Yesterday, the national Financial Crisis Inquiry Commission (FCIC), tasked with determining the roots our fiscal crisis, held its first formal hearings. The Wall Street star power of initial witnesses drew coast-to-coast media attention as Commission members questioned all the top executives from Bank of America, Goldman Sachs, JPMorgan Chase, and Morgan Stanley. The four CEOs addressed risky financial practices, their decision-making, the complex products they sold and the roles they had in specific aspects of the fiscal meltdown.
One important topic, however, was left untouched by these leading investment bankers: the role campaign contributions played in their successful efforts to persuade Congress to relax financial sector regulation. According to data from the Center for Responsive Politics, employees of their four firms contributed $63 million in federal campaign donations over the past decade. And that money is just a fraction of the political funding shipped from Wall Street and other addresses in the financial sector into the campaign coffers of Congressional candidates. While some still insist that there is little or no connection between campaign contributions and public policy, it is hard to think of a group of people who eat, sleep, breath, and dream about return on their investment more than financial firm executives.
The FCIC needs to investigate the ways in which Wall Street was able to control public policy to its will. As described on its own webpage, its goal is to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." Its more specific charges include investigation of the legal and regulatory structures governing financial institutions and investor protection as well as many other areas subject to policies set by Congress. To explore these topics without digging into the means through which the most powerful elements of the financial sector pursued their public policy goals is to undermine the FCIC's larger purpose - helping us chart a new course that might avoid a similar economic crisis in the future.
Yesterday, national watchdog groups Common Cause and Public Campaign delivered a letter to the Commission urging it to investigate the financial and political interactions between Congress and the financial sector. The Commission has powerful legal tools at its disposal, unavailable to outraged citizens or muckraking journalists. It can examine closely held documents and force testimony under oath, producing the vital information required to fully analyze the practices that led to the fiscal meltdown.
The groups called upon the Commission to:
-Review e-mail traffic from company staff, lobbyists, and other consultants to members of Congress and their aides.
-Review any internal corporate documents that reference campaign fundraising.
-Seek testimony from Wall Street lobbyists to more fully understand the political and policy strategies they employed to influence lawmakers and the role of campaign contributions in carrying out those strategies.
-Explore any written or verbal requests made by lawmakers for fundraising assistance from financial industry leaders or lobbyists.
It is essential that such an inquiry proceed. Right now, these politically connected firms are working to gut or kill financial reforms already moving through Congress, using the same combination of insider lobbying and campaign cash to impose their will.
As a witness during the Commission's second panel yesterday, Peter Solomon, the CEO of a smaller investment firm and a veteran of decades on Wall Street made this point without mincing words: "the financial community has become increasingly active in Washington and is now one of the largest contributors to federal political campaigns. Even today, one can see the detrimental effects of its lobbying on Government action to create transparent, accountable, and efficient markets."
Any analysis that gets to the roots of what happened in the meltdown should include an in-depth look at how finance sector campaign contributions played a role in the policymaking process. To do otherwise would be more than the unfortunate squander of a good opportunity. For the taxpayers who are paying for the Commission, it would be a simple and willful betrayal of public trust.
Nick Nyhart is President and CEO, Public Campaign.