The Full Tale of Economic Corruption
The largest contributing factor to Wall Street’s legislative influence is due to the fact that our government is permeated with financial insiders on every level; Congressionally, bureaucratically, and judicially who fight to deregulate the industry and defend the necessity of big banks taking advantage of us because only they know how to work the complex trading algorithms that manipulate markets in the first place. The financial sector donated over $150 million to Congressional candidates in the most recent election cycle. (Healthcare is the second most generous industry, coincidentally). Only six years after the Great Recession the House Financial Services Committee was bickering about how generous they should be with big banks, as Wall Street’s legions of lobbyists had already been deployed to eliminate registration requirements for brokers trading derivatives, along the way tarnishing the transparency that Congress had originally attempted to impose, and were well on their way to fully repealing Dodd-Frank. This act had been established to prevent another recession like ‘08 in which up to $34 trillion of wealth was destroyed, attempting to reign in the derivatives market that had tanked the economy due to greedy, risky bets.
The Center for Public Integrity conducted a review into the Financial Services Committee members and records of their donations received, who they were from, and how representatives correspondingly voted. (The Financial Services Committee is also known as the ‘banking caucus’). Their results unsurprisingly yielded deeply intimate ties to the financial sector among all members.
Steve Stivers (Ohio) was a longtime lobbyist with the former Bank One and closely connected to Jamie Dimon, who is now CEO of the world’s largest bank JP Morgan. Blaine Luetkemeyer’s family (Missouri) owns a smaller bank, and he has a decades long friendship with the top lobbyist for small banking. Luetkemeyer sponsored a legislative package written by the lobbyist and was “positioned and ready to fight” for banking according to the Independent Community Bankers of America. Shelley Moore Capito (West Virginia) is a chair on the House subcommittee that oversees consumer finance and lending companies, and she also happens to be married to a banker whose resume includes Citi and Wells Fargo. Jim Himes (Connecticut) spent 12 years at Goldman Sachs and now represents the district of Greenwich, a suburb notorious for being home to some of the largest hedge funds; Silver Point, Viking Global, Lone Pine, and over a dozen more. Ed Royce (California) has been in office for 21 years and developed such a close relationship with credit unions that he raised over twice as much from their industry as anyone else, additionally sponsoring 11 bills that would make life easier for them. He also attended a conference of credit union members and pledged over 4,400 people in attendance that he would loosen the restrictions on their commercial lending.
The Financial Services Committee is the most lucrative panel in the House; members are encouraged to constantly be on the phone requesting money and meetings with lobbyists, and they pulled in an average of $2.6 million per year during the 2012 elections until 2014. Party leadership has also packed the committee with as many representatives as possible, second only to the Armed Services Committee, with 61 members now and 71 at its height in 2009. (That timing with the Great Recession was not a coincidence). The highest ranking Republican in the banking caucus, Jeb Hensarling (Texas) doubled his fundraising after attaining senior position. His political action committee took in over $87,000 some months, with consistent donors including the Capital One Financial PAC, Consumer Bankers Association, National Pawnbrokers Association, and more. Representatives across Congress are wined and dined by the financial industry, getting to go on fundraising trips to Super Bowl parties, enjoying fine dining, and receiving gifts that are often in the form of payment or donation.
In 2013 when small banks were in danger of having to give up their toxic CDOs for good, their lobbyists went into overdrive and drummed up congressional support for the Fairness for Community Job Creators Act. This forced regulators to respect small bank CDOs and coincidentally, this act passed Congress and was affirmed by the big five regulatory agencies just in time for banks to report their first quarter revenues. The same act that had nearly forced small banks to end CDOs, the Volcker Act, was also aimed at another form of CDO called Collateralized Loan Obligations, or CLOs.
I know, there are too many abbreviations and it is very confusing, but bear with me because the banking industry relies on its complexity to confuse people into supporting their own financial enslavement.
At the time over $70 billion in CLOs were held by Wall Street, and JP Morgan incidentally held 41% of those. The SEC suspects that banks have been using CLOs in place of the CDOs that melted down in 2008, illegally shifting assets off the balance sheet and into the pockets of top corporate leadership. Yet David Scott (Georgia) took the floor at a Financial Services Committee hearing to urge the big five not to regulate CLOs because they provided “large amounts of credit,” also assuring regulators that they weren’t toxic like the CDOs before. Yeah, right. A regulatory official who wished to remain anonymous is quoted as saying that Representative Scott’s arguments were identical down to the word of a list of preset questions and answers the Securities Industry and Financial Markets Association (SIFMA) published. SIFMA represents Fidelity, Morgan Stanley, and more of their buddies, also spending over $5 million a year in lobbying.
The banking caucus was able to convince regulators to back off the Volker Act, even submitting a bill to tweak it, and a couple months later $10.8 billion in CLOs hit the market. Other representatives such as Scott Garrett (New Jersey) have engaged in massive letter writing campaigns and expressed concerns in dozens of messages that Dodd-Frank or Volcker weren’t fair. Garrett is revealed to have written a letter to Ben Bernake when he was chairman of the Fed, asking him to lift a proposed law that would delay or permanently cut the profits big banks could earn by speculating on CDO and CLO packages.
Ann Wagner (also Missouri) has blocked the Labor Department from regulating the money managers who control retirement funds, successfully lobbying the department to nullify the law while the delay in oversight cost retirement investors billions as brokers casually gambled away savings. Wagner was richly rewarded by Wall Street for championing their cause, raising hundreds of thousands from Goldman Sachs and three major insurance groups in her first year.
Sean Duffy (Wisconsin) has been able to employ populist rhetoric to somehow flip regulation on its head, claiming that community banks would benefit from less Consumer Financial Protection Bureau (CFPB) oversight, and has sponsored a dozen bills to weaken the agency since Dodd-Frank was passed. He claimed he was against the big banks that had caused the crisis in ‘08, defending his deregulation with lies that entities such as the CFPB are somehow harmful to the average American. His reelection campaign had more donations from Goldman Sachs than any other entity. The Financial Services Committee also slows regulation by subpoenaing agency officials to hours of arduous meetings that require a ton of preparation. Time that could have been spent actually doing their job to regulate the financial industry.
When legislators leave their seats in Congress, they are gladly swooped up by the very entities they were supposed to be regulating to protect the American people; Wall Street banks and other massive financial entities. In one of the biggest political upsets during Obama’s term, Republican Majority Leader Eric Cantor lost a bid for reelection to his Congressional seat in Virginia. He was known for cultivating relationships with Wall Street and almost immediately hired by Moelis, a major investment bank. He got paid over a million dollars upon signing, also additional stock options valued over $400k. Bringing on former politicians has been a trend across the financial world recently, and there is an intimate power structure that is interconnected across various developed economies. Wall Street has essentially set up an environment in which the people they are supposed to regulate have highly lucrative jobs waiting for them once they’re out of politics.
The political field being unpredictable and Congressmen being humans that view the world in a zero sum way, of course they’re going to cultivate relationships that set up their own future interests rather than protect the American people who elected them. Elizabeth Warren Calls this the “revolving door” between Congress and Wall Street; a worrying trend that our lawmakers are essentially just Wall Street insiders with governmental influence.
A very special mention to Kelly Loeffler (Georgia); she was CEO of Bakkt, a software company that is a subsidiary of megacorporation and financial provider Intercontinental Exchange (ICE). Her husband also happens to be CEO of ICE, and in a hilarious coincidence is the Chairman of the New York Stock Exchange. Financial criminal Citadel (unproven as of yet but I guarantee they will be implicated within the next couple years as we experience another crash), has over a 60% market share within the NYSE. As a market maker Citadel processes millions of orders a day through their payment for order flow system (PFOF), sucking in money from hundreds of different financial institutions that pay them to route their individual trades through Citadel’s network.
Citadel happens to also operate hedge fund and dark pool entities under the same ownership, Ken Griffin. (Not officially a dark pool in name, but a subsidiary that routes orders off the NYSE to avoid altering stock prices on record, so essentially the same thing). The billionaire has successfully cordoned off a giant portion of the market, able to manipulate prices in collaboration with other firms. His biggest political donations ever, within 9 figure range, happen to have gone to Senator Loeffler. Further, Griffin and Citadel along with many other big banks including Credit Suisse and Citigroup have heavily lobbied Janet Yellen. Her records for ‘speaking fees’ show that in 2019 alone she was paid $7 million by financial institutions.
Conveniently, Yellen has come out as a major proponent against regulating markets, most recently the crypto sphere, specifically lobbying officials to vote against the Wyden-Lummis-Toomey amendment. This new legislation was proposed to clarify the delineation of brokers, essentially closing loopholes that financial institutions could use to avoid taxes by ‘pumping and dumping’ crypto coins, since transactional income on these commodities is not taxed currently.
By lobbying against regulations like these Yellen, a former Treasury Secretary and Chair of the Fed, is blatantly crafting a market in which her Wall Street buddies can continue to hide massive sums of money, keeping it out of the economy, avoiding taxes, and creating volatile markets that act on a whim in which thousands of Americans have lost their life savings. Markets simply aren’t free and fair as we believe them to be; predatory financial institutions have lines to infinite money through lowered interest and the Fed, hoard that in bonuses and commodities like art, then complain that they’re being taxed too much and the laborers generating their wealth (held on minimum wage because the job market is also heavily undervalued,) should just work harder instead of whining about social welfare. Keep in mind I have only discussed a narrow look into the questionable connections that exist in Congress, as that would be an entire book on its own. I urge the reader to look further into the corruption that plagues our government, but hope that this was a sufficient discussion of the fact that Congress has no desire to protect the American people, only their own pockets.
- “Meet wall street’s secret weapon,” Fitzgerald, Alison & Wagner, Daniel, 2014.
- Report from the University of Indiana and University of Texas – “It pays to set the menu, mutual fund investment in 401k.”
- “Cantor Brings Congressional Connections to Wall Street Job,” Zarroli, Jim. 2014. NPR.
- Wyden-Lummis-Toomey amendment, US Senate Committee on Finance.
- Frontline News special, “The Power of the Fed.” 2021. PBS with James Jacoby as correspondent.