,000	10/28/08
Morgan Stanley	$610,000	10/28/08
PNC Financial Services Group	$10,000	12/31/08
State Street Corporation	$210,000	10/28/08
The Bank of New York Mellon	$330,000	10/28/08
U.S. Bancorp	$160,000	11/14/08
Wells Fargo & Co.	$580,000	10/28/08

I just received a one line statement from Tara Andringa, press officer for Sen. Carl Levin, on the will he or won't he question of whether the senator will release copies of contracts that companies participating in the Troubled Asset Relief Program signed:

Senator Levin intends to release the documents, consistent with Senate rules, after reviewing them for proprietary information.

Levin had to fight to get the documents from Treasury; it's good news that he intends to release them to the public. He deserves credit for announcing this. One wrinkle worth noting -- Footnoted, a blog devoted to reading company disclosures to the Securities and Exchange Commission, says that these contracts (the same ones Levin got from Treasury) are already filed on EDGAR (the online SEC disclosure site) -- they look at one filing here. I pretty quickly managed to find a TARP contract with American International Group here and one with Citigroup here. I also found an agreement between AIG and something called Maiden Lane II LLC for which the Federal Reserve Bank of New York served as controlling party. The New York Fed so far has rebuffed attempts to pry loose information on its own, non-TARP bailout activities (it would appear that this might be one of them).

I think it's fair to operate under the assumption that Levin will get more information than that disclosed to the public, but I'm not positive about that.

Thanks much to Michelle Leder, editor and founder of Footnoted, for pointing us to the SEC.

Sen. Carl Levin, angered by the lack of transparency in the Troubled Assets Relief Program, vowed to subpoena the Treasury Department last Sunday if they refused to release contracts that Citigroup and other banks signed to receive funds under TARP.

Treasury assured Levin yesterday that there was no need for a subpoena -- they would provide him with copies of the contracts as early as today. Lisa Chiu, one of our intrepid researchers on the SubsidyScope project, wanted to know if that meant the public would have the same opportunity as Levin to see how what banks are agreeing to do with TARP funds.

Dave Pollock, Levin's spokesperson, told Chiu that the Michigan senator has no plans to release the contracts once he gets them, saying that the Senate Homeland Security and Government Affairs Subcommittee on Investigations - which Levin chairs - typically does not release such documents to the public.

Treasury is giving Levin the contracts that financial titans and totterers like American International Group, Bank of America, Bank of New York Mellon Corporation, Citigroup, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, State Street Corporation, and Wells Fargo signed to get billions of bailout money -- taxpayer money -- last year. Did these firms, as Levin wanted to know, agree to aid borrowers who are trying to keep up with their mortgage payments? Did they offer debt relief to cash-strapped customers? Levin will know, the public won't. (Update: Levin now says his instinct would be to release the documents. Ours too. So let's have them.)

Pollack suggested that we contact Treasury if we want the information. We've asked; if Treasury says no, we'll file a Freedom of Information Act request. With any luck, and assuming that the FOIA request will be handled with the usual speed, they should have the documents, oh, a year or two from now.

Today, President-Elect Barack Obama named the key members of economic team including Timothy Geithner as Treasury Secretary and Larry Summers as head of the National Economic Council. Notably, many in Obama's economic circle are acolytes of former Clinton Treasury Secretary Robert Rubin, the subject of much talk in the wake of the bailout of Citigroup. Rubin, a revolving door spinner between Wall Street and Washington, began his career at Goldman Sachs, moved to the National Economic Council, then Treasury, and in 1999, left government and joined Citigroup. Rubin's story provides a telling story about the conflicts of interest that can occur when a high-ranking official moves so seemlessly between the public and private sector.

In this New York Times article addressing Citigroup's economic troubles, Rubin appears as a key player, in both the deregulation that allowed the bank to become so large and unwieldy and as an adviser to the bank urging riskier behavior:

The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.

Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits. Mr. Prince and Mr. Rubin both declined to comment for this article.

When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent.

...

But while Mr. Rubin certainly did not have direct responsibility for a Citigroup unit, he was an architect of the bank’s strategy.

In 2005, as Citigroup began its effort to expand from within, Mr. Rubin peppered his colleagues with questions as they formulated the plan. According to current and former colleagues, he believed that Citigroup was falling behind rivals like Morgan Stanley and Goldman, and he pushed to bulk up the bank’s high-growth fixed-income trading, including the C.D.O. business.

Former colleagues said Mr. Rubin also encouraged Mr. Prince to broaden the bank’s appetite for risk, provided that it also upgraded oversight — though the Federal Reserve later would conclude that the bank’s oversight remained inadequate.

Once the strategy was outlined, Mr. Rubin helped Mr. Prince gain the board’s confidence that it would work.

The conflict of interest line is often easy to draw when involving revolving door moves from Washington to K Street. When high-powered officials move into other parts of the private sector they still maintain large amounts of influence in Washington, and have just as much of a need to influence officials as lobbyists. (Citigroup's lobbying expenses are close to $6 million for the year.)

In Rubin's case, the industry into which he went has fallen into complete turmoil roiling not only economic markets but politics in Washington. Yet, Rubin remains a top transition adviser to President-Elect Obama and, as noted above, his proteges are among Obama's top picks for economic positions.

Despite Rubin's hand in the current crisis and his revolving door tale, the line between his work and the new Obama appointments is not so clear. While Rubin came from the private sector, Geithner, Obama's Treasury pick, does not. Geithner has spent nearly his entire career in the public sector from positions in the Treasury Department, the IMF, and the New York Federal Reserve. This is quite a change of pace from the recent history of Treasury Secretaries. All three of President Bush's Treasury Secretaries were CEOs, with the current occupant Hank Paulson, like Rubin, the former CEO of Goldman Sachs. Going back more than 30 years, only George Schultz, Treasury Secretary under Nixon, and Larry Summers came into the job without a stint in the private sector. (They both came from acadamia.)

As Rubin's revolving door tale shows, conflicts of interest can pop up during government service and for years to come afterwords. The importance of controling these kind of situations is seen in the types of appointments like Geithner's and the revolving door restrictions that Obama has said he will implement.

For more discussion of revolving door policies, see this Sunlight Policy Review post from last week.