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How Wall Street and Washington Betrayed America

March 2009 Essential Information * Consumer Education Foundation www.wallstreetwatch.org

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How Wall Street and Washington Betrayed America

March 2009 Essential Information * Consumer Education Foundation www.wallstreetwatch.org

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Primary authors of this report are Robert Weissman and James Donahue. Harvey Rosenfield, Jennifer Wedekind, Marcia Carroll, Charlie Cray, Peter Maybarduk, Tom Bollier and Paulo Barbone assisted with writing and research.

Essential Information PO Box 19405 Washington, DC 20036 202.387.8030 info@essential.org www.essential.org

Consumer Education Foundation PO Box 1855 Studio City, CA 91604 cefus@mac.com

Repeal of the Glass-Steagall Act and the Rise of the Culture of ………….org 5 Table of Contents Introduction: A Call to Arms.. Congress Blocks Financial Derivative Regulation ………………………… The SEC’s Voluntary Regulation Regime for Investment Banks ………….……………... 1.……. Executive Summary ………………………………………………. 5.... Part II: Wall Street’s Washington Investment ..wallstreetwatch. 9.. Appendix: Leading Financial Firm Profiles of Campaign Contributions and Lobbying Expenditures .... 7. Fannie and Freddie Enter the Subprime Market …………………………… 11..…………………… 98 109 115 .. Conclusion and Recommendations: Principles for a New Financial Regulatory Architecture . by Harvey Rosenfield ...……………………. Merger Mania ……………………………………………………………… 12........ Recklessness 2.SOLD OUT www.. Escaping Accountability: Assignee Liability ……………………………… 33 39 47 50 54 58 67 73 80 87 93 6 14 21 22 10. 3....... Part I: 12 Deregulatory Steps to Financial Meltdown . Bank Self-Regulation Goes Global: Preparing to Repeat the Meltdown? … Failure to Prevent Predatory Lending ……………………………………… Federal Preemption of State Consumer Protection Laws ………………….. 6.... 8.. Rampant Conflicts of Interest: Credit Ratings Firms’ Failure ……………. Hiding Liabilities: Off-Balance Sheet Accounting ………………………… The Executive Branch Rejects Financial Derivative Regulation …………. 4..

6 SOLD OUT ber of Congress to the President of the United States. Here are the “highlights” of our economic downfall: • Beginning in 1983 with the Reagan Administration. prepared by longer pursue a college education. • Between 1998 and 2000.8 million over the last three Millions over what the months.” This money went into the political coffers of everyone from the lowliest mem- Essential Information and the Consumer Education Foundation. Congress and the Clinton Administration repeatedly blocked efforts to regulate ∗ 1 President. for most of the last $ to Lobbyists $600 million $383 million $1002 million $122 million ten years.7 billion in what are prettily described as “campaign contributions. details step-by-step many of the events that led to the financial debacle. for a total of 1. . Wall Street showered Washington with over $1. <www.000 Americans lost their jobs in January. and the situation grows dire by the day.1 billion. government acquiesced in accounting rules adopted by the financial industry that allowed banks and other corporations to take money-losing assets off their balance sheets in order to hide them from investors and the public.opensecrets. Families cannot afford to see a doctor. Consumer Education Foundation Source: Center for Responsive Politics.S. over the last decade. Nearly 600. more next Industry1 Securities Commercial Banks Insurance Cos. Accounting In return for the investment of more than $5. the U. What caused this catastrophe? As this report chronicles in gruesome detail.org>. the Money Industry was able to get rid of many of the reforms enacted after the Great Depression and to operate.4 billion on lobbyists whose job it was to press for deregulation — Wall Street’s license to steal from every American. Many Americans owe more on their homes than they are worth. Students can no straints whatsoever. Those lucky enough to have had pensions or retirement funds have watched helplessly as 25 percent of their value evaporated in 2008. Introduction: A Call to Arms by Harvey Rosenfield∗ America’s economy is in tatters. without any effective rules or re- $ to Politicians $512 million $155 million $221 million $81 million will lose theirs year no matter happens. The Money Industry spent another $3. The report.

and vice versa.SOLD OUT “financial derivatives” — including the mortgage-related credit default swaps that became the basis of trillions of dollars in speculation. started buying large numbers of subprime loans from private banks as well as packages of mortgages known as “mortgage-backed securities. • The financial industry’s friends in Congress made sure that those who speculate in mortgages would not be • • • 7 legally liable for fraud or other illegalities that occurred when the mortgage was made. on the ground that the inaction of federal agencies superseded state laws. shady mortgage brokers and bankers began offering mortgages on egregious terms to purchasers who were not qualified. authorized investment banks to decide for themselves how much money they were required to set aside as rainy day reserves. Worse.” In 2004. a tidal wave of mergers and acquisitions in the financial world — 11. When these predatory lending practices were brought to the attention of federal agencies.500 between 1980 and 2005 — led to the predominance of just a relative handful banks in the U. when states stepped into the vacuum by passing laws requiring protections against dirty loans. enabling these firms to engage in speculation by investing money from checking and savings accounts into financial “derivatives” and other schemes understood by only a handful of individuals. the Bush Administration went to court to invalidate those reforms. • Taking advantage of historically low interest rates in the early part of this decade.S. Successive administrations failed to enforce antitrust laws to block these mergers. Some firms then entered into $40 worth of speculative trading for every $1 they held. financial system. • In 1999. they refused to take serious action. the top cop on the Wall Street beat in Washington — the Securities and Exchange Commission — now operating under the radical deregulatory ideology of the Bush Administration. The result: less competi- . With the compensation of CEOs increasingly tied to the value of the firm’s total assets. two government-sponsored corporations. Egged on by Wall Street. Congress repealed the Depression-era law that barred banks from offering investment and insurance services. Fannie Mae and Freddie Mac.

and the subsequent collapse of Enron — at the time unprecedented — was an early warning that the nation’s system of laws and regulations was inadequate to meet the conniving and trickery of the financial industry. At the time. Greased with millions in campaign contributions from Wall Street and the energy industry. Not surprisingly. It’s not like our elected leaders in Washington had no warning: The California energy crisis in 2000. the legislation was approved on a bipartisan basis without a dissenting vote. those officials in government who dared to propose stronger protections for investors and consumers consistently met with hostility SOLD OUT and defeat. • Investors and even government authorities relied on private “credit rating” firms to review corporate balance sheets and proposed investments and report to potential investors about their quality and safety. and a financial system vulnerable to collapse if any single one of the banks ran into trouble. . Blackouts ensued. greed-driven financial speculation were readily apparent to any astute observer of the financial system. It began with the deregulation of electricity prices by the state legislature. in order to force California’s taxpayers to bail out the utility companies. And as the report explains. the utility companies — unable because of a loophole in the law to pass through the higher prices to consumers — simply stopped paying for the power. The power of the Money Industry overcame all opposition.” But the energy shortages were orchestrated by Wall Street rating firms. Californians were chastised for having caused the shortages through “over-consumption. Once deregulation took effect. investment banks and energy companies. on a bipartisan basis.8 tion. Within a few weeks. The financial lobby made sure that regulation of the credit ratings firms would not solve these problems. Wall Street began trading electricity and the private energy companies boosted prices through the roof. The California crisis turned out to be a foreshock of the financial catastrophe that our country is in today. None of these milestones on the road to economic ruin were kept secret. The dangers posed by unregulated. But few of those entrusted with the responsibility to police the marketplace were willing to do so. But the credit rating companies had a grave conflict of interest: they are paid by the financial firms to issue the ratings. they gave the highest ratings to the investments issued by the firms that paid them. higher fees and charges for consumers. even as it became clear that the ratings were inflated and the companies were in precarious condition.

The state of California was forced to increase utility rates and borrow over $19 billion — through Wall Street firms — to cover these debts. the American people have been told that our greatest enemy lived in a cave. Nor can we blame the Americans who were offered amazing terms for mortgages but forgot to bring a Ph. Rather. came to light. and a lawyer to their “closing. real and imagined. the report sets the record straight: consumers are not to blame for this debacle. taxpayers and small investors live in multimillion-dollar palaces and pull down seven-. distracted attention from deepening problems at home. including massive losses hidden in off-balance sheet corporate entities. were derivatives: pieces of paper that were backed by other pieces of paper that were backed by packages of mortgages.” Today. But then 9/11 occurred. as Warren Buffett famously put 9 it. The subsequent focus on external threats. Enron’s vast accounting shenanigans. Not those of us who used credit in an attempt to have a decent quality of life (as opposed to the tiny fraction of people in our country who truly got ahead over the last decade). the enemies of American consumers. Its electricity trading activities under investigation. “our enemies of today are the forces of privilege and greed within our own borders. America’s economic system is at or beyond the verge of depression today because gambling became the financial sector’s principal preoccupation. the complexity and value of which only a few understood. and the pile of chips grew so big that the Money Industry displaced real businesses that provided real .or even nine-figure annual paychecks. As Franklin Roosevelt observed seventy years ago. It looked at the time as though the California deregulation disaster and the Enron scandal would lead to stronger regulation and corporate accountability. the house of cards finally collapsed. Meanwhile. and $11 billion in public money was used to pay for electricity at prices that proved to be artificially manipulated by … Wall Street traders.” and later found out that they had been misled and could not afford the loan at the real interest rate buried in the fine print. And for most of the last decade. For those who might have heard the “blame the victim” propaganda emanating from the free marketers whose philosophy lies in a smoldering ruin alongside the economy. Their weapons of mass destruction.SOLD OUT California’s political leadership and utility regulators largely succumbed to the blackmail. eight. and the company collapsed within a matter of days. the lessons of Enron were cast aside after a few insignificant measures — the tougher reforms killed by the Money Industry — and Wall Street went back to business as usual. Last fall.D. student loans and credit card debt.

By that time. credit card companies. this time for the mother of all favors: a $700 billion bailout of the biggest financial speculators in the country. That’s why many of the details of the bailout remain a secret. the moment the Money Industry realized that the casino had closed. or to build their empires by purchasing other banks. the amount of financial derivatives in circulation around the world — $683 trillion by one estimate — was more than ten times the actual value of all the goods and services produced by the entire planet. If we Americans are to blame for anything. at this very moment of national threat. it turned — as it always does — to Washington. One thing is certain: this last Washington giveaway — the Greatest Wall Street Giveaway of all time — has not fixed the economy. When all the speculators tried to cash out. The bailout was quickly extended to insurance companies. or how it has been spent. to buy back their own bank stock. starting in 2007.10 goods. hiding the fact that no one really knows why certain companies were given our money. hedge funds and other parasite firms that crippled our economy are pouring money into Washington to preserve their privileges at the expense of the rest of us. Congress rebuffed efforts to include safeguards on how taxpayer money would be spent and accounted for. The total tally so far? At least $8 trillion. Or that credit default swaps and other derivatives should . But very little of the money has been used for the purpose it was ostensibly given: to make loans. That’s correct: the people who lost hundreds of billions of dollars of investors’ money were given hundreds of billions of dollars more. Meanwhile. the banks. That’s why you won’t hear anyone in the Washington establishment suggest that Americans be given a seat on the Board of Directors of every company that receives bailout money. there really wasn’t enough money to cover all the bets. Panicked by Wall Street’s threat to pull SOLD OUT the plug on credit. The only thing that has changed is that many of these firms are using taxpayer money — our money — to do so. Bankers used it pay bonuses. it’s for allowing Wall Street to do what it calls a “leveraged buy out” of our political system by spending a relatively small amount of capital in the Capitol in order to seize control of our economy. the government has blown open the federal bank vaults to offer the Money Industry a feast of discount loans. Of course. auto manufacturers and even car rental firms. In addition to cash infusions. Or that America’s economic security is intolerably jeopardized when pushing paper around constitutes a quarter or more of our economy. services and jobs. loan guarantees and other taxpayer subsidies.

if you are one of the very unlucky few unable to take advantage of the loopholes in the plan announced by the Treasury Secretary Geithner. or seize the money and let the banks go bankrupt. the Federal Reserve has been loaning public money to Wall Street firms money at as little as . or limited just like slot machines. And. livelihoods. worst come to worst. drive multiple cars. . It’s been only five months since Congress authorized $700 billion to bail out the speculators. So long as the Money Industry remains in charge of the federal agencies and keeps our elected officials in its deep pockets. you can go to jail for stealing a loaf of bread. homes and dreams of an entire nation. These companies are then turning around and charging Americans interest rates of 4 percent to 30 percent for mortgages and credit cards. In most of the United States. Punishment? You might not be able to get your bonus this year or. President- 11 Here are seven basic principles that Americans should insist upon. Americans should be appointed to sit on the boards of directors of these firms in order to have a say on what these companies do with our money — to keep them from wasting it and to make sure they repay it. Relief. transfers of taxpayer money should be conditioned on acceptance of other terms that would help the public. They are unlikely to challenge the narrow boundaries of the debate that has characterized Washington’s response to the crisis. nothing will change. But if you have paid off Washington. Similarly. you can steal the life-savings. If the banks aren’t going to keep their end of the bargain. There should be a cap on what banks and credit card companies can charge us when we borrow our own money back from them. roulette wheels and other forms of gambling. Like their predecessors. (More good news for corporate thieves: this flea-bitten proposal is not retroactive — it does not apply to all the taxpayer money already handed out). the government should use its power of eminent domain to take control of the banks. On top of the $700 billion bailout. and you will be allowed to live in the fancy homes you own.SOLD OUT be prohibited. and an agreement not to lobby the government. throw multi-million dollar birthday parties. or misspent it.000 while you are on the dole. you may end up having to live off your past riches because you can only earn a measly $500. the SEC and other agencies are veterans of the Money Industry. But the banks have hoarded the money.25 percent. elected Obama’s key appointments to the Treasury. Congress was told that the bailout would alleviate the “credit crunch” and encourage banks to lend money to consumers and small businesses. such as an agreement to waive late fees.

When Warren Buffett acquired preferred shares in Goldman Sachs. Responsibility. should join to build a national network for the investigation and prosecution of the corporate crooks. It is clear that the original $700 billion bailout was a rush job so poorly constructed that it has largely failed and much of the money wasted. Return — to a real economy. Now the Obama administration has suggested that it might offer a dramatically expanded guarantee program for toxic assets. Americans are tired of watching corporate criminals get off with a slap on the wrist when they plunder and loot. The Congressional Oversight Panel estimates that taxpayers received preferred shares worth about two-thirds of what was given to the initial bailout recipients. The federal government should revise the last bailout and establish new terms for oversight and disclosure of which companies are getting federal money and what they are doing with it. State and local law enforcement agencies. Reform. paying 8 percent interest. Even worse are the taxpayer loan guarantees offered to Citigroup. Further mergers of financial industry titans should be barred under the antitrust laws. Regulation. Wall Street needs to operate under rules that will contain their excessive greed. with the assistance of the federal government. The grand experiment in letting Wall Street regulate itself under the assumption that free market forces will police the marketplace has failed catastrophically. he demanded that Goldman Sachs pay 10 percent interest. Derivatives should be prohibited unless it can be shown that they serve a useful purpose in our economy. Accountability is necessary to maintain not only the honesty of the marketplace but the integrity of American democracy. In 2007. Corporate officials who acted recklessly with stockholder and public money should be prosecuted and sentenced to jail time under the same rules applicable to street thugs. more than a quarter of all corporate profits came . and the current monopolistic industry should be broken up once the country has recovered. putting the taxpayer on the hook for hundreds of billions more.12 Restitution. Companies that get taxpayer money must be required to repay it on terms that are fair to taxpayers. taxpayers are only getting back 5 percent. those that are authorized should be traded on exchanges subject to SOLD OUT full disclosure. For a $20 billion cash injection plus taxpayer guarantees on $306 billion in toxic assets — likely to impose massive liabilities on the public purse — the government received $27 billion in preferred shares.

and then we would have our own credit card. stock and barrel. Revolt. run on careful business principles but without the need to turn an enormous profit. as this report shows. not Wall Street. student loan and mortgage company. creativity. The spectacle of so many large corporations lining up for government assistance puts to rest the argument made by the corporate-funded think tanks and talking heads over the last three decades that government is “the problem.SOLD OUT from the Money Industry. It’s time for Americans to make their voices heard. which ■ ■ ■ 13 private enterprise has plundered and then for so many Americans abandoned. Think of the assistance that that would offer to Main Street.” In fact. And massive government intervention is what’s really needed in the health care system. For the $20 billion in taxpayer money that the government gave Citigroup in November. largely based on speculation by corporations operating in international markets and whose actions call into question their loyalty to the best interests of America. To recover. America must return to the principles that made it great — hard work. Now Washington must serve America. government has been the solution for the Money Industry all along. not to mention the competitive effect it would have on the market. not the solution. . we could have bought the company lock. Massive government intervention is not only appropriate when it is necessary to save banks and insurance companies. Things will not change so long as Americans acquiesce to business as usual in Washington. and innovation — and both government and business must serve that end.

established limits on the use of leverage. It also has two other.2 For the last three decades. They hid risky investments in offbalance-sheet vehicles or capitalized on their legal status to cloak investments altogether. They created and trafficked in exotic investment vehicles that even top Wall Street executives — not to mention firm directors — did not understand. This report has one overriding message: financial deregulation led directly to the Executive Summary Blame Wall Street for the current financial crisis. . Investment banks. But while Wall Street is culpable for the financial crisis and global recession. and contained the financial sector so that it remained subordinate to the real economy. They engaged in unconscionable predatory lending that offered huge profits for a time. Even now. Though it bows to the political reality that new regulation is coming. including because it too often failed to deliver on its promises. And they created. but led to dire consequences when the loans proved unpayable. enforced meaningful limits on economic concentration. others do share responsibility.14 SOLD OUT aimed to force disclosure of publicly relevant financial information. drew bright lines between different kinds of financial activity and protected regulated commercial banking from investment bank-style risk taking. This hodge-podge regulatory system was. it aims to reduce the scope and importance of that regulation and. not just those located in New York’s financial district. if possible. steadily gaining momentum until it reached fever pitch in the late 1990s and continued right through the first half of 2008. Congress and the executive branch have steadily eroded the regulatory system that restrained the financial sector from acting on its own worst tendencies. top-tier messages. maintained and justified a housing bubble. resulted in a foreclosure epidemic ripping apart communities across the country. The 2 post-Depression regulatory system This report uses the term “Wall Street” in the colloquial sense of standing for the big players in the financial sector. financial meltdown. Wall Street continues to defend many of its worst practices. use the guise of regulation to further remove public controls over its operations. financial regulators. especially in the banking sector. hedge funds and commercial banks made reckless bets using borrowed money. the bursting of which has thrown the United States and the world into a deep recession. provided meaningful consumer protections (including restrictions on usurious interest rates). But it was not its imperfections that led to the erosion and collapse of that regulatory system. It was a concerted effort by Wall Street. highly imperfect. of course.

Commercial banks spent more than $155 million on campaign contributions. . the details matter. its consequence. while investing nearly $383 million in officially registered lobbying. Primarily reflecting the balance of power over the decade. Insurance companies donated more than $220 million and spent more than $1. Financial firms employed an extraordinary number of former government officials as lobbyists. The industry spent even more — topping $3. and cultivated a pliant media — especially a cheerleading business media complex.7 billion in federal elections from 1998-2008. critics warned of the dangers of further deregulation.4 billion — on officially registered lobbying of federal officials during the same period. Second. about 55 percent went to Republicans and 45 percent to Democrats.1 billion on lobbying. insurance.1 billion in political influence purchasing over the last decade.SOLD OUT First. and the process by which big financial firms and their political allies maneuvered to achieve their deregulatory objective. Their evidence-based claims could not offset the political and economic muscle of Wall Street. invested heavily in a legion of lobbyists. spending more than $1. The report documents a dozen specific deregulatory steps (including failures to regulate and failures to enforce existing regulations) that enabled Wall Street to crash the financial system. paid academics and think tanks to justify their preferred policy positions. The financial sector showered campaign contributions on politicians from both parties. we present data on financial firms’ campaign contributions and disclosed lobbying investments. we aim to explain the deregulatory action taken (or regulatory move avoided). real estate) drowned political • • • 15 candidates in campaign contributions over the past decade. For each deregulatory move. The aggregate data are startling: The financial sector invested more than $5. The financial sector employed 2. During the period 1998-2008: • Accounting firms spent $81 million on campaign contributions and $122 million on lobbying. Part I of this report presents 12 Deregulatory Steps to Financial Meltdown. At every step. Securities firms invested nearly $513 million in campaign contributions. All this money went to hire legions of lobbyists. Wall Street didn’t obtain these regulatory abeyances based on the force of its arguments. and an additional $600 million in lobbying. In Part II.996 lobbyists in 2007. The entire financial sector (finance. Democrats took just more than half of the financial sector’s 2008 election cycle contributions.

investment gambles that company appear more valuable than it is. By all accounts this has been a disaster. February 21. Report to Shareholders. Berkshire Hathaway. Citibank and insurance giant Travelers Group merged in 1998 — a move that was illegal at the time. or special purpose vehicles (SPVs) — to hold securitized mortgages. The Executive Branch Rejects Financial Derivative Regulation Financial derivatives are unregulated. which prohibited commercial banks from offering investment banking and insurance services. The 1999 repeal of Glass-Steagall helped create the conditions in which banks invested monies from checking and savings accounts into creative financial instruments such as mortgage-backed securities and credit default swaps. Because the securitized mortgages were held by an off-balance sheet entity. Available at: <http://www. In a form of corporate civil disobedience. Hiding Liabilities: SOLD OUT Off-Balance Sheet Accounting Holding assets off the balance sheet generally allows companies to exclude “toxic” or money-losing assets from financial disclosures to investors in order to make the ■ ■ ■ These are the 12 Deregulatory Steps to Financial Meltdown: 1.16 This report finds 142 of the lobbyists employed by the financial sector from 19982008 were previously high-ranking officials or employees in the Executive Branch or Congress. Chairman. however. Warren Buffett. Repeal of the Glass-Steagall Act and the Rise of the Culture of Recklessness The Financial Services Modernization Act of 1999 formally repealed the Glass-Steagall Act of 1933 (also known as the Banking Act of 1933) and related laws. Banks used off-balance sheet operations — special purpose entities (SPEs). but for which they were given a two-year forbearance — on the assumption that they would be able to force a change in the relevant law at a future date. 2.3 Financial derivatives have 3 rocked the financial markets in 2008. 2003. as Warren Buffet’s warning that they represent “weapons of mass financial destruction” has proven prescient.com/letters/ . They did. the banks did not have to hold capital reserves as against the risk of default — thus leaving them so vulnerable. 3.berkshirehathaway. Off-balance sheet operations are permitted by Financial Accounting Standards Board rules installed at the urging of big banks. The Securities Industry and Financial Markets Association and the American Securitization Forum are among the lobby interests now blocking efforts to get this rule reformed.

RTexas. so most companies maintained a ratio far below it. Then-Deputy Treasury Secretary Lawrence Summers told Congress that CFTC proposals “cas[t] a shadow of regulatory uncertainty over an otherwise thriving market. 17 crisis.SOLD OUT amplified the financial crisis far beyond the unavoidable troubles connected to the popping of the housing bubble. The Commodities Futures Modernization Act exempts financial derivatives. and insisted that CFTC regulation might imperil existing financial activity that was already at considerable scale (though nowhere near present levels).pdf>. it enabled the banks to create a more tangled mess of derivative investments — so that their individual failures. The SEC’s Voluntary Regulation Regime for Investment Banks In 1975. or the potential of failure. including credit default swaps. Congress Blocks Financial Derivative Regulation The deregulation — or non-regulation — of financial derivatives was sealed in 2000. options and other derivatives connected to commodities. as in the case of Merrill Lynch. from regulation and helped create the current financial 2002pdf. It forbid trading in securities if the ratio reached or exceeded 12 to 1. the CFTC sought to exert regulatory control over financial derivatives. The Commodity Futures Trading Commission (CFTC) has jurisdiction over futures. Henry Paulson — and authorized investment banks to develop their own net capital requirements in accordance with standards published by the Basel Committee on Banking Supervision. 5. became systemic crises. With this new freedom. with the Commodities Futures Modernization Act (CFMA). During the Clinton administration. . Former SEC Chair Chris Cox has acknowledged that the voluntary regulation was a complete failure. and was voluntarily administered. This essentially involved complicated mathematical formulas that imposed no real limits. Fed Chair Alan Greenspan. the SEC’s trading and markets division promulgated a rule requiring investment banks to maintain a debt-to-netcapital ratio of less than 12 to 1. investment banks pushed borrowing ratios to as high as 40 to 1. the SEC succumbed to a push from the big investment banks — led by Goldman Sachs. In 2004. This superleverage not only made the investment banks more vulnerable when the housing bubble popped. and its then-chair.” 4. however. above all. They challenged the agency’s jurisdictional authority. The agency was quashed by opposition from Treasury Secretary Robert Rubin and. passage of which was engineered by then-Senator Phil Gramm.

thereby rendering them inoperative. “In 2003. with only limited exceptions. Wall Street interests could purchase.18 6. bundle and securitize subprime loans — including many with pernicious. and lessened though not prevented the current financial crisis. But the regulators sat on their hands. Federal Preemption of State Consumer Protection Laws When the states sought to fill the vacuum created by federal nonenforcement of consumer protection laws against predatory lenders. the feds jumped to stop them. “during the height of the predatory lending crisis. to impose a minimum global standard of capital adequacy for banks. Basel II. The Office of Comptroller of the Currency. Commercial banks in the United States are supposed to be compliant with aspects of Basel II as of April 2008. which has authority over almost 1. This arrangement effectively immunized acquirers of the mortgage (“assignees”) for any problems with the initial loan. Bank Self-Regulation Goes Global: Preparing to Repeat the Meltdown? In 1988. Failure to Prevent Predatory Lending Even in a deregulated environment.” as Eliot Spitzer recounted. and relieved them of any duty to investigate the terms of the loan. predatory terms — without fear of liability for . 8. only the original mortgage lender is liable for any predatory and illegal features of a mortgage — even if the mortgage is transferred to another party. but complications and intra-industry disputes have slowed implementation. however. global bank regulators adopted a set of rules known as Basel I. The SEC experience with Basel II principles illustrates their fatal flaws. 7.800 banks. based on subjective factors of agency ratings and the banks’ own internal riskassessment models. which led to negotiations over a new set of regulations. Such enforcement activity would have protected homeowners. the Office of the Comptroller of the Currency invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws. The Federal Reserve took three formal actions against subprime lenders from 2002 to 2007. Complicated financial maneuvering made it hard to determine compliance. took three consumer-protection 9.” Under existing federal law. the banking regulators retained authority to crack down on predatory lending abuses. establishes varying capital reserve requirements. heavily influenced by the banks themselves. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. Escaping Accountability: Assignee Liability SOLD OUT enforcement actions from 2004 to 2006.

Representative Bob Ney. but they did end up taking on substantial subprime assets — at least $57 billion. and typically with no defenses against being foreclosed upon. Credit ratings are a key link in the financial crisis story. In fact. not leaders. The purchase of subprime assets was a break from prior practice. Merger Mania 19 for the financial crisis. the motivation was the for-profit nature of the institutions and their particular executive incentive schemes. the resultant financial instruments were attractive to many buyers because they promised high returns. even in advance of recent moves to combine firms as a means to preserve the functioning of the financial system. even as they pursued reckless high-risk investments. The credit rating firms enabled these . They are responsible for their own demise. The megabanks achieved too-big-to-fail status. Massive lobbying — including especially but not only of Democratic friends of the institutions — enabled them to divert from their traditional exclusive focus on prime loans.SOLD OUT illegal loan terms. With Wall Street combining mortgage loans into pools of securitized assets and then slicing them up into tranches. Rampant Conflicts of Interest: Credit Ratings Firms’ Failure 11. Fannie and Freddie Enter the Subprime Market At the peak of the housing boom. While this should have meant they be treated as public utilities requiring heightened regulation and risk control. The Government-Sponsored Enterprises were followers. and the resultant massive taxpayer liability. other deregulatory maneuvers (including repeal of Glass-Steagall) enabled these gigantic institutions to benefit from explicit and implicit federal guarantees. The effective abandonment of antitrust and related regulatory principles over the last two decades has enabled a remarkable concentration in the banking sector. The arrangement left victimized borrowers with no cause of action against any but the original lender. 10. R-Ohio — a close friend of Wall Street who subsequently went to prison in connection with the Abramoff scandal — was the leading opponent of a fair assignee liability regime. justified by theories of expanded access to homeownership for low-income families and rationalized by mathematical models allegedly able to identify and assess risk to newer levels of precision. But pension funds and other investors could only enter the game if the securities were highly rated. Fannie Mae and Freddie Mac were dominant purchasers in the subprime secondary market. Fannie and Freddie are not responsible 12.

Wall Street executives continue to warn about the perils of restricting “financial innovation” — even though it was these very innovations that led to the crisis. and their desire to maintain and obtain other business dealings with issuers.20 investors to enter the game. legislating must be to control Wall Street. The credit ratings firms have a bias to offering favorable ratings to new instruments because of their complex relationships with issuers. This report’s conclusion offers guiding principles for a new financial regulatory architecture. and plunged the global economy into deep recession. If we are to see the meaningful regulation we need. not further Wall Street’s control. but the Credit Rating Agencies Reform Act of 2006 gave the SEC insufficient oversight authority. With Wall Street having destroyed the system that enriched its high flyers. it’s time for Congress to tell Wall Street that its political investments have also gone bad. ■ ■ ■ Wall Street is presently humbled. This institutional failure and conflict of interest might and should have been forestalled by the SEC. but not prostrate. by attaching high ratings to securities that actually were high risk — as subsequent events have revealed. the SEC must give an approval rating to credit ratings agencies if they are adhering to their own standards — even if the SEC knows those standards to be flawed. This time. Congress must adopt the view that Wall Street has no legitimate seat at the . And they are scheming to use the coming Congressional focus on financial regulation to centralize authority with industry-friendly agencies. In fact. ■ ■ ■ SOLD OUT table. Despite siphoning trillions of dollars from the public purse.

SOLD OUT 21 Part I: 12 Deregulatory Steps to Financial Meltdown .

§ 101(a). Pub. Starting in the 1980s. 106-102. 5 See amendments to the Bank Holding Company Act of 1956. II 1997 (amended 1999). which prohibited commercial banks from offering investment banking and insurance services.5 The repeal removed the legal prohibi4 ownership. they began to breach the regulatory walls between commercial banking and other financial services. responding to a steady drumbeat of requests. but for which they were given a two-year forbearance — on the assumption that they would be able to force a change in the relevant law at a future date. regulators began to weaken the strict prohibition on cross- IN THIS SECTION: The Financial Services Modernization Act of 1999 formally repealed the Glass-Steagall Act of 1933 (also known as the Banking Act of 1933) and related laws.S. 1341. They did. 6 Glass-Steagall repealed at Pub. The Gramm-Leach-Bliley Act6 removed the remaining legal restrictions on combined banking and financial service firms. §§ 1841-1850. As banks eyed the higher profits in higher risk activity. The 1999 repeal of Glass-Steagall helped create the conditions in which banks invested monies from checking and savings accounts into creative financial instruments such as mortgage-backed securities and credit default swaps. 106–102. Perhaps the signature deregulatory move of the last quarter century was the repeal of the 1933 Glass-Steagall Act4 and related legislation. 1994 & Supp. L. In a form of corporate civil disobedience. 113 Stat.S. Congress tore down the legal walls altogether. Glass-Steagall’s strict rules originated in the U. Glass-Steagall and related laws advanced the core public objectives of protecting depositors and avoiding excessive risk for the banking system by defining industry structure: banks could not maintain investment banking or insurance affiliates (nor affiliates in non-financial commercial activity).22 SOLD OUT 1 REPEAL OF THE GLASSSTEAGALL ACT AND THE RISE OF THE CULTURE OF RECKLESSNESS tion on combinations between commercial banks on the one hand. and investment banks and other financial services companies on the other. investment gambles that rocked the financial markets in 2008. title I. Nov. and ushered in the current hyper-deregulated era. after a long industry campaign. 1999. Citibank and insurance giant Travelers Group merged in 1998 — a move that was illegal at the time. 12. 12 U.C. however. . L. In 1999. No. Government’s response to the Depression and reflected the learned experience of the severe dangers to consumers and the overall financial system of permitting giant financial institutions to combine commercial banking with other financial operations.

Kennedy. The Pecora Hearings Origins Banking involves the collection of funds from depositors with the promise that the funds will be available when the depositor wishes to withdraw them. real output in the United States fell nearly 30 percent and prices fell at a rate of nearly 10 percent per year. Bernanke. National Bank v.S. 99 U. Banks keep only a specified fraction of deposits in their vaults. “Money. After repeal. 628.gov/boarddocs/s peeches/2004/200403022/default. Gold.” New York Times on the web. “Money. 633 (1878) (holding that national bank may be liable for stock held in another bank). 1999. “Looking Back at the Crash of ’29. 67. 2004.” March 2. Bernanke. Depositors depend on the bank’s stability. 139 U. The economic collapse that began with the 1929 stock market crash hit Americans hard. 78 (1891) (holding that national bank may be liable as shareholder while in possession of bonds obtained under contract made absent legal authority).htm>. 9 Remarks by Federal Reserve Board Chairman Ben S.com/library/financial/i ndex-1929-crash. Gold. 167 U. the Supreme Court prohibited commercial banks from engaging directly in securities activities. available at: <http://www. They lend the rest out to borrowers or invest the deposits to generate income.S. available at: <http://www. in 1932.S. 10 Remarks by Federal Reserve Board Chairman Ben S. .htm>.federalreserve. often investing in highly speculative activities and dubious companies and derivatives. Case.SOLD OUT The overwhelming direct damage inflicted by Glass-Steagall repeal was the infusion of investment banking culture into the conservative culture of commercial banking.federalreserve. 8 Floyd Norris.html>. By the time the bottom arrived.” March 2.10 See California Bank v. the Dow Jones Industrial Average was down 89 percent from its 1929 peak. Logan County Nat’l Bank v. The difficulties faced by depositors in judging the quality of bank assets has required government regulation to protect the safety of depositors’ money and the well being of the banking system. and the Great Depression. 362.7 but bank affiliates — subsidiaries of a 7 23 holding company that also owns banks — were not subject to the prohibition.8 An estimated 15 million workers — almost 25 percent9 of the workforce — were unemployed. 2004. and the Great Depression. commercial banks sought high returns in risky ventures and exotic financial instruments.nytimes. In the 19th and early 20th centuries. Townsend. As a result. with disastrous results. commercial bank affiliates regularly traded customer deposits in the stock market.gov/boarddocs/s peeches/2004/200403022/default. 370-71 (1897) (holding that national bank may neither purchase nor subscribe to stock of another corporation). and communities and businesses depend on banks to provide credit on reasonable terms. available at: <http://www.

Davidson.11 held by the Senate Banking and Currency Committee and named after its chief counsel Ferdinand Pecora. The Senate committee found conflicts when commercial banks were able to garner confi- The Pecora hearings concluded that common ownership of commercial banks and investment banks created several distinct problems. dential insider information about their corporate customers’ deposits and use it to benefit the bank’s investment affiliates. had 2. investigated the causes of the 1929 crash. “Glass-Steagall and the ‘Subtle Hazards’ of . the National City Company. commercial banks had misrepresented to their depositors the quality of securities that their investment banks were underwriting and promoting.fdic.” were authorized by S.html>.” Undated.. The committee uncovered blatant conflicts of interest and self-dealing by commercial banks and their investment affiliates. and 4) an inability to provide honest investment advice to depositors because banks were conflicted by their underwriting relationship with companies. No.24 The 1932-34 Pecora Hearings.12 Those brokers had repackaged the bank’s Latin American loans and sold them to investors as new securities (today.gov/about/learn/learning/ when/1920s. 14 Joan M. For example. 84. The Pecora hearings concluded that common ownership of commercial banks and investment banks created several distinct problems. banks commercial routinely would purchase the stock of firms that were customers of the bank. formally titled “Stock Exchange Practices: Hearings Before the Senate Banking Committee. among them: 1) jeopardizing depositors by investing their funds in the stock market. First National City Bank (now Citigroup) and its securities affiliate. 2) loss of the public’s confidence in the banks. as opposed to firms that were most financially stable. available at: <http://www.html>. 72d Cong. which led to panic withdrawals. Federal Deposit Insurance Corporation website. leading the depositors to be overly confident in commercial banks’ stability.fdic.13 Peruvian government bonds were sold even though the bank’s staff had internally warned that “no further national loan can be safely made” to Peru. 12 Federal Deposit Insurance Corporation website. 1st Session (1931). available at: <http://www. LeGraw and Stacey L. In addition. The hearings were convened in the 72d and 73d Congresses (1932-1934).000 brokers selling securities.14 13 11 The Pecora hearings.gov/about/learn/learning/ when/1920s. this is known as “securitization”) without disclosing to customers the bank’s confidential findings that the loans posed an adverse SOLD OUT risk.” Undated. “The Roaring 20s. Res. 3) the making of unsound loans. “The Roaring 20s.

§ 78 (1933) (provided that no officer.C. public sale.” Federal Reserve.C. (See “The Structure of the Federal Reserve System. (Commercial paper is a debt instrument or bond equivalent to a short-term loan. § 24.. . business trust. to engage at the same time to any extent whatever in the business of [deposit banking]. bonds. notes. 225. • 15 25 • Section 32 prohibited individuals from serving simultaneously with a commercial bank and an investment bank as a director.. 15 12 U. Seventh (1933) (provided that a national bank “shall not underwrite any issue of securities or stock” ). It is considered an independent central bank because its decisions do not have to be ratified by the President and Congress.S. Fall 1989. underwriting. and 17 Judicial Activism. U. § 377 (1933) (prohibited affiliations between banks that are members of the Federal Reserve System and organizations “engaged principally in the issue. It also permitted banks to help private companies issue “commercial paper” for the purpose of obtaining short-term loans. government bonds. 16 12 U. corporation. including payments Section 21 prohibited investment banks from engaging in any commercial banking activities.. D. available at: <http://federalreserve.e.. § 378(a) (1933) (“it shall be unlawful . Federal Reserve member banks include all national banks and some state-chartered banks and are subject to regulations of the Federal Reserve System. debentures. created in 1913.”). firm.S. underwriting. selling. association.SOLD OUT Congress Acts The Glass-Steagall Act consisted of four provisions to address the conflicts of interest that the Congress concluded had helped trigger the 1929 crash: • Section 16 restricted commercial national banks from engaging in most investment banking activities. and twelve regional Federal Reserve Banks. or through syndicate participation. or other securities.S. or distributing. officer.” 17 12 U. at wholesale or retail. is the central bank of the United States comprised of a central. director. bonds. companies issue “commercial paper” to fund daily (i. director. flotation. or employee of an association primarily engaged in the activity described in section 20).htm>.” 24 New Eng.S. engaged in the business of issuing. stocks. or distribution at wholesale or retail or through syndicate participation of stocks. employee. located in major cities throughout the nation. or other securities. or principal. debentures. governmental agency — the Board of Governors — in Washington.S.C.. short-term) operations. The Fed supervises thousands of its member banks and controls the total supply of money in the economy by establishing the rate of interest it charges banks to borrow. and real estate bonds. notes.18 One exception in Section 20 permitted securities activities by banks in limited circumstances.gov/pubs/frseries/frser i. Federal Reserve member banks must comply with the Fed's minimum capital requirements. often referred to as the Federal Reserve or simply “the Fed.16 • Section 20 prohibited any Federal Reserve-member bank from affiliating with an investment bank or other company “engaged principally” in securities trading.) 18 12 U.” The Fed. L. such as the trading of municipal general obligation bonds.(1) For any person.. or other similar organization.C. Rev. or employee of a bank in the Federal Reserve System may serve at the same time as officer.C.

Despite the prohibitions in Glass-Steagall. Importantly.g. a single company could own both commercial and investment banking interests if those interests were held as separate subsidiaries by a bank holding company. Under the Federal Reserve System. The BHCA also required bank holding companies to divest all their holdings in non-banking assets and forbade acquisition of banks across state lines. Congress enacted the Bank Holding Company Act of 1956 (BHCA) Glass-Steagall was a key element of the Roosevelt administration’s response to the Depression and considered essential both to restoring public confidence in a financial system that had failed and to protecting the nation against another profound economic collapse. bank holding companies are “paper” or “shell” companies whose sole purpose is to own two or more banks. it did not fully embrace the New Deal. Most commercial paper has a maturity of 30 days or less.) Glass-Steagall was a key element of the Roosevelt sion administration’s and considered response to the Depresessential both to restoring public confidence in a financial system that had failed and to protecting the nation against another profound collapse. But the BHCA contained a loophole sought by the financial industry. to prohibit bank holding companies from acquiring “non-banks” or engaging in “activities that are not closely related to banking. Congress expressed its intent to separate customer deposits in banks from risky invest- ments in securities. the BHCA also mandated the separation of banking from insurance and non-financial commercial activities. A legal construct known as a “bank holding company” was not subject to the Glass-Steagall restrictions.” Depository institutions were considered “banks” while investment banks (e. While the financial industry was cowed by the Depression. and almost immediately sought to maneuver around Glass-Steagall. those that trade stock on Wall Street) were deemed “nonbanks” under the law. It allowed bank holding companies to acquire nonbanks if the Fed determined that the nonbank activities were “closely related to banking. Bank holding comeconomic SOLD OUT panies became a popular way for financial institutions and other corporations to subvert the Glass-Steagall wall separating commercial and investment banking. As with Glass-Steagall.” The Fed was given wide latitude . Companies issue commercial paper as an alternative to taking out a loan from a bank. In response.26 to employees and financing inventories.

the Fed reinterpreted the phrase “engaged principally. 2003. Am.S. 207 (1984). The Federal Reserve approved the proposals in a 3-2 vote. v. As a result.J. municipal revenue bonds and mortgage-backed securities. in the spring of 1987.” judges should not intervene. May 8. the Supreme Court in 1971 ruled that courts should defer to regulatory decisions involving bank holding company applications to acquire non-bank entities under the BHCA loophole.pbs. It substantially freed bank regulators to authorize bank holding companies to conduct new non-banking activities without judicial interference. thereby weakening the wall separating customer deposits from riskier trading activities. 8 Admin. L.html>.SOLD OUT under the Bank Holding Company Act to approve or deny such requests. 401 U. 335. the Federal Reserve frequently invoked its broad authority to approve bank holding company acquisitions of investment banking firms. 27 buy securities firms. May 8.20 rendering a significant blow to Glass-Steagall. 22 “The Long Demise of Glass-Steagall.22 Just a few months later. available at: <http://www.html>.S.21 The Federal Reserve had decided that Schwab’s service of executing buy and sell stock orders for retail investors was “closely related to banking” and thus satisfied requirements of the BHCA. 20 Jonathan Zubrow Cohen. Federal Reserve System. As long as a Federal Reserve Board interpretation of the BHCA is “reasonable” and “expressly articulated. For example. U. In December 1986. Securities Industry Association v. . 2003. 23 “The Long Demise of Glass-Steagall. Summer 1994. In the decades that followed passage of the BHCA.23 One of the dissenters. BankAmerica purchased stock brokerage firm Charles Schwab in 1984. J.org/wgbh/pages/frontline/s hows/wallstreet/weill/demise. was soon replaced by Alan 21 Deference to regulators In furtherance of the Fed’s authority under BHCA.” in Section 20 of the BHCA.” PBS Frontline.” PBS Frontline.pbs.19 The ruling was a victory for opponents of Glass Steagall because it increased the power of bank-friendly regulators.org/wgbh/pages/frontline/s hows/wallstreet/weill/demise. 617 (1971). the Fed entertained proposals from Citicorp. which prohibited banks from affiliating with companies engaged principally in securities trading. available at: <http://www. the court concluded. Camp. The Fed decided that up to 5 percent of a bank’s gross revenues could come from investment banking without running afoul of the ban. banks whose primary business was managing customer deposits and making loans began using their bank holding companies to 19 Investment Company Inst. 468 U. then-Chair Paul Volcker.P Morgan and Bankers Trust to loosen Glass-Steagall regulations further by allowing banks to become involved with commercial paper.

including soft money donations to the Democratic and Republican parties. at the request of J.” in this report. Glass Steagall was withering at the hands of industry-friendly sion-era reforms. §§ 1841-1850 (1994 & Supp. Bankers Trust and Citicorp. as amended.S. but the Bank Holding Company Act of 1956. 1843(c)(8) (1994). Morgan. Members of Congress introduced major deregulation legislation in 1982. By acquiring TBC. In the next congressional session. securities firms and insur- Bank holding companies were prohibited from providing insurance not under GlassSteagall. Big banks. From the time Glass-Steagall was enacted until the Bank Holding Company Act of 1956 was passed. In this sense.C.org>. upping campaign contributions to more than $150 The Financial Services Modernization Act While the Fed had been progressively undermining Glass-Steagall through deregulatory interpretations of existing laws. 12 U. and the finance industries were becoming increasingly nervous that the legislation would not pass. the financial industry was simultaneously lobbying Congress to repeal Glass-Steagall altogether.opensecrets. a strong proponent of deregulation. the Fed had authorized commercial bank holding companies to own and operate full service brokerages and offer investment advisory services.C. the three industries delivered more than $85 million in campaign contributions. Under the Act. Section 4(c)(8) of the Bank Holding Company Act of 1956. regulators whose free market ideology conflicted with the Depres24 SOLD OUT ance companies24 spent lavishly in support of the legislation in the late 1990s. banks were permitted only to engage in activities that were deemed “closely related to banking. <www.” The statutory definition of “closely related to banking” specifically excludes insurance activities. and in most policy discussions. prohibited bank holding companies and their subsidiaries from “providing insurance as a principal. the Fed approved an acquisition by a bank holding company. II 1997) (amended 1999). 1995 and 1998. the Fed enlarged the BHCA loophole again. Gramm-LeachBliley ended the Bank Holding Company Act’s prohibition in 1999. of TBC Advisors. The Clinton administration was winding down.S. permitting banks to generate up to 10 percent of their revenue from investment banking activity.28 Greenspan. The Bank Holding Company Act ended this activity. in this case Mellon Bank. bank holding companies had become increasingly involved in insurance (and securities) activities. 1991. which is just as important as Glass-Steagall itself. 25 Data from the Center for Responsive Politics. During the 1997-1998 Congress.P. 1988.25 But the Glass-Steagall rollback stalled. In 1993. the industry redoubled its efforts. commonly refer also to the BHCA of 1956. See 12 U. In 1989. agent or broker” except under seven minor exemptions. Chase Manhattan. Mellon Bank was authorized to provide investment advisory services to mutual funds. . an administrator and advisor of stock mutual funds. See Bank Holding Company Act 4(c)(8). references to “Glass-Steagall. By the early 1990s.

and the finance industries were becoming increasingly nervous that the legislation to repeal Glass-Steagall would not pass. available at: <http://www. 28 Jake Lewis.html>. enthusiastically promoted the legislation. Robert Rubin. 1995. RTexas. … U. 27 Data from the Center for Responsive Politics.com/government/b usiness-regulations/500983-1. <www. available at: <http://www. formerly a professional staff member of the House Banking Committee. let alone in 1933.” Multinational Monitor. . the truest of true believers in deregulation. Even domestically. He was assisted by Federal Reserve Chair Alan Greenspan. In 1995 testimony before the House Banking Committee. the Clinton administration even toyed with the idea of allowing a total blurring of the lines between banking and 26 29 commerce (meaning non-financial businesses). A handful of other personalities were instrumental in the effort. banks generally engage in a broader range of securities activities abroad than is permitted domestically. Clinton’s Treasury Secretary. now marketed under a new and deceptive name. “When the legislation became snagged on controversial provisions.allbusiness. for example.org>. Notes Jake Lewis. as both Treasury Secretary and in his subsequent private sector role. Rubin had argued that “the banking industry is fundamentally different from what it was two decades ago.28 Rubin played a key role in obtaining approval of legislation to repeal Glass-Steagall. he claimed that Glass-Steagall could “conceivably impede safety and soundness by limiting revenue diversification. was chair of the Senate Banking Committee.opensecrets.” At times.SOLD OUT million. Senator Phil Gramm. The Clinton administration was winding down.org/mm2 005/012005/lewis. but was forced to back away from such a radical move after criticism from former Federal Reserve Chair Paul Volcker and key Members of Congress. and drove the repeal legislation. “Monster Banks: The Political and Economic Costs of Banking and Financial Consolidation. “Financial Modernization.” Journal of Accountancy. an avid proponent of deregulation who was also eager to support provisions of the proposed Financial Services Modernization Act that gave the Fed enhanced jurisdictional authority at the expense of other federal banking regulatory agencies.” Remarkably. May 1.html>. who had run Goldman Sachs.multinationalmonitor.26 in considerable part to support Glass-Steagall repeal. the separation of investment banking and commercial banking envisioned by Glass-Steagall has eroded significantly.S.” The Clinton administration supported the push for deregulation. January/February 2005. 27 “Rubin Calls for Modernization Through Reform of Glass-Steagall Act.

30 Greenspan would invariably draft a letter or present testimony supporting Gramm’s position on the volatile points. April 7. Top Citigroup officials vetted drafts of the legislation were duced. Such a combination of banking and insurance companies was illegal under the Bank Holding Company Act. But this was not public knowledge at the time.multinationalmonitor. December 1999.html>. along with lead lobbyist Roger Levy. The Financial Services Modernization Act. formally Jake Lewis. “Monster Banks: The Political and Economic Costs of Banking and Financial Consolidation.” Washington Post. Deploying the credibility built up as part of what the media had labeled “The Committee to Save the World” (Rubin.31 As the deal-making on the bill moved into its final phase in Fall 1999 — and with fears running high that the entire exercise would collapse — Robert Rubin stepped into the breach. January/February 2005. 1988. In 1998. formally repealed GlassSteagall. led a swarm of industry executives 29 SOLD OUT and lobbyists who badgered the administration and pounded the halls of Congress until the final details of a deal were hammered out. and said Greenspan had a “positive response” to the audacious proposal.” Multinational Monitor.”29 Also playing a central role were the CEOs of Citicorp and Travelers Group. . before they intro- The Depression-era conflicts and consequences that Glass-Steagall was intended to prevent re-emerged once the Act was repealed. the two companies announced they were merging. The new law authorized banks.html>.30 Citigroup’s co-chairs Sandy Weill and John Reed. 31 Russell Mokhiber. Rubin helped broker the final deal. Travelers CEO Sandy Weill met with Greenspan prior to the announcement of the merger.org/mm2 005/012005/lewis. 30 Peter Pae. available at: <http://www. available at: <http://www. so named for their interventions in addressing the Asian financial crisis in 1997).05. Having recently resigned as Treasury Secretary. Travelers in $82 Billion Deal. but was excused due to a loophole in the BHCA which provided a two-year review period of proposed mergers. also known as the Gramm-Leach-Bliley Act of 1999. Rubin was at the time negotiating the terms of his next job as an executive at Citigroup.” Multinational Monitor. Greenspan and then-Deputy Treasury Secretary Lawrence Summers.org/mm1 999/mm9912.multinationalmonitor. “The 10 Worst Corporations of 1999. “Bank. It was a classic back-scratching deal that satisfied both players — Greenspan got the dominant regulatory role and Gramm used Greenspan’s wise words of support to mute opposition and to help assure a friendly press would grease passage. Insurance Giants Set Merger: Citicorp.

and the ensuing collapse when so much of the paper went bad. Senator Gramm declared. market them as securities through their retail networks. In the congressional debate over the Financial Services Modernization Act. . A new clause was inserted into the Bank Holding Company Act allowing one entity to own a separate financial holding company that can conduct a variety of financial activities. and James A. using the prestigious brand name of the bank — e. in the midst of the Great Depression. but had made a comeback in the 1970s as Glass-Steagall was being dismantled.occ. available at: <http://financialservices. thought government was the answer.gov/ftp/workpaper/w p2000-5.” The chief economist of the Office of the Comptroller of the Currency supported the legislation because of “the increasingly persuasive evidence from academic studies of the preGlass-Steagall era. regardless of the parent corporation’s main functions. mortgage loans — and the securities connected to them — are at the center of the present financial crisis.” 32 31 where aggressive deal-making became the norm. Repeal of Glass-Steagall created a climate and culture 32 James R.house. Dan Brumbaugh Jr. The banks suspended careful scrutiny of loans they originated because they knew that the loans would be rapidly packaged into mort33 Impact of Repeal The gradual evisceration of Glass-Steagall over 30 years. There is mounting evidence that the repeal of Glass-Steagall contributed to a high-flying culture that led to disaster. Testimony of Robert Kuttner before the Committee on Financial Services. It was this practice. culminating in its repeal in 1999. U. In this period of economic growth and prosperity. available at: <http://www. Barth.pdf>. R. Economic analyst Robert Kuttner testified in 2007 that trading loans on Wall Street “was the core technique that made possible the dangerous practices of the 1920s. Wilcox.pdf>.treas. October 2.S. House of Representatives.g. opened the door for banks to enter the highly lucrative practice of packaging multiple home mortgage loans into securities for trade on Wall Street. The practice of “securitization” had virtually disappeared after it contributed to the 1929 crash. April 2000. that led Congress to enact the Glass-Steagall Act”33 that separated banks and securities trading. we believe freedom is the answer.SOLD OUT securities firms and insurance companies to combine under one corporate umbrella. 2007. Office of the Comptroller of the Currency. Whereas bank deposits had been a centerpiece of the 1929 crash.gov/hearing1 10/testimony_-_kuttner. “GlassSteagall. Morgan or Chase — as a proxy for the soundness of the security. “The Repeal of GlassSteagall and the Advent of Broad Banking. Banks would originate and repackage highly speculative loans.” Economic and Policy Analysis Working Paper 2000-5.

Commercial banks are not supposed to be highrisk ventures.”35 See Liz Rappaport and Carrick Mollenkamp. When repeal of Glass-Steagall brought investment and commercial banks together. ■ ■ ■ 35 Joseph Stiglitz. or those of off-balance-sheet affiliates. Instead of issuing new loans with hundreds of billions of dollars in taxpayerfooted bailout money given for the purpose of jump-starting frozen credit markets. as they packaged mortgages into securities and then sold them off into “tranches. In short. they are supposed to manage other people’s money very conservatively. February 9. “Capitalist Fools.org/mm2 008/112008/interview-prins. Since the banks weren’t going to hold the mortgages in their own portfolios. November/December 2008. It appears that.html>. Multinational Monitor.” Wall Street Journal. available at: <http://sec.html>. They also seemed to have maintained liability in some cases where securitized mortgages went bad. “The most important consequence of the repeal of Glass-Steagall was indirect — it lay in the way repeal changed an entire culture. “Before That. the banks used the money to offset losses on their mortgage securities investments. .34 But the banks did not in fact escape exposure to the mortgage market. Investment banks. Banks and insurance companies were saddled with billions more in losses from esoteric “credit default swaps” created to insure against 34 SOLD OUT mortgage defaults and themselves traded on Wall Street.” the banks often kept portions of the least desirable tranches in their own portfolios.” Vanity Fair. The once staid commercial banking sector quickly evolved to emulate the risk-taking attitude and practices of investment banks. available at: <http://www. Notes economist Joseph Stiglitz. they had little incentive to review the borrowers’ qualifications carefully.online. 2009.32 gage-backed securities and sold off to third parties.” An Interview with Nomi Prins.com/magazine/2009/ 01/stiglitz200901>.wsj. have traditionally managed rich people’s money — people who can take bigger risks in order to get bigger returns.vanityfair. January 2009. with disastrous results. on the other hand. they stopped making new loans in order to conserve their assets. There was a demand for the kind of high returns that could be obtained only through high leverage and big risk taking.multinationalmonitor. It is with this understanding that the government agrees to pick up the tab should they fail.com/article/SB123422 980301065999. As banks lost billions on mortgage-backed securities in 2008. the Depression-era conflicts and consequences that Glass-Steagall was intended to prevent re-emerged once the Act was repealed. They Made A Lot of Money: Steps to Financial Collapse. “Banks May Keep Skin in the Game. available at: <http://www. the investmentbank culture came out on top.

the banks’ financial 2 HIDING LIABILITIES: OFF-BALANCE SHEET ACCOUNTING IN THIS SECTION: Holding assets off the balance sheet generally allows companies to exclude “toxic” or money-losing assets from financial disclosures to investors in order to make the company appear more valuable than it is. then the apparent improvement in Wall Street recognized this immediately after the adoption of the relevant accounting rule. March 15. when bad times hit. it will appear to be in greater financial health. off-balance sheet accounting let banks hide their losses from investors and regulators. 2002. commercial banks were able to undertake exactly this sort of deceptive financial shuffling in recent years. . Thanks to the exploitation of loopholes in accounting rules. or special purpose vehicles (SPVs) — to hold securitized mortgages. a managing director at Moody's. It may eat into the profit of these products [securitized loans]. “If they have to keep these bonds on their balance sheet. without commensurate reserve-loss capital.36 As they made and securitized more loans shunted off into off-balance sheet entities. enabling them to expand lending without setting aside more reserve-loss capital (money set aside to protect against loans that might not be repaid). If a company can move money-losing assets off of its balance sheet. however. The Securities Industry and Financial Markets Association and the American Securitization Forum are among the lobby interests now blocking efforts to get this rule reformed.” Michael McDonald. the banks did not have to hold capital reserves as against the risk of default — thus leaving them so vulnerable. known as FASB 140 (see text below for more explanation). vulnerability kept increasing — they had increased lingering obligations related to securitized loans. This allowed their condition to grow still more acute.” The Bond Buyer.SOLD OUT 33 financial health is illusory. “Derivatives Hit the Wall . “How the sponsors and their lawyers and accountants address FASB 140 may have an impact on the continuing viability of this market. placing securitized mortgage loans off balance sheet had important advantages for banks. 36 A business’s balance sheet is supposed to report honestly on a firm’s financial state by listing its assets and liabilities. Even in good times. But if it is still incurring losses from the asset taken off the balance sheet. Then. Because the securitized mortgages were held by an off-balance sheet entity. they have to reserve against them. Off-balance sheet operations are permitted by Financial Accounting Standards Board rules installed at the urging of big banks.” said Gail Sussman. Banks used off-balance sheet operations — special purpose entities (SPEs). ultimately imposing massive losses on investors and threatening the viability of the financial system.Sector Found Wary Investors in 2001.

com. The FASB is an independent.bloomberg. on-balance sheet assets grew by 200 percent. . 2008. Pursuant to Statement 140. the lender may still be liable for mortgage 37 Joseph Mason. private sector organization whose purpose is to establish financial accounting standards. 38 Alan Katz and Ian Katz. But whether a true sale of the mortgages has occurred is often unclear because of the complexities of mortgage securitization. Multinational Monitor.org/mm2 008/112008/interview-turner. partner at PriceWaterhouseCoopers LLP and team leader in London for financial instruments). The Statement 140 test of whether a lender has severed responsibility for mortgages is to ask whether a “true sale” has taken place. “Greenspan Slept as Off-Books Debt Escaped Scrutiny. Lenders often retain some control over the mortgages even after their sale to a QSPE.518 [percent]. but it delegates this investment vehicles” (SIVs). available at: <http://www. This ratio represents a massive surge over the last decade and half: “During the period 19922007. October 30.9 times the amount on the balance sheets in 2007. The theory is that the lender no longer has control or responsibility for the mortgages. while off-balance sheet asset grew by a whopping 1. “Off-balance Sheet Accounting and Monetary Policy Ineffectiveness. December 17.” An Interview with Lynn Turner. FASB’s Statement 140 establishes rules relevant to securitization of loans (packaging large numbers of loans resold to other parties) and how securitized loans may be moved off a company’s balance sheet. 39 “Plunge: How Banks Aim to Obscure Their Losses. the lender is authorized not to report the mortgages on its balance sheet.34 The scale of banks’ off-balance sheet assets is enormous — 15.multinationalmonitor. including the standards that govern the preparation of financial reports. A former SEC official called it “nothing more than just a scam. a lender may sell blocks of its mortgages to separate trusts or companies known as Qualified and Exchange and Special “special Purpose Entities (QSPEs). making lenders appear more financially stable than they really are. created by the lender. former SEC chief accountant.com/apps/news?pid =20601170&refer=home&sid=aYJZOB_gZi 0I> (quoting Pauline Wallace. As long as the mortgages are sold to the QSPE. or Commission (SEC) has statutory authority establish accounting reporting standards.html>. 2008.rgemonitor.” RGE Monitor.” The to Securities financial 39 38 SOLD OUT authority to the Financial Accounting Standards Board (FASB). while the sale results in moving mortgages off the balance sheet.”37 One Wall Street executive described off-balance sheet accounting “as a bit of a magic trick” because losses disappear from the balance sheet. November/December 2008. available at: <http://www. So.com/financemarket s-monitor/254797/offbalance_sheet_accounting_and_monetary_p olicy_ineffectiveness>. available at: <http://www.” Bloomberg.

) The SEC's Office of the Chief Accountant agreed with Chairman Cox in a staff letter to industry in 2008.house. If there was any doubt. Barney Frank. The defaults revealed that the mortgages were not actually put “beyond the reach” of the lender after the QSPE bought them. The problems with QSPEs became clear in 2007 when homeowners defaulted in record numbers and lenders were forced to renegotiate or modify mortgages held in the QSPEs. A considerable books. they should have been included on the lender’s balance sheet pursuant to Statement 140.gov/apps/list/press/finan cialsvcs_dem/sec_response072507. July 24. Financial Executives International. 2008. they had actually retained control in violation of Statement 140. available at: <http://www.SOLD OUT defaults. The partnerships. Enron established off-balance sheet partnerships whose purpose was to borrow from banks to finance the company’s growth. Chairman. the deleterious impact of off-balance sheet accounting was vividly illustrated by the notorious collapse of Enron in December 2001. The Securities and Exchange Commission (SEC) was forced to clarify its rules on Statement 140. in a staff letter to Arnold Hanish. 35 the matter to allow lenders to renegotiate loans without losing off-balance sheet status. however.gov/info/accountants/staffl etters/hanish010808. borrowed heavily by using Enron stock as collateral. the lender] and its creditors.” treatment under The problems with off-balance sheet accounting are a matter of common sense. a “sale” of mortgages to a QSPE occurs when the mortgages are put “beyond the reach of the transferor [i. (SEC Office of the Chief Accountant. But the current financial crisis has revealed that while lenders claimed to have relinquished control. when default is reasonably foreseeable.e. This retained liability is concealed from the public by virtue of moving the assets off the balance sheet. January 8.sec. also known as special purpose entities (SPEs). U. The debt incurred by the SPEs was kept off Enron’s balance sheet so that Wall Street 40 (Chairman Christopher Cox. does not preclude continued off-balance sheet 40 A former SEC official called off-balance sheet accounting “nothing more than just a scam. 2007. Former SEC Chair Christopher Cox announced to Congress in 2007 that loan restructuring or modification activities. in a letter to Rep.” This is a “true sale” because the lender relinquishes control of the mortgages to the QSPE.pdf>. portion of the banks’ to the mortgage-related losses remain off the however. As such. Committee on Financial Services.S. contributing continuing uncertainty about the scale of the banks’ losses. . Under Statement 140. and thus moved the mortgages off the balance sheet.pdf>). House of Representatives. available at: <http://www.

In the fallout of the Enron scandal. “After Enron. light on the murky underworld of off-balance sheet assets.” Senator Jack Reed of Rhode Island. The skyrocketing stock price allowed Enron to borrow even more funds while using its own stock as collateral.” means that many financial institutions are not subject to the heightened requirements provided under FIN 46R. Specifically. The Enron fiasco got the attention of Congress. it requires disclosure of the existence of off-balancesheet arrangements. attempted to shine more light on the murky underworld of offbalance sheet assets. the company’s on-balance sheet debt was $13. known as the “scope exception. Investors pushing Enron’s stock price to sky-high levels were SOLD OUT institutions. . more far-reaching demands were defeated by the financial lobby. passed in 2002. regardless of whether a true sale occurred. but the company had a roughly equal amount of offbalance sheet liabilities. which soon began considering systemic accounting reforms. even if they are not required to include them on the balance sheet. The caveat. Moreover. Sarbanes-Oxley requires that companies make some disclosures about their QSPEs. But the guidance has one caveat: QSPEs holding securitized assets may still be excluded from the balance sheet. the FASB adopted a policy to address offbalance sheet arrangements. disclosures have often been made in such a general way as to be meaningless. The SarbanesOxley Act. But lenders have sole discretion to determine whether a QSPE will have a “material” impact. if they are reasonably likely to have a “material” impact on the company’s financial condition. The lessons of Enron were thus ignored for financial The Sarbanes-Oxley Act. setting the stage for the current financial crisis. Under its FIN 46R guidance. we tried legislatively to make it clear that there has to be some transparency with regard to offbalance sheet entities. with Sarbanes-Oxley. attempted to shine more oblivious to the enormous amount of debt incurred to finance the company’s growth.15 billion. but the final measure was a watereddown compromise. but the final measure was a watered-down compromise. a company must include any SPE on the balance sheet if the company is entitled to the majority of the SPE’s risks or rewards. the chair of the Securities. passed in 2002. including QSPEs. Credit rating firms consistently gave Enron high debt ratings as they were unaware of the enormous off-balance sheet liabilities. At the time of bankruptcy.36 and regulators were unaware of it.

available at: <http://www. Relearned. That has led us to conclude that now it’s time to take away the punch bowl. and contending that “It is also important to remember that too much consolidation of SPEs can be just as confusing to users of financial statements as . 2008.” An Interview with Lynn Turner.pdf >. The Board has repeatedly tried to rein in off-balance sheet accounting. available at: <www.”44 It is not. Executive Director. 42 FASB and International Accounting Standards Board. as well as accounting staff of the SEC and the bank regulatory agencies. Securities Industry and Financial Markets Association. February.aspx?id=76>.com/articles/2008/02/28/bu siness/norris29. and Relearned Again from the Credit Crisis — Accounting and Beyond. 2008. (Arguing for delay of new rules until 2010. 28.php>. available at: <http://accountingonion.iht. (“Throughout this process [consideration of revisions of Statement 140].45 The “We thought that was already corrected and the rules were clear and we would not be discovering new things every day. FASB Chairman Bob Herz. Senior Managing Director. 45 “Plunge: How Banks Aim to Obscure Their Losses. its detailed and complicated rules created sufficient loopholes and exceptions to enable financial institutions to circumvent its purported logic as a matter of course.” he said.” September 18. George P.” August 11. Multinational Monitor.” he said.S.fasb. available at: <http://www. the banking The merits of the “true sale” theory of Statement 140 notwithstanding.iasplus.americansecuritization. said in early 2008 as the financial crisis was unfolding. The FASB has recognized for years that Statement 140 is flawed.”). “Lessons Learned.” “Unfortunately. a certainty that the FASB will succeed in its effort.americansecuritization. July 16. “Information for Observers. representatives of the ASF have met on numerous occasions with FASB board members and staff. And so we are proposing eliminating the concept of a 41 44 Floyd Norris.SOLD OUT Insurance and Investment subcommittee of the Senate Banking Committee.typepad.org/mm2 008/112008/interview-turner.com/sto ry.” International Herald Tribune. “it seems that some folks used [QSPEs] like a punch bowl to get off-balance sheet treatment while spiking the punch.html>. American Securitization Forum.multinationalmonitor.” 42 commercial banking industry and Wall Street are waging a major effort to water down the rule and delay adoption and implementation.” April 21. 43 See Thomas Selling. Miller.aspx?id=2906>. 46 See “FAS Amendments. concluding in 2006 that the rule was “irretrievably broken.com/sto ry.html>. to present industry views and recommendations concerning these proposed accounting standards and their impact on securitization market activities. 2008.org/articles&reports/1208-08_herz_speech.com/resource/0804j03obs. but failed in the face of financial industry pressure. available at: <http://www. 2008. accounting literature.46 Ironically. available at: <http://www. letter to Financial Accounting Standards Board. former SEC chief accountant. however. available at: <http://www.pdf>. and Randy Snook. 2008. November/December 2008.com/theacc ountingonion/2008/08/fas-140-letsca. 41 37 QSPE from the U.” American Securitization Forum.43 FASB Chairman Robert Herz likened off-balance sheet accounting to “spiking the punch bowl. “FAS 140: Let’s Call the Whole Thing Off. “Off-the-balance-sheet mysteries.

■ ■ ■ too little.46R.com/apps/news?pid =20601009&sid=a4O4VjK. July 30. “FASB Postpones Off-Balance-Sheet Rule for a Year.47 in part because of the likelihood that forcing banks to SOLD OUT recognize their off-balance sheet losses will reveal them to be insolvent. Connecticut-based panel that sets U. forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their books. the Norwalk. October 31. Chief Operating Officer.” Bloomberg.fX5Q&>.org/files/Advocacy/Testi monyandCommentLetters/MBACommentLe tter-10-31-2008AmendmentstoFASBInterpretationNo.S. available at: <http://www. FASB.bloomberg. (“The Financial Accounting Standards Board postponed a measure. 2008. Courson.”). opposed by Citigroup Inc. accounting standards.p df>.”) 47 Jody Shenn and Ian Katz. and the securities industry.mbaa. voted 5-0 today to delay the rule change until fiscal years starting after Nov. (“MBA believes the proposed disclosures would result in providing readers of financial statements with an unnecessary volume of data that would obfuscate important and meaningful information in the financial statements. letter to Financial Accounting Standards Board.38 industry and Wall Street lobbyists argue that disclosure of too much information will confuse investors. 15. 2008. John A.”) . available at: <http://www. These lobby efforts are meeting with success. 2009. Mortgage Bankers Association.

imposing an unexpected and enormous demand for cash collateral on the company. Most derivatives are characterized by high leverage. this has been a disaster. During the Clinton administration. such as a mortgage contract. As Warren Buffett warned in 2003. have become concentrated in the hands of relatively few derivatives dealers” so that “[t]he troubles of one could quickly infect the others” and “trigger serious systemic problems. trigger still more downgrades. . The Commodity Futures Trading Commission (CFTC) has jurisdiction over futures.”48 A financial derivative is a financial instrument whose value is determined by the value of an underlying financial asset. options and other derivatives connected to commodities.berkshirehathaway. This pile-on effect occurs because many derivatives contracts require that a company suffering a credit downgrade immediately supply collateral to counterparties. Chairman. Report to Shareholders. Derivatives are not a recent invention. The agency was quashed by opposition from Treasury Secretary Robert Rubin and. Fed Chair Alan Greenspan. By all accounts this has been a disaster. Wrote Buffet: “Another problem about derivatives is that they can exacerbate trouble that a corporation has run into for completely unrelated reasons. The need to meet this demand can then throw the company into a liquidity crisis that may. or by financial conditions. in some cases. as Warren Buffet’s warning that they represent “weapons of mass financial destruction” has proven prescient. It all becomes a spiral that can lead to a corporate meltdown. 2003. The value of the contract is determined by fluctuations in the price of the underlying asset.” Over-the-counter financial derivatives are unregulated.pdf>.SOLD OUT 39 financial derivatives represent “weapons of mass financial destruction” because “[l]arge amounts of risk. then. By all accounts. Warren Buffett. above all. 48 3 THE EXECUTIVE BRANCH REJECTS FINANCIAL DERIVATIVE REGULATION IN THIS SECTION: Financial derivatives are unregulated. that a company is downgraded because of general adversity and that its derivatives instantly kick in with their requirement. Imagine. particularly credit risk. meaning they are bought with enormous amounts of borrowed money. Financial derivatives have amplified the financial crisis far beyond the unavoidable troubles connected to the popping of the housing bubble. February 21. Then-Deputy Treasury Secretary Lawrence Summers told Congress that CFTC proposals “cas[t] a shadow of regulatory uncertainty over an otherwise thriving market. the CFTC sought to exert regulatory control over financial derivatives. and insisted that CFTC regulation might imperil existing financial activity that was already at considerable scale (though nowhere near present levels). such as interest rates or currency values. Berkshire Hathaway.” Available at: <http://www.com/letters/ 2002pdf. They challenged the agency’s jurisdictional authority. stock or bond.

2008.businessweek. irrespective of the price for oranges at that future time. are negotiated and traded privately (not on public exchanges) and are not subjected to public disclosure. Derivatives and the current financial crisis In the 1990s. including mortgage-backed 49 securities. Investment banks that hold mortgage debt. where buyers and sellers agree to deliver or accept delivery of a specified number of oranges at some point in the future. Once home values stopped rising in 2006 and mortgage default became more commonplace. One over-the-counter derivative that has exacerbated the current financial crisis is the credit default swap (CDS). non-financial derivatives include futures contracts traded on exchanges such as the Chicago Mercantile Exchange. futures on oranges. by contrast. . CDSs were invented by major banks in the mid-1990s as a way to insure against possible default by debtors (including mortgage holders). which agrees to become liable for all the debt in the event of a default in the mortgage-backed securities. the value of the packages of mortgages known as mortgage-backed securities plunged. The current financial crisis has exposed how poorly the sellers and the buyers understood the value of the derivatives they were trading. the financial industry began to develop increasingly esoteric types of derivatives. CDS traders with no financial interest in the underlying mortgages received enormous profits from buying and selling CDS contracts and thus speculating on the likelihood of default. and regulated by the Commodity Futures Trading Commission. the CDS agreements called for the sellers of the CDSs to reimburse the purchasers for the losses in the mortgage-backed securities. Wall Street wunderkinds with backgrounds in complex mathematics and statistics developed algorithms that they claimed allowed them to correctly price the risk and the CDSs.htm>. can purchase a CDS from a seller. Billions in these “insurance policies” were traded every day. at a price determined now.49 Banks and hedge funds also began to sell CDSs and even trade them on Wall Street. At that point. SOLD OUT such as an insurance company like AIG. Over-the-counter (OTC) financial derivatives. February 21. available at: <http://www. “Credit Default Swaps: Is Your Fund at Risk?” BusinessWeek.com/magazine/c ontent/08_09/b4073074480603. with traders essentially betting on the likelihood of default on mortgage-backed securities. government supervision or other requirements applicable to those traded on exchanges. for example. Lewis Braham.40 Traditional. This kind of futures contract can help farmers and others gain some price certainty for commodities whose value fluctuates in uncertain ways. A traditional futures contract might include.

stock market. the company’s debt rating was downgraded by credit rating firms. 2008. but they would also be getting money back in. 2008.htm>.htm>. Table 19: Amounts Outstanding of Over-the-counter Derivatives.org/statistics/derstats. The value of the entire global derivatives market reached $683 trillion by mid2008. more than 20 times the total value of the U.bis. For example. did not buy CDS contracts — it only sold them.1 trillion.bis. while the total value of each CDS buy and sell order equaled $60 trillion in 2007. stock market. available at: <www. The global market value of CDS contracts (“notional value”) reached over $60 trillion in 2007. 52 Adam Davidson.com/article/newsOne/id USMAR85972720080918>. So. became responsible for posting billions of dollars in collateral or paying the purchasers. AIG was unable to provide enough collateral or pay its obligations from the CDS contracts. Table 19: Amounts Outstanding of Over-the-counter Derivatives.S. however. Eventually.50 The total dollars actively at risk from CDSs is a staggering $3.reuters. available at: <www. The insurance giant AIG. including billions in mortgage-backed securities that went bad after the housing bubble burst. The financial spiral downward ultimately required a taxpayerfinanced bailout by the Federal Reserve. the actual value at risk was a fraction of that — but still large enough to rock the financial markets. In addition. 51 41 banks might have to pay some money out.SOLD OUT Firms that had sold CDS contracts. Many banks throughout the world were at risk because they had bought CDS contracts from AIG. “How AIG fell apart. more than 20 times the total value of the U. Adam Davidson.52 When a mortgage-backed security defaulted. September 18. a move that triggered a clause in its CDS contracts that required AIG to put up more collateral to guarantee its ability to pay. the 50 Bureau of International Settlements. making it liable for loan defaults. like AIG. which committed $152. banks and hedge funds would buy CDS protection on the one hand and then sell CDS protection on the same security to someone else at the same time. AIG issued $440 billion 53 The value of the entire global derivatives market reached $683 trillion by mid-2008. available at: <http://www. .S. 51 Bureau of International Settlements.” Reuters.reuters. available at: <http://www. Its stock price tumbled. worth of such contracts.” Reuters.com/article/newsOne/id USMAR85972720080918>. surpassing country in the the gross world domestic product of every combined. September 18. “How AIG fell apart.org/statistics/derstats.5 billion to the com53 The amount at risk is far less than $60 trillion because most investors were simultaneously “on both sides” of the CDS trade. making it impossible for the firm to attract investors.

55 Exchange-traded and agricultural derivatives are generally regulated by the Commodity Futures Trading Commission (CFTC). 2008. Born was outspoken and adamant about the need to regulate the quickly growing but largely opaque area of financial derivatives.com/wpdyn/content/story/2008/10/14/ST200810140 3344.html>. President Clinton appointed Brooksley Born chair of the Commodity Futures Trading Commission (CFTC).57 Pressing back against her critics. In 1996.gov/opa/press98/opa414298. “The Crash: What Went Wrong. Born published a CFTC concept paper in 1998 describing how the derivatives sector might be regulated. in order to minimize “disruption to the financial markets. October 15. The men were determined to derail her efforts to regulate derivatives. 58 CFTC Issues Concept Release Concerning Over-the-Counter Derivatives Market.”58 Federal Agencies Reject Regulation of Financial Derivatives. An April 1998 meeting of the President’s Working Group on Financial Markets. turned into a standoff between the three men and Born. This report primarily uses the shorthand term “financial derivative” to reference over-the-counter financial derivatives. But acceding to political pressure from the powerful financial industry.42 pany in 2008. . The CFTC is an independent federal agency with the mandate to regulate commodity futures and option markets in the United States. all of whom felt that the financial industry was capable of regulating itself. Treasury Secretary Robert Rubin and Federal Reserve Chair Alan Greenspan.” The Washington Post. She found fierce opposition in SEC Chair 56 54 Erik Holm. Overthe-counter financial derivatives — not traded on an exchange — were and are not subject to CFTC jurisdiction. 2008. available at: <http://www. Greenspan. Some industry observers warned of the dangers of over-the-counter derivatives. December 15. “AIG Sells Mortgage-Backed Securities to Fed Vehicle.htm> 57 Anthony Faiola. which consisted of Levitt. 1998. available at: <http://www.htm>. the industry and our fellow regulators on the appropriate regulatory approach to today’s OTC derivatives marketplace.55 especially the credit default swaps that have exacerbated the current financial meltdown.cftc. Ellen Nakashima and Jill Drew.gov/anr/anrcomm98.com.” Bloomberg. 56 <http://www. the federal agencies with the responsibility to safeguard the integrity of the financial system refused to permit regulation of financial derivatives. “The Commission is not entering into this process with preconceived results in mind.” said Born.cftc.washingtonpost. We are reaching out to learn the views of the public. May 7. but left the meeting without any assurances. Rubin and Born.” 54 SOLD OUT Arthur Levitt. Born framed the CFTC’s interest in mild terms: “The substantial changes in the OTC derivatives market over the past few years require the Commission to review its regulations.

October 9. Concept Release: Over-the-Counter Derivatives. 2008. • Impose capital requirements on those engaging in financial derivatives trading (so that they would be required to set aside capital against the risk of loss. Commodity Futures Trading Commission. “While OTC derivatives serve important economic functions. and its probing questions suggested a range of meaningful regulatory measures — measures which. like any complex financial instrument. likely would have reduced the severity of the present crisis. available at: <http://www. htm#issues_for_comment>. and to avoid excessive use of borrowed money). But the concept paper was clear that the CFTC view was that the unrestrained growth of financial derivatives trading posed serious risks to the financial system. May 7. available at: <http://www. htm#issues_for_comment>. Concept Release: Over-the-Counter Derivatives.62 Meanwhile. “Former Clinton Official Says Democrats. Concept Release: Over-the-Counter Derivatives.SOLD OUT The publication described the growth of derivatives trading (“Use of OTC derivatives has grown at very substantial rates over the past few years.” ProPublica.” to a notional value of more than $28 trillion) and raised questions about financial derivatives rather than proposed specific regulatory initiatives. if they had been adopted.org/feature/formerclinton-official-says-democrats-obamaadvisers-share-blame-for-marke/>. 1998. Born faced off against Greenspan and others in 59 Commodity Futures Trading Commission. industry lobbyists met with CFTC commissioners at least 13 times. The uproar from the financial industry was immediate. these products. Obama Advisers Share Blame for Market Meltdown. 62 Sharona Coutts and Jake Bernstein. and • Require issuers of derivatives to disclose the risks accompanying those instruments. htm#issues_for_comment>. • Require registration of person or entities trading financial derivatives.propublica.cftc. • Require financial derivatives to be traded over a regulated exchange.gov/opa/press98/opamntn. available at: <http://www.cftc. available at: <http://www.” the CFTC noted.cftc. “The explosive growth in the OTC market in recent years has been accompanied by an increase in the number and size of losses even among large and sophisticated users which purport to be trying to hedge price risk in the underlying cash markets. 1998.”60 59 61 43 Among the proposals floated in the concept paper were the following measures:61 • Narrow or eliminate exemptions for financial derivatives from the regulations that applied to exchangetraded derivatives (such as for agricultural commodities).gov/opa/press98/opamntn. can present significant risks if misused or misunderstood by market participants. . May 7. May 7. 60 Commodity Futures Trading Commission.gov/opa/press98/opamntn. During the next two months. 1998.

washingtonpost.ustreas.washingtonpost. Regulation that serves no useful purpose hinders the efficiency of ing. 1998.htm>. stepped into the fray. R-Indiana. Lawrence H. “Regulation of Over the Counter (OTC) Derivatives and Derivatives Markets.” nearly $250.org/politicians/ind ustries. Nutrition.”) For a full account of the dispute. 68 Sharona Coutts and Jake Bernstein.” Hearing of the Senate Agriculture. informed the Fed it was on the brink of collapse. 1998.67 The New York Federal Reserve quickly recruited 14 private banks to bail out Long Term Capital by investing $3. a hedge fund heavily focused on derivatives. but there are circumstances that could compel Congress to act preemptively in the near term.”66 In September 1998. complained that Born’s proposal “cast the shadow of regulatory uncertainty over an otherwise 63 65 Center for Responsive Politics.html>. October 15. President Clinton’s then-Deputy Treasury Secretary. July 30.” The Washington Post. and couldn’t cover $4 billion in losses.com/wpdyn/content/story/2008/10/14/ST200810140 3344. 1998 (“[I]t is essential that the government not create legal uncertainty for swaps.” Hearing of the Senate Agriculture. 66 Alan Greenspan. Testimony Before the Senate Committee on Agriculture. Nutrition and Forestry Committee. “Regulation of Over the Counter (OTC) Derivatives and Derivatives Markets. Nutrition and Forestry Committee. <http://www. chair of the Senate Agricultural Committee. “Former . “The Crash: What Went Wrong. July 30.html>. Lugar.com/wpdyn/content/story/2008/10/14/ST200810140 3344.44 numerous antagonistic congressional hearings. Summers (now head of the Obama administration’s National Economic Council).php?cycle=1998&cid=N00001764>. Senator Richard Lugar. 67 Anthony Faiola. The Treasury Department weighed in with its view that derivatives should remain unregulated. “Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary. see: <http://www. Summers.opensecrets. Lawrence H. available at: <http://www.64 The stalemate continued. July 30. and Forestry. 64 Senator Richard Lugar. Long Term Capital Management. 2008. arguing that regulation would be both unnecessary and harmful.68 markets to enlarge standards of liv- Lawrence Summers complained that a proposal to regulate derivatives “cast a shadow of regulatory uncertainty over an otherwise thriving market. who received thriving market “65 SOLD OUT Federal Reserve Chair Alan Greenspan echoed the Treasury Department view. I hope it will not be necessary. available at: <http://www.gov/press/releases/rr26 16.6 billion. Ellen Nakashima and Jill Drew.000 in campaign contributions from securities and investment firms in 1998.63 extended an ultimatum to Born: cease the campaign or Congress would pass a Treasury-backed bill that would put a moratorium on any further CFTC action.

but did not take seriously. “Over-the-Counter Derivatives Markets and the Commodity Exchange Act. Government regulation should serve to supplement. To the extent that such risk exists.treas. as the next section details.gov/press/releases/reports /otcact. “The Crash: What Went Wrong.gov/press/releases/reports /otcact.” ProPublica.S. 69 Brooksley Born. Obama Advisers Share Blame for Market Meltdown. Ellen Nakashima and Jill Drew. October 15. it was well addressed by private parties: “private counterparty discipline currently is the primary mechanism relied upon for achieving the public policy objective of reducing systemic risk. William Rainer.”71 Among other rationalizations for this nonregulatory posture.com/wpdyn/content/story/2008/10/14/ST200810140 3344. saying it would “perpetuate legal uncertainty or impose unnecessary regulatory burdens and constraints upon the development of these markets in the United States.72 The report briefly touched upon. 72 The President’s Working Group on Financial Markets.gov/banking/ 10198bor. The President’s Working Group on Financial Markets.SOLD OUT “This episode should serve as a wake-up call about the unknown risks that the overthe-counter derivatives market may pose to the U.” Born told the House Banking Committee two days later. available at: <http://www. the report concluded. 2008.pdf>.org/feature/formerclinton-official-says-democrats-obamaadvisers-share-blame-for-marke/>. and Congress enacted a six-month moratorium on any CFTC action regarding derivatives or the swaps market. available at: <http://www.” November 1999.house.70 (Permanent congressional action would soon follow. Born resigned in frustration.propublica. “It has highlighted an immediate and pressing need to address whether there are unacceptable regulatory gaps relating to hedge funds and other large OTC derivatives market participants. 2008. Testimony Before the House Committee on Banking and Financial Services. economy and to financial stability around the world. rather than substitute for.html>.”69 But what should have been a moment of vindication for Born was swept aside by her adversaries. available at: <http://financialservices. In November 1999. the report argued.” November 1999. 70 Anthony Faiola. CFTC Chair. the inter-agency President’s Working Group on Financial Markets released a new report on derivatives recommending no regulation. October 1.” The Washington Post.treas.pdf>. 1998. “the sophisticated counterparties that use OTC derivatives simply do not require the same protections” as retail investors. Summers 45 (whom Clinton had appointed Treasury Secretary) and Levitt’s campaign to block any CFTC regulation. available at: <http://www. available at: <http://www.) In May 1999. went along with Greenspan. . Born’s replacement. “Over-the-Counter Derivatives Markets and the Commodity Exchange Act. October 9.washingtonpost.pdf>. the idea that financial derivatives posed overall financial systemic risk. private market 71 Clinton Official Says Democrats.

and the tools required by federal regulators already exist. private counterparty credit risk management has been employed effectively by both regulated and unregulated dealers of OTC derivatives. In general. “Over-the-Counter Derivatives Markets and the Commodity Exchange Act.” November 1999.gov/press/releases/reports /otcact.”73 SOLD OUT ■ ■ ■ 73 The President’s Working Group on Financial Markets. .pdf>.46 discipline.treas. available at: <http://www.

including credit default swaps.com/wpdyn/content/story/2008/10/14/ST200810140 3344. 78 Dirk van Dijk.” The Washington Post. S. complaining that “[b]anks are already heavily regulated 76 4 crisis. in the House. in the Senate. 146 Cong.S. 2000. Rec. CFMA formally exempted financial derivatives. amending the Commodity Exchange Act. a year after the outspoken Brooksley Born left the Commodity Futures Trading Commission (CFTC). “Credit Default Swaps Explained.washingtonpost.SOLD OUT 47 bipartisan affair and inaction ruled the day. CONGRESS BLOCKS FINANCIAL DERIVATIVE REGULATION IN THIS SECTION: The deregulation — or non-regulation — of financial derivatives was sealed in 2000. introduced separate bills calling for derivatives regulation. and Representative Henry Gonzalez. available at: . 106th Congress.76 In 2000. seq.com/stock/news/14884/ Credit+Default+Swaps+Explained>. there were some in Congress who believed that the federal government should be given greater power to regulate derivatives. passage of which was engineered by then-Senator Phil Gramm. 11867. 106-554. available at: <http://www. D-Texas. 2nd Session.” Zacks Investment Research. Phil Gramm.C. RTexas. the Derivatives Safety and Soundness Supervision Act of 1994. Senator Donald Riegle. 7 U. 2008. September 24. DMichigan.77 The legislation included an “Enron loophole. Appendix E.html>. “The Crash: What Went Wrong. 79 Sen. from regulation and federal government oversight. from regulation and helped create the current financial Long before financial derivatives became the darlings of Wall Street. No. including the now infamous credit default swaps. 77 Pub. One Wall Street analyst later noted that the CFMA “was slipped into the [budget] bill in the dead of night by our old friend Senator Phil Gramm of Texas — now Vice Chairman of [Swiss investment bank] UBS. Ellen Nakashima and Jill Drew. 75 Anthony Faiola. L. The Commodities Futures Modernization Act exempts financial derivatives. December 15. The action that Congress did take — the sixmonth moratorium on CFTC regulation described in the previous section — cut against the need for regulation.” which prohibited regulation of energy futures contracts and thereby contributed to the collapse of scandal-ridden Enron in 2001.74 both went nowhere. In 1994. with the Commodities Futures Modernization Act (CFMA). October 15. 2008. available at: <http://www.”78 Gramm led the congressional effort to block federal agencies from regulating derivatives.zacks. § 1 et. Congress and President Clinton codified regulatory inaction with passage of the Commodity Futures Modernization Act (CFMA).”79 Gramm predicted 74 The Derivatives Supervision Act of 1994.75 Opposing regulation was a institutions.

C. telling the New York Times. Gramm’s UBS was reeling from the global financial crisis he had helped create.cgi?position=all&page=S11868 &dbname=2000_record>. there’s no question that we would have been better off if we had been regulating derivatives. In 1995. Former SEC Commissioner Harvey J. 2000. By 2008. Goldschmid. conceded that “in hindsight.com/2008/11/17/busin ess/economy/17gramm.” better 83 than you might have Others have a more reality-based view. 2nd Session.gpo.cgi?position=all&page=S11866 &dbname=2000_record>.com/wpsrv/business/risk/index.”80 He said the legislation “protects financial institutions from over-regulation. Unswayed. 2nd Session. As mortgages and mortgage-backed securities plummeted in value from declining real estate values.cgi?position=all&page=S11867 &dbname=2000_record>. Undated. Rec.S.html?pagewanted=al l> 84 “The Crash: What Went Wrong?” Washington Post website. 81 106th Congress. available at: <http://www. Depression-era approach to financial regulation. Rec.access. Unswayed. . November 16.access. December 15. big financial firms were unable to meet their insurance obligations under their credit default swaps.” New York Times. available at: <http://www. bowing to the financial lobby after years of lobbying. “Deregulator Looks Back. I don’t see any evidence in our history or anybody <http://frwebgate. § 78u-4.access. S. available at: <http://frwebgate. and provides legal certainty for the $60 trillion market in swaps”81 — in other words.gov/cgibin/getpage. Dec. available at: <http://www.” New York Times. 2000. The firm declared nearly $50 billion in credit losses and write-downs.85 The measure greatly restricted the rights of investors to sue Wall Street trading. 11868. Another action by Congress must be mentioned here. 80 Sen. 2008. … The markets have worked thought. 82 Eric Lipton and Stephen Labaton. 146 Cong. 11866. 15. prompting a $60 billion bailout by the Swiss government.nytimes. 2008. Phil Gramm.html?_r=1&pagewanted=1& em>.com/2008/11/17/busin ess/economy/17gramm.washingtonpost. “The Reckoning: Deregulator Looks Back.gpo. “There is this idea afloat that if you had more regulation you would have fewer mistakes. The author of the legislation was Representative 83 Senator Gramm remains defiant today. 146 Cong. accounting and investment firms for securities fraud.nytimes.”84 While credit default swaps are not the underlying cause of the financial crisis. available at: <http://frwebgate. Congress passed the Private Securities Litigation Reform Act.gov/cgibin/getpage.gpo. they dramatically exacerbated it. S.48 CFMA “will be noted as a major achievement” and “as a watershed.html?hpid=topnews> . Eric Lipton and Stephen Labaton. 106th Congress. November 16. 85 15 U. 82 SOLD OUT else’s to substantiate it. it offered a guarantee that they would not be regulated. where we turned away from the outmoded.gov/cgibin/getpage.

the ordinary individual that thinks that they are sophisticated. The Private Securities Litigation Reform Act weakened that deterrent — including for derivatives — and today makes it more difficult for defrauded investors to seek compensation for their losses. He was able to cite the opposition of Alan Greenspan. R-California.gpo. H. 141 Cong.cgi?dbname=1995_record&pag e=H2826&position=all>. “It would be a grave error to demonize derivatives. which by their very personality cannot possibly be understood by ordinary. but they are not so sophisticated that they can understand an algorithm that stretches out for half a mile and was constructed only inside of the mind of this 26or 28-year-old summa cum laude in mathematics from Cal Tech or from MIT who constructed it. the CEOs of the companies do not even want to know how it happens until the crash. D-Massachusetts. in fact.gov/cgibin/getpage. 1995. By that. He quoted Greenspan saying that “singling out derivative instruments for special regulatory treatment” would be a “serious mistake. who warned.gpo. 104th Congress 1st Session. who President Bush later appointed Chair of the Securities and Exchange Commission.cgi?position=all&page=H2828 &dbname=1995_record>.” Representative Cox led the opposition to the Markey amendment. available at: <http://frwebgate. Christopher Cox. available at: <http://frwebgate.SOLD OUT Christopher Cox. I mean the town treasurers. chair of the Federal Reserve. proposed an amendment that would have exempted financial derivatives from the Private Securities Litigation Reform Act. 104th Congress 1st Session.access.access. March 8.gov/cgibin/getpage. Rec. Rec. … The objective of the Markey amendment out here is to ensure that investors are protected when they are misled into products of this nature. No one else in the firm un86 ■ ■ ■ Rep. and President Clinton’s SEC Chair Arthur Levitt. because the profits are so great from these products that. In the debate over the bill in the House of Representatives. Markey.86 Markey anticipated many of the problems that would explode a decade later: “All of these products have now been sent out into the American marketplace. H. 1995. The specter of litigation is a powerful deterrent to wrongdoing. 141 Cong.” He also quoted Levitt.”87 The amendment was rejected. 87 Rep. Edward Markey. unsophisticated investors. The lesson that we are learning is that the heads of these firms turn a blind eye. 2826. 2828. in many instances with the promise that they are quite safe for a municipality to purchase. March 8. the country treasurers. Representative Ed 49 derstands it. .

it enabled the banks to create a more tangled mess of derivative investments — so that their individual failures. The Securities and Exchange Commission (SEC) prohibited broker-dealers (i. as in the case of Merrill Lynch. and was voluntarily administered. “Toxic Waste Build Up: How Regulatory Changes Let Wall Street Make Bigger Risky Bets. § 240. Multinational Monitor.88 As a result. the SEC succumbed to a push from the big investment banks — led by Goldman Sachs. This super-leverage not only made the investment banks more vulnerable when the housing bubble popped. Former SEC Chair Chris Cox has acknowledged that the voluntary regulation was a complete failure. the SEC’s trading and markets division promulgated a rule requiring investment banks to maintain a debt-to-netcapital ratio of less than 12 to 1. the riskier the investment.89 The rule was adopted by the 88 89 IN THIS SECTION: In 1975. stock brokers and investment banks) from exceeding established limits on the amount of borrowed money used for buying securities. The rule also required broker-dealers to maintain a designated amount of set-aside capital based on the riskiness of their investments. It forbid trading in securities if the ratio reached or exceeded 12 to 1. In 2004. and to ensure that the broker or investment bank could meet its contractual obligations to other firms. the more they would need to set aside. or the potential of failure.F. available at: <http://www. so most companies maintained a ratio far below it. the five major Wall Street investment banks maintained net capital ratios far below the 12 to 1 limit.” An Interview with Lee Pickard.multinationalmonitor. became systemic crises. investment banks regularly borrowed funds to purchase securities and debt instruments.org/mm2 . 17 C. This essentially involved complicated mathematical formulas that imposed no real limits.R. November/December 2008. and its then-chair.e. Investment banks that accrued more than 12 dollars in debt for every dollar in bank capital (their “net capital ratio”) were prohibited from trading in the stock market. Henry Paulson — and authorized investment banks to develop their own net capital requirements in accordance with standards published by the Basel Committee on Banking Supervision. however. investment banks pushed borrowing ratios to as high as 40 to 1.50 SOLD OUT 5 THE SEC’S VOLUNTARY REGULATION REGIME FOR INVESTMENT BANKS Until the current financial crisis. A “highly leveraged” financial institution is one that owns financial assets that it acquired with substantial amounts of borrowed money. 15c3-1. With this new freedom. This limitation on accruing debt was designed to protect the assets of customers with funds held or managed by the stock broker or investment bank.

enabled investment banks to make much greater use of borrowed funds. the SEC abolished its 19-year old “debt-to-net-capital rule” in favor of a voluntary system formulate “rule. investment firms.92 Banks Pile Up New Debt. October 2. available at: <http://www. In 2004. SEC Chair Christopher Cox continued to support the voluntary program: “We have a good deal of comfort about the capital cushions at these firms at the moment.com/2008/10/03/busin ess/03sec. insurers and others. these firms had borrowed 20. that their allowed banks to own investment Under this new scheme. Goldman Sachs. far exceeding the standard 12 to 1 ratio. the SEC voted unanimously to abolish the rule. §§ 200 and 240 (2004).F. available at: <http://www.html?_r=1>. By 2008. Merrill Lynch and Lehman Brothers.SOLD OUT SEC under the general regulatory authority granted by Congress when it established the SEC to regulate the financial industry in 1934 as a key reform in the aftermath of the 1929 crash. As late as the March 2008 collapse of Bear Stearns. who would become Treasury secretary two years later..” he said. After a 55-minute discussion. 90 Final Rule: Alternative Net Capital Requirements for Broker-Dealers that are Part of Consolidated Entities.” New York Times. Much of the bor- The SEC’s Inspector General concluded that “it is undisputable” that the SEC “failed to carry out its mission in its oversight of Bear Stearns.sec. “Agency’s ’04 Rule Let other mortgage-backed securities (MBSs) and their associated derivatives.gov/rules/final/34. 91 Stephen Labaton. 30 and 40 dollars for each dollar in capital.htm>. which was then headed by Henry M.91 008/112008/interview-pickard.R. October 2. Paulson Jr. Available at: <www. 17 C.” New York Times.com/2008/10/03/busin . including credit default swaps. 2008. 92 Stephen Labaton. The SEC acted at the urging of the big investment banks led by Goldman Sachs. “Agency’s ’04 Rule Let Banks Pile Up New Debt. large investment banks would assess their level of risk based on rowed funds were used to purchase billions of dollars in subprime-related and their own risk management computer models.nytimes. and was the architect of the Bush administration’s response to the current financial debacle: the unprecedented taxpayer bailout of banks. The securities were purchased at a time when real estate values were skyrocketing and few predicted an end to the financial party.” which collapsed in 2008 under massive mortgage-backed securities losses.” 90 51 The SEC’s new policy. Morgan Stanley.html>. 2008. foreseeably. The top five investment banks participated in the SEC’s voluntary program: Bear Steams.nytimes.49830.

the SEC “became aware that risk management of mortgages at Bear Stearns ess/03sec. and the stock market crash of October 1987. and a failure to contemplate systemwide asset deflation.” The much-lauded computer models and risk management software that investment banks used in recent years to calculate risk and net capital ratios under the SEC’s voluntary program had been overwhelmed by human error. including lack of expertise by risk managers in mortgagebacked securities” and “persistent understaffing.” Notwithstanding this knowledge. concluded the IG. .com/2008/10/03/busin ess/03sec.52 The SEC had abolished the net capital rule with the caveat that it would continue monitoring the banks for financial or operational weaknesses. including that the housing bubble would not burst. The IG concluded that “it is undisputable” that the SEC “failed to carry out its mission in its oversight of Bear Stearns. it “did not make any efforts to limit Bear Stearns’ mortgage securities concentration. “Agency’s ’04 Rule Let Banks Pile Up New Debt. a proximity of risk managers to traders suggesting a lack of independence. 93 SOLD OUT had numerous shortcomings. leading the Federal Reserve to intervene with taxpayer dollars “to prevent significant harm to the broader financial system.html?_r=1>.” which collapsed in 2008 under massive mortgage-backed securities losses.html?_r=1>.” Nevertheless. But a 2008 investigation by the SEC’s Inspector General (IG) found that the agency had neglected its oversight responsibilities.” Moreover. the SEC “was aware . the SEC “missed opportunities to push Bear Steams aggressively to address these identified concerns. turnover of key personnel during times of crisis. “but did not take actions to limit these risk factors.93 The editors at Scientific American magazine lambasted the SEC and the investment banks for their “[o]verreliance on financial software crafted by physics and Stephen Labaton.. Bole.” New York Times. and the inability or unwillingness to update models to reflect changing circumstances.” including its concentration of mortgage securities and high leverage.” Furthermore.. overly optimistic assumptions. available at: <http://www.” The IG said the SEC was “aware that Bear Stearns’ leverage was high.nytimes. a heavily leveraged hedge fund that collapsed in 1998. Similar computer models failed to prevent the demise of Long-Term Capital Management.” but made no effort to require the firm to reduce leverage “despite some authoritative sources describing a linkage between leverage and liquidity risk. that Bear Stearns’ concentration of mortgage securities was increasing for several years and was beyond its internal limits.” The IG said the SEC “became aware of numerous potential red flags prior to Bear Stearns’ collapse. software consultant). October 2. 2008 (citing Leonard D.

SOLD OUT math Ph. SEC Chair Cox. 2008. All five securities grants either disappeared or became bank holding companies in order to avail themselves of taxpayer bailout money. “After the Crash: How Software Models Doomed the Markets. On September 26. November 2008. while Goldman Sachs and Morgan Stanley became bank holding companies with the Federal Reserve as their new principal regulator. the number of major investment banks on Wall Street dropped from five to zero.cfm?id=after -the-crash>.” The Washington Post. “The Crash: What Went Wrong. October 15. Bank of America announced its rescue of Merrill Lynch by purchasing it. available at: <http://www. 2008. who spent his entire public career as a deregulator. Ellen Nakashima and Jill Drew. as the crisis became a financial meltdown of epic proportions. 95 Anthony Faiola.com/article.”95 53 ■ ■ ■ 94 The Editors. Lehman Brothers filed for bankruptcy protection. conceded “the last six months have made it abundantly clear that voluntary regulation does not work.washingtonpost.s. .” Scientific American.”94 By the fall of 2008.com/wpdyn/content/story/2008/10/14/ST200810140 3344.D. JP Morgan bought Bear Stearns. available at: <http://www.html>.sciam.

banks with riskier credit exposures are required to retain more capital to back the bank’s obligations. The idea of an international agreement was to level the playing field for capital regulation as among banks based in different countries. Basel II. The first Basel Accords. This gave rise to two sets of problems. Complicated financial maneuvering made it hard to determine compliance. the purpose of the Basel Accords is to prevent banks from creating a “systemic risk. banks are required to keep higher capital amounts in reserve in order to hold assets with higher risks and. based on subjective factors of agency ratings and the banks’ own internal riskassessment models. Regulators have therefore required banks to maintain an adequate cushion of capital to protect against unexpected losses. As a result. meaning they hold large an incentive to make riskier (and potentially higher return) loans. because the riskier loans within a given category did not require more set-aside capital. The Basel Accords determine how much capital a bank must hold as a cushion. which led to negotiations over a new set of regulations. Banks had IN THIS SECTION: In 1988. The SEC experience with Basel II principles illustrates their fatal flaws. Ultimately. global bank regulators adopted a set of rules known as Basel I. In 1988. lower capital for lower risk assets. to impose a minimum global standard of capital adequacy for banks.54 SOLD OUT 6 BANK SELF-REGULATION GOES GLOBAL: PREPARING TO REPEAT THE MELTDOWN? vestments. Commercial banks in the United States are supposed to be compliant with aspects of Basel II as of April 2008. national bank regulators from the largest industrial countries adopted a set of international banking guidelines known as the Basel Accords. especially losses generated on highly leveraged in- . Generally. their debt-to-equity (or debt-to-capital) ratios are generally higher than for other types of corporations. For example. Basel I categorized all commercial loans into the 8 percent capital category — meaning 8 percent of a bank’s capital must be set aside to hold commercial loans — even though not all commercial loans are equivalently risky. The Basel I rules also gave banks an amounts of debt compared to their net worth (or equity). establishes varying capital reserve requirements. known as Basel I. however.” or a risk to the financial health of the entire banking system. In other words. but complications and intra-industry disputes have slowed implementation. inversely. heavily influenced by the banks themselves. Banks are inherently highly leveraged institutions. did not well distinguish between loans involving different levels of risk.

” Committee on Banking. depending on the loan’s estimated risk. where Basel I categorized all commercial loans into the 8 percent capital category. not the regulators. internal bank models would have allowed for capital allocations on commercial loans that vary from 1 percent to 30 percent. and the Office of Thrift Supervision — have struggled to find an operationally satisfactory means to implement Basel II. Spain. available at: <http://banking.96 To address these problems. banks will be able to employ their internal risk models to transform highrisk assets into “low risk.newyorkfed. Basel II authorized banks to use their own internal models for assessing “risk. Italy. Rather than dealing directly with the issue of differentiated levels of risk within categories and the problem of regulatory 55 arbitrage by establishing updated and more granular capital standards. Housing and Urban Affairs. federal financial regulatory agencies — the Federal Reserve. France. Securitization is the main method used by banks to engage in regulatory capital arbitrage. Sweden.” 4 FRBNY Econ. Pol’y Rev. United States Senate. application will be limited to large commercial banks only. the United Kingdom and the United States. 10 2005.” whereby a bank maneuvers the accounting classification of a loan so that it is classified under Basel I rules as requiring less set-aside capital — even though the bank’s overall risk has not diminished.” Critics say that under this system. Japan.S.97 U. 53 (1998). formally known as the “International Convergence of Capital Measurement and Capital Standards: a Revised Framework.org/research/epr/9 8v04n3/9810jone.” For example.pdf>.S. Tarullo. the Basel Committee on Banking Supervision agreed in 2004 to an updated bank capital accord (Basel II). the Federal Deposit Insurance Corporation. November. Switzerland. Canada.” The Committee’s members come from Belgium. Germany.” where loans are maintained. “Industry Practices in Credit Risk Modeling and Internal Capital Allocations: Implications for a Models-Based Regulatory Capital Standard.” which requires less set-aside capital than the “banking book. Basel II rules appear set to reduce the overall capital requirements for banks. depending on risk as estimated by banks. “Hearing on the Development of the New Basel Capital Accords.gov/public/_files/taru llo. available at: <http://www. the Netherlands.senate. the United States Federal Reserve serves as a participating member. Office of the Comptroller of the Currency. 3. Securitized loans are listed on a bank’s “trading account. . It now appears U.SOLD OUT incentive to engage in “regulatory capital arbitrage. Luxembourg.pdf>. 97 Testimony of Daniel K. with some Basel II 96 David Jones and John Mingo. The revised framework under Basel II gives banks the leeway to lump commercial loans into these differing capital adequacy requirements.

gov/law/basel.” undated. “Basel II Advanced Approaches and Basel II Standardized Approach.federalreserve.house.treas. Jr. arguing that “some have viewed the new Basel II approach as leaving it up to the banks to determine their own minimum capital — putting the fox in charge of the chicken coop. SEC Chairman Christopher Cox said “the rapid collapse of Bear Stearns . Federal Reserve Board. While a bank’s internal models and risk assessment systems will be the starting point for the calculation of capital. 2008.S. Proponents of Basel II argue that internal risk assessments will not be cause for abuse because regulations internationally. Bear Stearns had a capital cushion 98 Office of the Comptroller of the Currency.” regulators will be heavily involved via added oversight and disclosure. Investment bank Bear Stearns collapsed in 2008 even though its own risk analysis showed it to be a sound institution. Hawke.pdf>. According to the Federal Reserve.”100 In other The Securities and (SEC) imposed Commission parallel requirements on Wall Street investment banks in 2004. Basel II is supposed to “improve the consistency make of capital capital risk99 The SEC’s experience with the Basel II approach reveals a fundamental flaw in allowing banks to make their own risk assessments. Comptroller of the Currency. 101 John D.S.. regulatory enhanced more risk sensitive. then U. bank supervisors will be heavily involved at every stage of the process.gov/GeneralInfo /basel2/>. Jr. Before the Committee on Bank- . U.. available at: <http://www. 2008.56 requirements coming into effect via regulation as of April 2008. 99 Basel II Capital Accord. At the time of its nearfailure. John D. internationally active banking organizations.. and promote management practices among large. available at: <http://www. Comptroller of the Currency.occ. challenged the fundamental assumptions behind the Basel standards and the other program metrics.”101 But the SEC’s experience with the Basel II approach reveals a fundamental flaw in allowing banks to make their own risk assessments. House of Representatives. This is categorically not the case. Bear Stearns had been complying with the relaxed Basel II framework and it still failed. Before the Committee on Oversight and Government Reform. Basel I Initiatives. Five years before the 2008 financial crisis. October 23. lauded the Basel II standards. words.htm>. available at: <http://oversight.. Hawke. Exchange 98 SOLD OUT well above what is required to meet supervisory standards calculated using the Basel framework and the Federal Reserve’s ‘wellcapitalized’ standard for bank holding companies.gov/documents/2008 1023100525. 100 Chairman Christopher Cox. and Other Basel-Related Matters. August 28.

pdf>.’ Mr. the IG concluded that “it is undisputable” that the SEC “failed to carry out its mission in its oversight of Bear Stearns. ‘Riskbased capital standards may also encourage institutions to lower their capital.aba. “Another Reason to Disagree Over Basel. United States Senate.5). As noted above (Part I. June 18.” American Banker. instead of build it up.access. 102 Steven Sloan.com/aba/documents/ICAA P_WG/Sloan_AB_090106. January 6.pdf>. Hoenig [the president and chief executive of the Federal Reserve Bank of Kansas City] said.102 57 ■ ■ ■ ing.cgi?dbname=108_senate_hearing s&docid=f:94514. 2009. (“‘I am most concerned that any institution that tends to underestimate its risk exposure — as many recently have — will be just as likely to underestimate its capital needs if allowed to operate a risk-based capital standard.” The banks’ internal risk models performed horribly in the housing bubble and subsequent meltdown. Housing. and Urban Affairs.gpo. available at: <http://www.’”) . in the prosperous times that typically precede a crisis. The SEC’s Inspector General (IG) found that regulators were anything but “heavily involved” in oversight of Bear Stearns in the years before its collapse. such as Basel II.SOLD OUT But the Comptroller’s claim is not supported by the SEC’s experience. It’s hard to see the logic of a system that would embed those models into regulatory requirements for setaside capital. 2003. available at: <http://frwebgate.gov/cgibin/getdoc.

unaffordable loans. IN THIS SECTION: Even in a deregulated environment. Albert Zacholl. the broker falsified his loan application by putting down an income of $7. and negative amortization loans.000 a month (and failed to deliver the $30. which require. The Office of Comptroller of the Currency. and lessened though not prevented the current financial crisis.000 cash. Predatory loans are. according to the lawsuit. . low teaser interest rates.” An interview with Allen Fishbein.000 a month.700. The real-world examples of predatory lending are shocking. a 74-year-old man living in Southern California. These are. available at: <http://www. 104 “The Foreclosure Epidemic: The Costs to Families and Communities of the Predictable Mortgage Meltdown.multinationalmonitor.”104 Common predatory terms 103 $958. typically. for a time. a subset of subprime loans. Consumer Federation of America. to a significant extent. May/June 2007. he could afford a mortgage up to $1. was to collect Non-prime mortgages known as Alt-A — with riskier borrower profiles than prime mortgages but less so than subprime — also often contain predatory terms.103 A bank is engaged in predatory lending when it “tak[es] advantage of a borrower’s lack of sophistication to give them a loan whose rates and terms may not be beneficial to the borrower. the banking regulators retained authority to crack down on predatory lending abuses. took three consumer-protection enforcement actions from 2004 to 2006. Multinational Monitor. monthly payments less than the interest due. which skyrocket after an initial grace period. The motivation for the scam. Zacholl told the brokers that his income consisted of a pension of $350 a month and Social Security payments of Subprime loans are those made to persons who ostensibly have a poor credit history. But the regulators sat on their hands.800 banks. which has authority over almost 1. and that with help from his son. According to the lawsuit.html>. In one lawsuit. The Federal Reserve took three formal actions against subprime lenders from 2002 to 2007. a mortgage that would replace his previous mortgage (which was leaving him owing more each month) and a monthly payment that would not exceed $1. They promised him $30.000 cash payment).58 SOLD OUT 7 FAILURE TO PREVENT PREDATORY LENDING include high fees and charges associated with the loan.700. Such enforcement activity would have protected homeowners. alleges that Countrywide and a pair of mortgage brokers “cold-called and aggressively baited” him. and then arranged for a high-interest mortgage that required him to pay more than $3.org/mm2 007/052007/interview-fishbein.

lulled into somnolence by cozy relationships with banks and Wall Street and a haze-inducing deregulatory ideology. Preventing predatory lending practices would not have prevented the housing bubble and the subsequent financial meltdown. 3. but it would have taken some air out of the bubble and softened the economic crisis — and it would have saved millions of families and communities across the country from economic ruin. Countrywide responded that Zacholl “consented to the terms of the transaction” and that any problems were the result of his own “negligence and carelessness. Action at the state level showed that predatory lending rules could limit abusive loans.org/issues/ mortgage/countrywide-watch/unfair-andunsafe. While highly imperfect. Federal regulators failed to take enforcement actions against predatory lenders. the new rules evidence what might have been done in 2001 to prevent abuses. 4. Federal regulators — and Congress — refused to issue appropriate regulatory rules to stem predatory lending. They declined. predatory lending was easily avoidable through sound regulation. Federal regulators — and Members of Congress — were warned at the outset of the housing bubble about the growth in predatory lending. Yield No Regulatory Action There are only limited federal substantive statutory requirements regarding predatory lending. Unlike the housing bubble itself. and the subprime lending industry collapsed. 2. refusing either to issue appropriate regulatory rules or to take enforcement actions against predatory lenders.” February 2008. available at: <http://www. (Congress similarly failed to act in response to the Early Warnings on Predatory Lending 105 Center for Responsible Lending.SOLD OUT $13. federal regulators in 2008 issued new rules to limit predatory practices. 5.html>. These are established in the Home .responsiblelending. After the housing bubble had popped. the Center for Responsible Lending reports. In court papers. and public interest advocates pleaded with them to take action. “Unfair and Unsafe: How Countrywide’s irresponsible practices have harmed borrowers and shareholders.) Reviewing the record of the past seven years shows that: 1.” 105 59 alarm bells sounded by public interest advocates. Regulators were warned at the outset of the housing bubble about the growth in predatory lending. and public interest advocates pleaded with them to take action. But federal regulators were asleep at the switch.000 in fees.

2001.R. the Federal Reserve and the Office of Thrift Supervision. 65604-65622 (2001) (adjusting the price trigger for coverage under HOEPA and prohibiting certain acts). 226 (Regulation Z. “Clearly. among other federal agencies.S. More expansive statements on predatory lending were issued only as non-binding guidelines. Predatory lenders easily devised ways to work around these limitations. but only for loans containing upfront fees or charges of more than 8 percent of the loan amount. the FDIC recognizes that there is a grave problem throughout the U. The reliance on non-binding guidelines continued through the decade. “All agencies should adopt a bold. adopted or considered rules to further restrict predatory lending. 245. particularly affecting low income and minority households and neighborhoods.”107 What was needed. But federal regulators were asleep at the switch. so that “predatory mortgage practices are either specifically prohibited. 106 SOLD OUT taken. . In 2000 and 2001.” wrote the National Consumer Law Center and the Consumer Federation of America in January 2001 comments submitted to the FDIC. the consumer groups argued. predatory lending was easily avoidable through sound regulation. was binding regulation. R1090).F. or are so costly to the mortgage lender that they are not economically feasible” while ensuring that “necessary credit is made available with appropriate rates and terms to all Ameri- Unlike the housing bubble itself. however. which was adopted in 1994. “How to Avoid Purchasing or Investing in Predatory Mortgage Loans. focused very narrowly on certain egregious practices.” January 31. but very high threshold. National Consumer Law Center and the Consumer Federation of America. or interest rates above a varying. public interest advocates were praising their recognition of the problem — but urging that more forceful action be 107 106 12 C.shtml>.nclc. “While many regulators recognize the gravity of the predatory lending problem. 66 Fed. the Federal Deposit Insurance Corporation (FDIC).60 Ownership and Equity Protection Act (HOEPA). Reg.” the groups wrote. the appropriate — and politically feasible — method of addressing the problem still appears elusive. HOEPA effectively put an end to certain predatory practices.org/issues/predatory_mort gage/fdic. As regulators were issuing non-binding guidelines. Docket No. available at: <http://www. The adopted binding rules. comprehensive and specific series of regulations to change the mortgage marketplace. issued by the Federal Reserve pursuant to HOEPA..

2001. 109 “Generally.111 These numbers reflect a startling regulatory failure during the peak period of abusive subprime lending. which has jurisdiction over the entire banking industry.bloomberg. They did issue additional guidance statements. written agreements. ordering improved practices in connection with the agency’s routine examinations of individual banks. From 2003 through the start of 2007. declined to issue any binding regulations in response to mushrooming predatory lending. Not surprisingly.shtml>. available at: <http://www. “How to Avoid Purchasing or Investing in Predatory Mortgage Loans. A Failure to Enforce Federal regulators also failed to enforce the rules that were on the books. bank-bybank basis.gov/pubs/feds/2 008/200829/200829pap. rules. The informal and non-public nature of this approach <http://www. “Enforcement Actions. Subprime loans made up between one-in-six and one-in-five home mortgage loans in 2004. 61 predatory lending. Where and to Whom. But federal agencies.org/issues/predatory_mort gage/fdic. took a mere three formal enforcement actions109 to stop 108 National Consumer Law Center and the Consumer Federation of America.com/apps/news?pid =20601103&sid=a6WTZifUUH7g&refer=u s>. available at: <http://www.federalreserve. “Fed Says It Could Have Acted Sooner on Subprime Rout.112 Although Federal Reserve officials now acknowledge that they should have done more.bloomberg.” available at: . they failed to curtail predatory lending practices.”108 Public interest groups would repeat this advice again and again over the subsequent years.” Bloomberg.federalreserve. 2007. 2008. March 22.” The Federal Reserve Board. March 14.gov/boarddocs/e nforcement>. the Federal Reserve takes formal enforcement actions against [banks] for violations of laws. 111 Craig Torres and Alison Vekshin. “Subprime Mortgages: What. Formal enforcement actions include cease and desist orders. 2005 and 2006. 112 Chris Mayer and Karen Pence.SOLD OUT cans.KbcMbvIiA&refer=ho me>. or regulations. OCC Publicly Chastised Few Lenders During Boom.” Bloomberg. unsafe or unsound practices. Craig Torres and Alison Vekshin. available at: <http://www.110 The Office of the Comptroller of the Currency (OCC).nclc. but these were non-binding and consistently behind the curve of evolving lender abuses. breaches of fiduciary duty. and violations of final orders.800 nationally chartered banks.pdf>. 2007. the Federal Reserve. pointing to growing abuses and proposing specific remedies. available at: <http://www. Both agencies insist that they also addressed abuses on an informal. similarly took three public enforcement actions from 2004 to 2006. Federal Reserve.com/apps/news?pid =20601087&sid=a1. which has regulatory authority over roughly 1.” January 31. operating under the prevailing laissez-faire ideology of the Bush Administration. “Fed.” Figure 1B. the OCC says it took appropriate action. and orders assessing civil money penalties. 110 James Tyson. removal and prohibition orders.

New Jersey. New Mexico. and West Virginia — are generally associated with the largest declines in targeted terms relative to states without significant protections. borrowers actually paid lower rates for subprime mortgages after their state laws became effective compared to borrowers in states without significant protections. “States with anti-predatory lending laws reduced the proportion of loans with targeted [predatory] terms by 30 percentage points. Even this number masked the superior performance of those with the toughest laws.pdf>. in some cases.” Center for Responsible Lending. Ernst. some predatory lending laws and brought enforcement actions against abusive lenders. SOLD OUT borrowers access to subprime credit. A comprehensive review of subprime loans conducted by the Center for Responsible Lending found that aggressive state regulatory action greatly reduced the number of predatory loans. Even if there were extensive private enforcement actions or such conversations. operating under the prevailing laissezfaire ideology of the Bush Administration. “The Best Value in the Subprime Market: State Predatory Lending Reforms. available at: <http://www. “States with the strongest laws — Massachusetts.114 states adopted meaningful anti- Federal agencies.113 The Center for Responsible Lending study also concluded that lending continued at a constant rate in states with antipredatory lending laws. This report does not explore state regulatory successes and failures. without affecting 113 Wei Li and Keith S. State Action Shows What Could Have Been Done While federal regulators sat on their hands. and that “state laws have not increased interest rates and.” the study determined.responsiblelending. thereby depriving them of an opportunity to initiate follow-on litigation to recover for harms perpetrated against them. but the ability of states to regulate and address abusive lender behavior demonstrates what federal regulators might have done. 2006. They do not signal appropriate behavior and clear rules to other lenders.” the study found. 114 Wei Li and Keith S.org/pdfs/rr0 10-State_Effects-0206. 23. and they do not provide information to victimized borrowers. North Carolina.” In other words. New York. “The Best Value in the Subprime Market: State Predatory . declined to issue any binding regulations in response to mushrooming predatory lending. moves fail to perform important public functions. eliminating abusive fees did not translate into higher interest rates. February. Ernst.62 means that Fed and OCC’s claims cannot be easily verified.

115 Federal Reserve System. • Require that the lender establish an escrow account for the payment of property taxes and homeowners’ insurance. In the last two years. The Federal Reserve proposal noted the growth of subprime mortgages.116 The new regulations establish a new category of “higher-priced mortgages” intended to include virtually all subprime loans. 1673-74 (2008). The lender may only offer the borrower the opportunity to opt out of the escrow account after one year.” Center for Responsible Lending. 12 C. • Require truth-in-lending disclosures to borrowers early enough to use while shopping for a mortgage. 118 These regulatory provisions. • Prohibit seven misleading or deceptive advertising practices for closed-end loans.SOLD OUT Partially Closing the Barn Door (after the horses left and a foreclosure sign is posted) After years of inaction. 147. Reg. § 226. Truth In Lending. February. and “pyramiding” late fees. such as failing to credit a payment to a consumer’s account when the servicer receives it. • Prohibit a lender from making a loan by relying on income or assets that it does not verify. delinquencies and foreclosure starts have increased dramatically and reached exceptionally high levels as house price growth has slowed or prices have declined in some areas. 23. not just nationally chartered banks. applying to all mortgages. claimed the expansion of subprime credit meaningfully contributed to increases in home ownership rates (a gain quickly unraveling due to the subprime-related foreclosure epidemic) and modestly suggested that “[r]ecently. It would also require that all applicable rates or payments be disclosed in advertisements with equal prominence as advertised introductory or “teaser” rates.org/pdfs/rr0 10-State_Effects-0206. Lenders could not charge fees until after the consumer receives the disclosures. The regulations prohibit a number of abusive practices in connection with these newly Lending Reforms. 73 Fed. regardless of whether they are subprime. some of this benefit has eroded.responsiblelending. Docket No.pdf>. [Regulation Z. Reg. however. regardless of whether they are subprime: • Prohibit certain servicing practices. the Fed adopted these rules in July.F. for example. 44521-614 (2008). • Restrict prepayment penalties only to loans that meet certain conditions.R. the Federal Reserve in January 2008 finally proposed binding regulations that would apply to all lenders. 73 Fed. R-1305].”115 With slight modification. including the condition that the penalty expire at least sixty days before any possible increase in the loan payment.”117 They also apply some measures — such as specified deceptive advertising practices — for all loans. • Prohibit a creditor or broker from coercing or encouraging an appraiser to misrepresent the value of a home. except a fee to . 6. failing to provide a payoff statement within a reasonable period of time. and confronted with signs of the economic meltdown to come. 116 Federal Reserve System.118 Key elements of these regulations: • Prohibit a lender from engaging in a pattern or practice of making loans without considering the borrowers’ ability to repay the loans from sources other than the home’s value. using the term “fixed” to describe a rate that is not truly fixed. 117 63 defined “higher-priced mortgages. 2006. available at: <http://www.

”).pdf>. National Consumer Law Center. But the 2008 regulations remain inadequate. They provide an extensive list of needed revisions to the proposed regulations.consumerfed. Address lender and originator incentives for appraisal fraud. “The proposed regulations continue to be most protective of the flawed concept that access to credit should be the guiding principle for credit regulation. Consumers Union.pdf>. a deep-rooted concern — while failing to acknowledge that the overriding problem has become lenders willing to make credit available.org/pdfs/HOEPA _comments_NCLC_final. National Association of Consumer Advocates. including prime loans.64 These measures are not inconsequential. • • Ban prepayment penalties. including that the regulations: • Cover all loans. The Fed continues to emphasize the importance of enabling lenders to make credit available to minority and lower-income communities — historically.120 because they fail to break with longstanding deregulatory nostrums. available at: <http://www. Consumer Federation of America. National Fair Housing Alliance. available at: <http://www.” April 2008.consumerfed. “Comments to the Board of Governors of the Federal Reserve System Regarding Proposed Regulations Relating to Unfair Trade Practices In Connection with Mortgage Lending. and the Empire Justice Center (“National Consumer Law Center et. 119 SOLD OUT tected. and • Provide effective private litigation remedies for victimized borrowers. al.” argue the consumer and housing groups. Leadership Conference on Civil Rights. “Comments to the Board of Governors of the Federal Reserve System Regarding Proposed Regulations Relating to Unfair Trade Practices In Connection with Mortgage Lending. They show the kind of action the Federal Reserve could have taken at the start of this decade — moves that could have dramatically altered the subsequent course of events.. al. as a coalition of consumer and housing groups has specified in great detail.org/pdfs/HOEPA _comments_NCLC_final.” April 2008. but on abusive terms. • Require an “ability to repay” analysis for each loan. . These regulations need to be significantly strengthened in order for consumers to be adequately pro- ■ ■ ■ 119 obtain a credit report. et. Consumer Action. 120 National Consumer Law Center.

Crucially. consumers. While this objective is broadly shared across the political spectrum.S. the Federal Reserve lowered interest rates to historically low levels in response to the economic downturn that followed the collapse of the stock market bubble of the 1990s and the additional economic slowdown after 9/11. and even denied the existence of a bubble. First. the housing bubble was the engine of an . bond market. China then reinvested much of that surplus in the U.S. Cheap credit did not automatically mean there would be a housing bubble. with the effect of keeping U. corporations were sending dollars to China in exchange for goods sold to U. He declined. China’s capital surplus was the mirror image of the U. They advanced expanded home ownership as an ideological goal. Low interest rates had beneficial effects in spurring economic activity. interest rates low. government officials failed to intervene to pop the housing bubble. simply by identifying the bubble — and adjusting public perception of the future of the housing market — Federal Reserve Chair Alan Greenspan could have prevented or at least contained the bubble.SOLD OUT 65 ORIGINS OF THE HOUSING BUBBLE The housing bubble can be traced to a series of inter-related developments in the macro-economy. but they also created the conditions for the housing bubble. themselves due in significant part to political choices. Cheap credit was not a result only of Fed interest rate decisions.S. as cheap credit made mortgage financing an attractive proposition for home buyers. A second contributing factor to the housing bubble was the massive influx of capital into the United States from China. the Bush administration and Greenspan’s ideological commitment to the goal biased them to embrace growing home buying uncritically — without regard to whether new buyers could afford the homes they were buying.S. There were reasons why Greenspan and other top officials did not act to pop the bubble. As economists Dean Baker and Mark Weisbrot of the Center for Economic and Policy Research insisted at the time. trade deficit — U. or the loans they were getting. Perhaps more importantly.S.

Rising home prices contributed to the huge growth of the construction industry. they effectively purred to borrowers. and people borrowed en masse against the rising value of their homes to spend more and keep the economy functioning. The toxic stew of financial deregulation and the housing bubble created the circumstances in which aggressive lenders were nearly certain to abuse ■ ■ ■ SOLD OUT vulnerable borrowers through predatory lending terms. .66 economy that otherwise was stalled. making the current rash of defaults and foreclosures on subprime loans inevitable. The terms of your loan don’t matter. Effective regulation of lending practices could have prevented the abusive loans. so long as the value of your house is going up. They duped borrowers into conditions they could not possibly satisfy. Wall Street grew rich on mortgagerelated securities and exotic financial instruments.

The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. 03-17] Preemption Determination and Order.” It is instructive to identify the provisions of the Georgia law. Hawke. Federal Register. National City argued that the effect of the Georgia law “is to limit National City’s ability to originate and to establish the terms of credit on residential real estate loans and lines of credit.121 In its petition. The Comptroller agreed with National City’s contention that the federal banking laws. The Georgia law included a wide range of consumer protections that consumer groups applauded but which National City complained would interfere with its freedom to operate: GFLA establishes specific and burdensome limitations on mortgage–secured loans and lines of credit that significantly interfere with National City’s ability to 121 8 FEDERAL PREEMPTION OF STATE CONSUMER PROTECTION LAWS IN THIS SECTION: When the states sought to fill the vacuum created by federal nonenforcement of consumer protection laws against predatory lenders.S. the feds jumped to stop them. “In 2003.” In 2003. announced that he was preempting state predatory lending laws. 2003. thereby rendering them inoperative. It was prompted by a petition from Cleveland-based National City Bank. No. Jr. John D. “during the height of the predatory lending crisis. a path breaking anti-predatory lending initiative.) . the Comptroller of the Currency.” as Eliot Spitzer recounted. which challenged the application of the Office of the Comptroller of the Currency [Docket No. to which National City objected. the history of federal regulation of national banks and relevant legislative history all supported the conclusion that federal regulatory authority should supersede and override any state regulation regarding predatory lending. Vol. 688. including loans or lines of credit submitted by a third party mortgage broker. This ruling meant that nationally chartered banks — which include the largest U. GFLA [the Georgia Fair Lending Act] has significantly impaired National City’s ability to originate residential real estate loans in Georgia. The Comptroller’s decision was a direct response to a request from the nation’s biggest banks. but not the more stringent consumer protection rules adopted by many states.SOLD OUT 67 Georgia Fair Lending Act to its operations in Georgia. august 5. banks — would be subject to federal banking standards. 46264. 150. the Office of the Comptroller of the Currency invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws..

and limiting late charges and prohibiting payoff and release fees. GFLA regulates National City’s ability to determine the borrower’s ability to repay the High Cost Home Loan. including the prohibition of financing of credit insurance. the imposition by National City of certain credit terms or servicing fees on High Cost Home Loans. it launched a rulemaking on the general issue of federal preemption of all state regulation of national banks. 04-xx]. February 11. GFLA restricts. These state rules afforded consumers greater protection than federal statutes. advance loan payments. Following passage of the Garn-St. mortgage brokers. 03-04. appendix to Office of the Comptroller of the Currency. In addition. with respect to the insurance provisions. assignees and servicers for injunctive and declaratory relief as well as actual damages. Finally. the Commissioner of Insurance has the jurisdiction to enforce GFLA through their general state regulatory powers and civil SOLD OUT process. statutory damages equal to forfeiture of all interest or twice the interest paid. 123 Office of the Comptroller of the Currency. post-default interest and fees to modify. Docket No. amend or extend the loan or defer a payment. . RIN 1557-AC73. 2003. Criminal penalties are also available. negative amortization. including: prepayment penalties. renew. In January 2004. the Commissioner of Banking and Finance and. GFLA does not permit National City to originate it unless the borrower has received advance counseling with respect to the advisability of the transaction from a third party nonprofit organization. and in some cases prohibits. [Docket No. balloon payments. the OCC had by regulation specifically preempted a number of state law consumer protections. district attorneys. Germain Depository Institutions Act of 1982. including the minimum requirements for down payments. GFLA imposes preforeclosure requirements. loan repayment schedules and minimum periods of time for loans.122 The Office of the Comptroller of the Currency (OCC) 2003 preemption decision was the latest in a long series of actions by the agency to preempt state laws.123 The OCC also announced rules 122 Letter from Thomas Plant to Julie Williams (National City’s Request for OCC preemption of the Georgia Fair Lending Act). debt cancellation and suspension coverage. All Home Loans are subject to restrictions on the terms of credit and certain loan related fees. National City is restricted from originating it unless the refinanced transaction meets standards established by GFLA. If the loan or line of credit is a Covered Home Loan which refinances a Home Loan which was closed within the previous five years. In conjunction with the OCC’s announcement on the Georgia case.68 make these loans. Any High Cost Home Loan must contain a specific disclosure that it is subject to special rules. Notice of Request for preemption Determination and Order. but then went further and preempted the Georgia rules entirely. the Georgia Attorney General. attorneys’ fees and costs. If the loan or line of credit is a High Cost Home Loan. The 2003 decision concluded that Georgia’s rules transgressed some of these longstanding regulatory preemptions. as they applied to national banks. GFLA currently creates strict assignee liability for all subsequent holders of a home loan. punitive damages. it issued rules preempting all state regulation of national banks. 12 CFR Parts 7 and 34. GFLA provides a private right of action for borrowers against lenders. including purchaser and assignee liability. including incidental and consequential damages. acceleration in the lender’s discretion. under GFLA.

January 7.com/wpdyn/content/article/2008/02/13/AR20080213 02783.” said Hawke in announcing the new rules. supervision and oversight — of national banks. I joined with colleagues in moves was that differing state standards subjected national banks to extra costs and reduced the availability of credit. “Not only did the Bush administration do nothing to protect consumers. Spitzer wrote. In this environment. many aspects of the financial services business are unrelated to geography apply or jurisdictional and boundaries.” Spitzer wrote. the ability of national banks to operate under consistent.126 “Predatory lending was widely understood [earlier in the decade] to present a looming national crisis. “as a result of technology and our mobile society.”125 Hawke the other 49 states in attempting to fill the void left by the federal government. February 14. 125 Statement of Comptroller of the Currency John Hawke.124 The stated rationale for these preemptive 69 argued that national banks were not engaged in predatory lending on any scale of consequence. uniform national standards administered by the OCC will be a crucial factor in their business future. “This threat was so clear that as New York attorney general.html>.htm>.SOLD OUT prohibiting state regulators from exercising “visitorial powers” — meaning inspection. 2004. “Today. 04-xx].” Washington Post.washingtonpost. or both. Regarding the Issuance of . available at: <http://occ.” junction with the preemptive moves — provided additional and satisfactory guarantees for consumers. 2008. it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye. “Predatory Lenders’ Partner in Crime How the Bush Administration Stopped the States From Stepping In to Help Consumers. 12 CFR Part 7.gov/newrules. 124 Office of the Comptroller of the Currency.. IndiRegulations Concerning Preemption and Visitorial Powers. [Docket No. 126 Eliot Spitzer. that federal regulation was sufficient. and that federal guidance on predatory lending — issued in con- Referring to the OCC’s preemptive measures. available at: <http://www. Jr. RIN 1557AC78. and efforts to restrictions directives that differ based on a geographic source increase the costs of offering products or result in a reduction in their availability. Former former New York Eliot State Attorney General (and Governor) Spitzer put these actions in perspective in a February 2008 opinion column in the Washington Post.

htm>. actively fought the new rules. denies Spitzer’s assertions. including New York’s. When state law enforcement agencies tried to crack down on predatory lending in their midst. “Not only did the Bush administration do nothing to protect consumers.occ. they clearly financed predatory subprime loans through bank intermediaries. the scale of federal bank financing of predatory loans was still substantial. February 14. securitized predatory subprime loans and held them in great quantities. and delinquency rates on those loans are well below the national average. . it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye. Alys Cohen of the National Consumer Law Center notes that Wachovia was a national bank that collapsed in significant part because of the unaffordable mortgage loans it originated. predatory mortgage lenders have avoided national banks like the plague.” he said. Wrote Spitzer. the OCC filed a federal lawsuit to stop the investigation. … The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general. In any case. when underwriting standards were weakest. The abuses consumers have complained about most — such as loan flipping and equity stripping — are not tolerated in the national banking system. available at: <http://www.” “But the unanimous opposition of the 50 states did not deter. enacted laws aimed at curbing such practices.gov/ftp/release/200816. the Bush administration in its goal of protecting the banks. 127 SOLD OUT “The OCC established strong protections against predatory lending practices years ago.”127 Even if it is true that federal banks originated fewer abusive loans.” news release.” Spitzer noted. And the looser lending practices of the subprime market simply have not gravitated to national banks: They originated just 10 percent of subprime loans in 2006.” Referring to the OCC’s preemptive measures.” John Hawke’s successor as Comptroller John Dugan. Spitzer wrote. Several state legislatures. “As a result. and all 50 state banking superintendents. the OCC intervened to stop them. and together. state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. “Comptroller Dugan Responds to Governor Spitzer. 2008. “In fact. and has applied those standards through examinations of every national bank.70 vidually. John Dugan. or even slow. when my office opened an investigation of possible discrimination in mortgage lending by a number of banks.

Third. Finally. First. This includes even basic contract and tort law. Chief Counsel.SOLD OUT Cohen of the National Consumer Law Center notes as well that the OCC’s preemptive actions protected federal banks from three distinct set of consumer protections. OTS was explicit that it wanted to preserve “maximum flexibility” for thrifts to design loans. Gilleran in announcing the preemptive decision.”128 “Federal law authorizes OTS to provide federal savings associations with a uniform national regulatory environment for their lending operations. 2003. adopted parallel preemptive actions.” said OTS Director James E. OTS took an aggressive posture. the OCC preempted the application of general state consumer protection law (as distinct from banking-specific rules) to national banks. In 2003.ots. the federal agency responsible for regulating federally chartered savings and loans. Meanwhile. federal voluntary standards made it difficult for victimized borrowers to file suit. .cfm?p=PressRel eases&ContentRecord_id=f8613720-2c1d42f4-8608f6362c04b6e2&ContentType_id=4c12f337b5b6-4c87-b45c838958422bf3&YearDisplay=2003>. Office of Thrift Supervision. the national banks were protected state law from to private enforce lawsuits brought under conduct their operations in accordance with best practices by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden. By requiring federal thrifts to treat custom128 consumer rights. from state banking laws that offered consumers greater protection than the OCC’s standards. arguing that it “occupied the field” for regulation of federally chartered institutions.gov/index. Like OCC. Buck. Cohen emphasizes that the OCC preemptive measures applied not just to the national banks themselves. they were immunized 71 predatory lending laws did not apply to federal thrifts. available at: <http://www. but to their non-supervised affiliates and agents. Second. As noted above. OTS announced its determination that New York and Georgia’s anti- Letter from Carolyn J. The agency said its objective was to “enable federal to savings associations Even if it is true that federal banks originated fewer abusive loans. the Office of Thrift Supervision (OTS). they clearly financed predatory subprime loans through bank intermediaries. January 30. “This enables and encourages federal thrifts to provide low-cost credit safely and soundly on a nationwide basis. securitized predatory subprime loans and held them in great quantities.

With the popping of the housing bubble. predatory loans proved a disaster not just for borrowers but for lenders or those banks that purchased subprime mortgage contracts. SOLD OUT ■ ■ ■ 129 “OTS Says New York Law Doesn’t Apply To Federal Thrifts.”129 The federal government’s regulatory approach ultimately boomeranged on the regulated institutions. IndyMac and Washington Mutual are two federal thrifts that collapsed as a result of the bad subprime mortgage loans that they administered.72 ers in New York differently.cfm?p=PressRel eases&ContentRecord_id=f8613720-2c1d42f4-8608f6362c04b6e2&ContentType_id=4c12f337b5b6-4c87-b45c838958422bf3&YearDisplay=2003>.ots. the New York law would impose increased costs and an undue regulatory burden. 2003. January 30. .” news release.gov/index. available at: <http://www.

C. only the original mortgage lender is liable for any predatory and illegal features of a mortgage — even if the mortgage is transferred to another party. but it only applies to a limited category of very high-cost loans (i. bundle and securitize subprime loans — including many with pernicious. a second bank acquiring a predatory loan is not liable for claims that may be brought by the borrower against the original lender. and relieved them of any duty to investigate the terms of the loan. 12 C. predatory terms — without fear of liability for illegal loan terms. Passed in 1994. attempted to reconcile these conflicting principles. The Home Ownership and Equity Protection Act (HOEPA). §§ 226. and typically with no defenses against being foreclosed upon. § 1639.31 and 226.130 the key federal protection against predatory loans. if a mortgage bank issues a predatory loan and then sells the loan to another bank. seeking either damages or rescission (meaning all fees and interest payments will be applied to pay down the principle of the loan. so long as those potential claims are not obvious. 15 U. which establishes that a third party purchasing a debt instrument is not liable for 9 ESCAPING ACCOUNTABILITY: ASSIGNEE LIABILITY IN THIS SECTION: Under existing federal law. after which the borrower could refinance with a non-predatory loan).e.31 and 226.R. so long as those problems are not apparent on the face of the instrument. For all 130 “Assignee liability” is the principle that legal responsibility for wrongdoing in issuing a loan extends to a third party that acquires a loan. For those loans. This arrangement effectively immunized acquirers of the mortgage (“assignees”) for any problems with the initial loan. It is implemented by Sections 226. Wall Street interests could purchase.32. . Under the holder-indue-course-doctrine.S. The arrangement left victimized borrowers with no cause of action against any but the original lender. assignee liability would hold the second bank liable for any The Home Ownership and Equity Protection Act of 1994 amended the Truth-in-Lending Act by adding Section 129 of the Act. loans with very high interest rates and/or fees). HOEPA does establish assignee liability.. a borrower may sue an assignee of a mortgage that violates HOEPA’s anti-predatory lending terms.F. ROhio — a close friend of Wall Street who subsequently went to prison in connection with the Abramoff scandal — was the leading opponent of a fair assignee liability regime.SOLD OUT 73 legal claims that the borrower might be able to bring against the original lender. problems with the debt instrument. Representative Bob Ney.32 of Regulation Z. Thus. Competing in the law with assignee liability is the “holder-in-due-course” doctrine.

Thus. The mortgage lender would then sell the loan to a larger bank with which it maintained relations. while it can pay damages.” 18 Loy. Margot Saunders of the National Consumer Law Center explained the problem in testimony to the House of Representatives’ Financial Services Committee in 2003. This arrangement relieved acquirers of the mortgage of any duty to investigate the terms of the loan and effectively immunized them from liability for the initial loan. lobbyists shielded financiers: Lack of liability laws fueled firms' avarice. federal law applies the holder in due course doctrine. available at: <http://seattlepi.com/business/382 707_mortgagecrisis09. this lender no longer exists as a legal entity. only the current holder of the mortgage can modify it. who then obtained a mortgage from an initial mortgage lender (often a non-bank lender. 151 (2005). October 10.” Seattle PostIntelligencer. “The Home Ownership and Equity Protection Act of 1994: Extending Liability for Predatory Subprime Loans to Secondary Mortgage Market Participants.nwsource. even where the initial lender still exists. Ultimately. according to statistics provided by mortgage trackers. it no longer has the ability to cure problems with the mortgage itself. none but the original mortgage lender is liable for any predatory and illegal features of the mortgage (so long as it is not a high-cost loan covered by HOEPA). Wall Street increased by eightfold its financing of subprime and nontraditional loans between 2001 and 2006.”) The rapid and extensive transfer of subprime loans. And. a borrower could not exercise a potential rescission remedy. among varying parties was central to the rapid proliferation of subprime lending. 2. Commonly. In many cases. jobs or assets were encouraged by brokers to take out loans. sold by a large commercial bank or investment bank. from the originators who sold it to them to the Wall Street investment bankers who ultimately funded it. Consumer advocates highlighted the problem early in the 2000’s boom in predatory lending. Consumer L. Without the measure in place. 131 132 It also left the borrow- Lisa Keyfetz. with which the broker worked). or take other action during the course of litigation to prevent the holder of his or her mortgage from foreclosing upon him or her or demanding unfair payments.74 other mortgage loans. mortgage brokers worked out deals with borrowers.html>. including abusive predatory loans. (“A principle known as assignee liability would have al- . Rev. 2008. Under existing federal law. 132 See Eric Nalder. including mortgages in which borrowers with no proof of income. The severe consequences of not applying assignee liability in the mortgage context have long been recognized. “Politicians. 131 SOLD OUT ers with no cause of action against any but the original lender. lowed borrowers to sue anyone holding paper on their loan. such as Countrywide. A hypothetical recovery of damages from the original lender long after the home is foreclosed upon is of little solace to the homeowner. such mortgages were pooled with others into a mortgage-backed security.

” The absence of assignee liability enabled Wall Street interests to bundle subprime loans — including many with pernicious. the case for expanded assignee liability has long been clear. for example. Had a regime of assignee liability been in place. House of Representatives. but the assignee of the loan claims to have no knowledge of the status of the work. Assume 1) an innocent consumer (victim of an illegal loan). but the corporate assignee. securitizers and others up the lending chain would have been impelled to impose better systems of control on brokers and initial mortgage lenders. and 3) an innocent holder of the illegal note. The home improvement work turns out to be shoddy and useless. Argued Saunders in her 2003 testimony.pdf>. because otherwise they cent parties — the consumer and the holder — who is best able to protect against the risk of loss associated with the making of an illegal loan? It is clear that the innocent party who is best able to protect itself from loss resulting from the illegality of another is not the consumer. securitizers and others up the lending chain would have been impelled to impose better systems of control on brokers and initial mortgage lenders. As between the two inno- party assignee that merely wants its monthly payments. 2003. “Most importantly consider the question of who should bear the risk in a faulty transaction. instead claiming it is an innocent third would have faced liability themselves. When the homeowners refuse to pay. Testimony Before the Subcommittee on Housing and Community Opportunity & Subcommittee on Financial Institutions and Consumer Credit of the Financial Services Committee. available at: <http://financialservices. 2) an originator guilty of violating the law and profiting from Had a regime of assignee liability been in place. the making of an illegal loan. .gov/media/p df/110503ms. U.” November 5.”133 133 Margot Saunders.SOLD OUT “Take.S. The documents do not include the required FTC Notice of Preservation of Claims and Defenses.house. predatory terms — and securitize them. 75 For community development and consumer advocates. the assignee claims the rights of a holder in due course and begins foreclosure proceedings. without fear of facing liability for unconscionable terms in the loans. because otherwise they would have faced liability themselves. and the contact information provided by the home improvement contractor is useless. the situation where homeowners sign a loan and mortgage for home improvements secured by their home. “Protecting Homeowners: Preventing Abusive Lending While Preserving Access to Credit.

Lenders and secondary market purchasers believe that it is very unfair to impose liability when there is no reasonable way that the loan or securities holder could have known of the violation. would be less credit for homebuyers. “Legislators must be extremely cautious in making changes that upset secondary market dynamics. chair of the industry group the Coalition for Fair and Affordable Lending (CFAL) and Chief Operating Officer of Option One Mortgage. Lenders and securitizers opposed pro134 135 SOLD OUT posals to require subsequent purchasers of mortgage debt to bear legal responsibility.gov/media/p df/110503sn.”135 “Predatory lending is harmful and Paul Muolo and Mathew Padilla. players in the secondary market — the acquirers of mortgages — were not innocent parties. 2008. authors of Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis. chair of the Coalition for Fair and Affordable Lending (CFAL) and chief operating officer of Option One Mortgage on “Protecting Homeowners: Preventing Abusive Lending While Preserving Access to Credit” before the Subcommittees on Housing and Community Opportunity & Financial Institutions and Consumer Credit of the Financial Services Committee. They claimed that assignee liability would impose unrealistic monitoring duties on purchasers of mortgage loans. The result. In any case. especially those with imperfect credit histories. November 5.house.76 Making the case even more clear. It wasn’t the loan brokers’ job to approve the customer’s application and check all the financial information. we feel that liability generally should apply only if the assignee by reasonable due diligence knew or should have known of a violation of the law based on what is evident on the face of the loan documents.S.”134 The securitizers had a counterargument against calls for assignee liability. House of Representatives. or at least it was supposed to be. an H&R Block subsidiary. either. They were often directly involved in enabling predatory lending by mortgage brokers. and wholesalers wouldn’t be able to fund loans unless Wall Street was buying. New York: Wiley. If Wall Street wouldn’t buy.” warned Steve Nadon. then there would be no loan to fund. Brokers didn’t design the loans. 2003. they said. Testimony of Steve Nadon. “Brokers wouldn’t even exist without wholesalers. Explain reporters Paul Muolo and Mathew Padilla. that was the wholesaler’s job. in 2003 congressional testimony.pdf>. . U. available at: <http://financialservices. “because unfettered access to the capital markets is largely responsible for having dramatically increased nonprime credit availability and for lowering costs for millions of Americans. and would therefore freeze up markets for securitized loans. Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis. The wholesalers and Wall Street did that. and were well aware of the widespread abuses in the subprime market. 295.

later.com/gst/fullpage. Testimony of Micah Green. May 24. U. Imposing open-ended liability on secondary market participants for the actions of lenders.pdf>. they supported legislation introduced by Representative Bob Ney. available at: <http://financialservices. available at: <http://query.house. president of The Bond Market Association.” secondary market. mortgage finance companies.americansecuritization. 2005. available at: <http://www. “Ney Is Sentenced to 2 1⁄2 Years in Abramoff Case.” before the Financial Services Committee. February 14.nytimes.” New York Times.aspx?id=264>. 138 Diana B. will ultimately have the effect of limiting credit for those who need it most. subprime loans. on “Legislative Solution to Abusive Market Lending Practices.com/2007/01/20/washi ngton/20ney.html?_r=>.S. 137 Philip Shenon.136 two years of (Proponents 77 thing but a single set of objective and readily detectable standards to determine whether an assignee has liability is a regulatory approach that threatens to undermine many of the benefits of the Securitizers continue to defend their position on assignee liability. however. Subcommittee on Housing and Community Opportunity and Subcommittee on Financial Institutions and Consumer Credit. “Faced with this type of environment. January 20. president.” New York Times. 2005.S.” news release. lenders 138 “Using any- “The Bond Market Association and the American Securitization Forum Applaud Responsible Lending Act. 2003. argued that diverse state standards relating to assignee liability were unfairly impinging on lenders and undermining access to credit among poor communities.SOLD OUT needs to be stopped. “In the absence of a national law. March 15.com/sto ry. the Housing Policy Council. made up of 17 of the largest U.) Securitizers not only defended the default federal application of the holder in due course doctrine for non-HOEPA loans. House of Representatives. 2007. 139 . pass C8B63&sec=&spon=&pagewanted=all>. secondary market participants may find it less attractive to purchase and repackage 139 assignee liability emphasize they have sought not openended liability.” echoed Micah Green.gov/media/p df/052405msg. 136 In a 2004 statement submitted to the House Financial Services Committee. available at: <http://www. R-Ohio — who subsequently went to prison in connection with the Jack Abramoff corruption scandal137 — that would have preempted state rules applying assignee liability. but the kind of measurable liability that applies under HOEPA. and even cities and counties. The Bond Market Association. Henriques with Jonathan Fuerbringer. even though it encourages the practices that helped fuel the subprime mess.” Green testified before the House Financial Services Committee in 2005.nytimes.html ?res=9405E2D7153AF937A25751C0A9659 face growing problems: (1) a number of states. “Bankers Opposing New State Curbs on Unfair Loans.

” June 23. even though it encourages the practices that helped fuel the subprime mess. under a national standard.gov/media/p df/062304hpc. What is permitted in some locales is not in others.” Further. and assignees decide that buying or lending against these loans is also not worth the risk for them.” asserted the Housing Policy Council. Before the Subcommittee on Financial Institutions . rather than a legal standard that would place responsibility on securitizers (the banks and investment banks that bundled loans into mortgagebacked securities) for predatory loans and give predatory loan victims a timely opportunity in court to prevent foreclosure.gov/media/p df/062304hpc. available at: <http://financialservices. 2004.pdf>.house.” 140 SOLD OUT Ney’s preemptive legislation regarding assignee liability never became law. (3) because of the lack of uniformity and great variety of differences between jurisdictions the chances of honest mistakes are compounded and the possibility of litigation is magnified. sometimes even within the same state. 141 Statement of the Housing Policy Council of the Financial Services Roundtable. 2004. “Promoting Homeownership by Ensuring Liquidity in the Subprime Mortgage Market. Securitizers continue to defend their position on assignee liability. the American Securitization Forum (ASF) argued that. or intentional failure to use appropriate due diligence in reviewing the loans assigned.” The ASF repeats the arguments of yesterday: that securitization has increased capital available and Consumer Credit and the Subcommittee on Housing and Community Opportunity. In a June 2007 paper. or intentionally failed to use due diligence (itself a weak standard). the Housing Policy Council asserted.” June 23.house. before the Subcommittee on Financial Institutions and Consumer Credit and the Subcommittee on Housing and Community Opportunity. and (5) lenders decide that making loans in states and municipalities with broad and vague statutes is no longer worth the risk to their reputations. “In addition to being largely unnecessary. assignee liability should only apply where an assignee had actual knowledge that a loan was flawed. banks and Wall Street were on the offensive — demanding even reduced standards of assignee liability. 141 140 Statement of the Housing Policy Council of the Financial Services Roundtable. “Actions and defenses. “Promoting Homeownership by Ensuring Liquidity in the Subprime Mortgage Market. The end result is actually less credit for borrowers.pdf>.78 widely different legislation that causes a variety of administrative and legal problems. (4) litigation adversely impacts the reputations of lenders. but it helped frame the debate so that the mortgage lenders. available at: <http://financialservices. “must be limited to those that are based on actual knowledge of the assignee of the existence of the violations in the loans assigned to them. (2) states and subdivisions begin competing to devise new restrictions. any federal legislation that would expose secondary market participants to assignee liability that is very high or unquantifiable would have severe repercussions.

142 Asserted the ASF. available at: <http://www. 143 American Securitization Forum.” June 2007. .SOLD OUT to subprime markets and helped expand homeownership. but too much poor quality credit.americansecuritization.pdf>. including by hiring third-party investigators or by contractual arrangement with mortgage originators. “Assignee Liability in the Secondary Mortgage Market: Position Paper of the American Securitization Forum. and victims often need to be able to bring claims against assignees in order to prevent unjust foreclosures. assignees have ample capacity to police the loans they acquire. available at: <http://www. As a fairness matter. that it is unreasonable to ask assignees to investigate all securitized loans. at precisely the time when increased liquidity is essential to ensuring the financial health of the housing market.pdf>. schemes imposing overly burdensome assignee liability threaten to cause a contraction and deleterious repricing of mortgage credit. “Assignee Liability in the Secondary Mortgage Market: Position Paper of the American Securitization Forum. “The imposition of overly burdensome and potentially unquantifiable liability on the secondary market — for abusive origination practices of which assignees have no knowledge and which were committed by parties over whom they have no control — would therefore severely affect the willingness of investors and other entities to extend the capital necessary to fund subprime mortgage lending.americansecuritization. assignees will often be the only party able to offer relief to victims of predatory loans.”143 142 79 That these arguments are overblown and misplaced was clear at the start of the subprime boom. As a result.” June 2007. They are now utterly implausible. that assignees have an economic incentive to ensure acquired loans that are unlikely to default.com/upl oadedFiles/Assignee%20Liability%20Final%20V ersion_060507. and that assignee liability would dry up the secondary loan market with dire consequences. and the overarching problem for lower-income families and communities since 2001 has not been too little credit. ■ ■ ■ American Securitization Forum. the hypothetical incentives for assignees to avoid loans that could not be paid off proved illusory.com/upl oadedFiles/Assignee%20Liability%20Final%20V ersion_060507.

Instead.S.80 SOLD OUT 10 FANNIE AND FREDDIE ENTER THE SUBPRIME MARKET consistent supply of mortgage funds. The Government-Sponsored Enterprises were followers.e. Emergency Home Finance Act. during Franklin D.144 As a “government sponsored enterprise” (GSE) chartered by Congress. from private bankers and other lenders so that they have additional funds to continue originating new mortgages. justified by theories of expanded access to homeownership for low-income families and rationalized by mathematical models allegedly able to identify and assess risk to newer levels of precision. but they did end up taking on substantial subprime assets — at least $57 billion.C.S. but private lenders seek to sell their loans to Fannie. 146 Federal Home Loan Mortgage Corporation 145 . loans for expensive homes). its loan purchasing criteria have a substantial influence on the prudence of the mortgages that lenders issue. the motivation was the for-profit nature of the institutions and their particular executive incentive schemes. as it is popularly known. In fact. Freddie buys loans from private lenders in order to provide added liquidity to fund America’s The Federal National Mortgage Association was created in 1938. Fannie Mae’s purpose is to purchase mortgages IN THIS SECTION: At the peak of the housing boom. Because many private lenders hope to sell their mortgages to Fannie. They are responsible for their own demise.C. or Freddie Mac. became a private. housing needs. Massive lobbying — including especially but not only of Democratic friends of the institutions — enabled them to divert from their traditional exclusive focus on prime loans. Fannie and Freddie are not responsible for the financial crisis. The purchase of subprime assets was a break from prior practice. Fannie Mae and Freddie Mac were dominant purchasers in the subprime secondary market. shareholder-owned corporation in 1968. as a federal government agency to address the lack of a 12 U. not leaders. which maintains specific dollar value ceilings for the repurchasing of single and multi-family loans and does not purchase high-end loans (i. § 1716b et seq.145 was established by Congress in 1970 as a private shareholder-owned corporation to take on the same role as Fannie Mae and prevent Fannie from exercising a monopoly. (1968).. § 1401 (1970). Fannie Mae. The Federal Home Loan Mortgage Corporation. Freddie Mac does not issue or originate new loans.146 144 Roosevelt’s administration. Fannie Mae does not issue or originate new loans. and the resultant massive taxpayer liability. As with Fannie Mae. 12 U.

” Prentice-Hall.jhtml>. 147 81 Freddie Mac provide no explicit guarantee of their debt obligations. available at: <http://welch. 2008. including that the borrower provided a 20 percent down payment.html>.brown. in turn. “Frequently Asked Questions About Freddie Mac.edu/oped/finsyste m. despite holding little capital in reserve as against the scale of their outstanding loans.S. October 29. however. had limited authority. 150 “About Fannie Mae: Our Charter. Even after it sells MBSs. use the added liquidity (cash) to originate new home loans.html>.html>. The laws establishing Fannie Mae and website. 148 and making it vital that Fannie exercise care in determining which loans it acquires. investors throughout the world assumed that because the entities are so intertwined with the U. Nonetheless. 149 An MBS is created by pooling thousands of purchased mortgages into a single security for trade on Wall Street. “Corporate Finance: An Introduction. Fannie only purchased high quality loans that conform to relatively stringent standards. 147 Federal National Mortgage Association website.com/corporate/com pany_profile/faqs/index. This law established “risk-based and minimum capital standards”150 for the two GSEs and also established the Office of Federal Housing Enterprise Oversight (OFHEO) to oversee and regulate the activities of Fannie and Freddie.jsessionid=XUMTTVZMCQYSHJ2F QSISFGA?p=About+Fannie+Mae>. available at: <http://welch.SOLD OUT Fannie Mae began converting mortgages it acquired into mortgage-backed securities (MBSs) in 1970.econ. Fannie Mae incurs all the risk of default by borrowers. jhtml.S. providing an incentive for lenders to make risky loans. 2008. Traditionally.” Prentice-Hall. 2008. “About Fannie Mae. OFHEO. available at: <http://www. Fannie guarantees payment to buyers of the MBSs — effectively providing insurance on the securities. “Corporate Finance: An Introduction. available at: <http://www.149 In 1992.edu/oped/finsyste m. Congress passed and President George H. By selling MBSs to investors. Fannie and Freddie enjoyed the highest-graded rating (Triple-A) from independent ratings firms. Bush signed into law the Federal Housing Enterprises Financial Safety and Soundness Act.com/aboutfm/index. the federal government would never to allow Fannie or Freddie to default on its debt.W.brown. 2008.freddiemac.econ. The legislation also required Fannie and Freddie to devote a minimum percentage of their lending to support affordable housing.” undated.fanniemae. . available at: <http://www.fanniemae. Fannie obtains additional funds to buy increasing numbers of mortgages from private lenders who. government and so central to U.com/aboutfm/charte r. Ivo Welch. Because they were considered quasi-governmental. 148 Ivo Welch. housing policy.” October 7. By purchasing mortgages from private lenders. however.” Fannie Mae website.

for the fiscal year ending December 31. 151 purchased just 3 percent of all subprime loans issued from 2004 through 2007. Fannie Mae softened the standards it required of loans that it purchased. 154 Fannie Mae form 10-K. 2008.com/articles/loanssubprime-banks-2228728-law-lenders>. and 3 per- As the housing bubble inflated starting in 2001.com/gst/fullpage. peaking in the years 2004-2006. That is. Fannie and Freddie were major players in the “secondary market. 2006. available at: <http://query. . 151 cent at the end of 2005.com/wpdyn/content/article/2008/06/09/AR20080609 02626_pf. The move came in response to pressure from the banking and thrift industries.html>.” buying up bundles of subprime loans that were traded on Wall Street. which wanted to extend subprime lending SOLD OUT But Fannie and Freddie were not buying subprime mortgages directly in significant quantities. 33 percent in 2005 and 20 percent in 2006. The two firms Fannie and Freddie’s largescale purchases of subprime mortgage-back securities on the secondary market may have facilitated greater subprime lending than otherwise would have occurred. 152 Steven A. pF-78.” Orange County Register. “Fannie Mae Eases Credit to Aid Mortgage Lending. and from federal officials who wanted Fannie and Freddie to buy more private industry mortgages made to low and moderateincome families. 2008.” Washington Post. Holmes. available at: <http://www.” New York Times. most of that in 2007 alone. so much as getting stuck with bad products already placed on the market. 1999. “Most Subprime Lenders Weren’t Subject to Federal Lending Law.html ?res=9c0de7db153ef933a0575ac0a96f95826 0&sec=&spon=&pagewanted=all>. 152 Carol D. September 30. they were not driving the market.153 Subprime loans represented 2 percent of Fannie Mae’s singlefamily mortgage credit book of business at the end of 2006. “How HUD Mortgage Policy Fed the Crisis. available at: <http://www. in part because the most predatory subprime loans did not meet their lending standards.ocregister. 153 Ronald Campbell.82 In 1999. They purchased 44 percent of subprime securities on the secondary market in 2004. June 10. November 16. Leonnig.washingtonpost. banks and especially non-bank lenders made an increasing number of subprime loans.154 Fannie and Freddie’s large-scale purchases of subprime mortgage-back securities on the secondary market may have facilitated greater subprime lending than otherwise would have occurred. (and wanted Fannie Mae to agree to purchase subprime loans). but to a considerable extent the companies were victims rather than perpetrators of the subprime crisis.nytimes.

p. 158 “Freddie Mac lobbied against regulation bill.pdf>.house. According to our models.gov/documents/2008 1209103003.SOLD OUT The two companies also trailed the market. 155 Fannie own or guarantee more than $5 trillion in mortgages158 and regularly issue MBSs. both investors and regulators were unaware of the extent of their growing mortgage problems. Fannie and Freddie were in fact subjected to government regulation — but the regulators’ hands were tied by a Congress heavily lobbied by Fannie and Freddie.msn. Today.msnbc. Both agencies were purchasing risky subprime secondary loans on the from market securitizers. 159 See statement by Treasury Secretary Henry Paulson.157 Yet 155 “Single Family Guaranty Business: Facing Strategic Crossroads.house. 9. Committee on Oversight and Government Reform. 2205. Henry A. “Our pricing is uncompetitive. p. available at: <http://www. available at: <http://oversight. but they were not required to report mortgage losses on the balance The same sheet.pdf>.” December 9.159 The federal government has infused <http://oversight.gov/press/releases/hp11 29. 2008.” June 27.asp?ID=22 52>.” Associated Press. Waxman. entering into the subprime arena because they felt at a competitive disadvantage as against other housing market players. 18. memo noted the risks of pursuing more aggressive strategies — noting that Fannie had a “lack of knowledge of the credit risks” 156 — and urged that the company “stay the course. 2004 to 2007. available at: <http://oversight. 156 “Single Family Guaranty Business: Facing Strategic Crossroads. September 7. “The Role of Fannie Mae and Freddie Mac in the Financial Crisis. 157 See Opening Statement of Rep. October 19. 2008. Internal Fannie memos obtained by the House Oversight Committee show the company was very concerned that it was rapidly share to losing Wall market Street 83 Fannie increased its direct investment in riskier loans despite these cautionary warnings — and even as the housing bubble was coming to an end. As a result.htm>. Freddie and Perceived as quasigovernmental agencies.com/id/27266607/ >.” Numerous other internal sources echoed this recommendation.house.” June 27. available at: <http://www. market participants today are not pricing legitimately for risks.ustreas. when the federal government placed them in conservatorship to prevent them from collapsing altogether. and related materials. 2005. The companies’ significant investments in the riskiest elements of the market would bring their demise in Fall 2008. Fannie itself is the largest issuer and guarantor of MBSs. 2008.gov/documents/2008 1209103003. available at: .” noted a top-level memo.gov/story.

that would have imposed tougher regulations on Freddie’s loan repurchase activities. to defeat legislation sponsored by Senator Chuck Hagel. R-Tennessee. Hagel and 25 other Republican senators pleaded unsuccessfully with Senate Majority Leader Bill Frist. many of whom were hostile to the GSEs’ government ties.. “Freddie Mac Lobbied Against Regulation Bill. but Republicans were heavily lobbied as well.msnbc. stronger government oversight. In 2005. October 19. 2008.161 The Associated Press reported. Freddie Mac paid $2 million to Republican lobbying firm DCI Inc.msn.”162 The former chair of the House Financial Services Committee. their reckless decisions are now forcing a mammoth drain of taxpayer resources. to allow a vote on the bill. “If effective regulatory reform legislation . available at: <http://www. Perceived as quasi-governmental agencies. Michael Oxley.com/id/27266607/ >.msn. Even if Fannie and Freddie did not create the financial crisis. available at: <http://www.msnbc.msn.” Associated Press. there was not enough Republican support for Hagel’s bill to warrant bringing it up for a vote because Democrats also opposed it and the votes of some would be needed for passage. 162 “Freddie Mac Lobbied Against Regulation Bill. is not enacted this year. the Treasury Department and the Federal Reserve. R-Ohio.” the senators wrote in a letter. October 19.” Associated Press. In general..” Oxley 160 “Freddie Mac Lobbied Against Regulation Bill. “In the end. the overall financial system and the economy as a whole.msnbc. . Democrats were far more protective of Fannie and Freddie than Republicans. 2008.com/id/27266607/ >. for example. complained that efforts to regulate Fannie and Freddie were blocked by the Bush administration. and more will follow. R-Nebraska. “What did we get from the White House? We got a one-finger salute. or to limit their acquisition of packages of risky loans. American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market. 2008. Housing and Urban Affairs Committee 161 SOLD OUT with all Republican committee members supporting it and all Democratic members opposed.84 $200 billion into Fannie and Freddie. Many Democrats sought to protect Fannie and Freddie from stringent regulatory oversight and capital reserve requirements.” Associated Press. October 19. The companies lobbied heavily to avoid requirements for larger capital reserves.160 The legislation languished in the Senate Banking. Fannie and Freddie were in fact subjected to government regulation — but the regulators’ hands were tied by a Congress lobbied by Fannie and Freddie.com/id/27266607/ >. available at: <http://www.

but they were also responsive to massive lobbying efforts.” Financial Times. <http://thinkprogress.16 million on lobbyists. . From 1998 to 2008.and middle-income communities. “Oxley Hits Back at Ideologues.org/2008/09/15/barney -frank-mccain-reform/>.org>. Freddie Mac spent $96.opensecrets.163 Democrats believed in Fannie and Freddie as ways to expand credit to low. <www.SOLD OUT would recall in 2008.53 million on federally registered lobbyists. 164 Totals compiled from annual data available from the Center for Responsive Politics. September 9. 2008.164 85 ■ ■ ■ 163 Greg Farrell. During the same period. Fannie Mae spent $80.

or the broader credit quality issues in the marketplace. Before the New America Foundation. and investors led to the current financial storm. there’s plenty of blame to go around. Kroszner. but some corporate-backed and libertarian think tanks and policy groups.”168 FDIC Chairman Sheila Bair said. However. 2008.gov/cra/history. December 17. 169 Remarks by Sheila Bair. let 165 Federal Financial Institutions Examination Council website. available at: <http://www. “Confronting Concentrated Poverty Policy Forum. now claim CRA is responsible for the current financial disaster.and moderateincome neighborhoods.fdic. available at: <http://www. “U.S. I want to give you my verdict on CRA: NOT guilty. “CRA is not the culprit behind the subprime mortgage lending abuses. Governor of the Board of Governors of the Federal Reserve System.gov/newsevents/s peech/kroszner20081203a. To be sure. as well as some Republican members of Congress. Nothing in the CRA requires banks to make risky loans. John Dugan.”167 Federal Reserve Board Governor Randall S. Comptroller of the Currency said. “Community Reinvestment Act: Background & Purpose.htm>.ffiec. The CRA has been in place for 30 years. 166 Federal Reserve Board website. available at: <http://www.gov/dcca/cra/>. “Redlining” was the name given to the practice by banks of literally drawing a red line around minority areas and then proceeding to deny loans to people within the red border even if they were otherwise qualified. 165 alone the broader financial crisis. 168 Remarks of Randall S. . financial system in better shape-OCC’s Dugan. “Community Reinvestment Act.com/article/regulatoryN ewsFinancialServicesAndRealEstate/idUSN1946588420081119>. 2008. The purpose of this law was to encourage banks to increase their very limited lending in low.”169 Most predatory loans were issued by non-bank lenders that were not subject to CRA requirements.reuters.” Undated.federalreserve.” Undated.federalreserve. Kroszner said he has not seen any evidence that “CRA has contributed to the erosion of safe and sound lending practices. Chairperson of the FDIC.gov/news/news/speeches/ar chives/2008/chairman/spdec1708. 2008.html>.and moderate-income and minority neighborhoods and more generally to low. available at: <http://www. 167 Congress passed this law in large part because too many lenders were discriminating against minority and low.and moderateincome and minority borrowers. Reuters.86 SOLD OUT Community Reinvestment Act: Not Guilty Congress passed and President Jimmy Carter signed the Community Reinvestment Act (CRA) into law in 1977.” November 19.htm>.166 Leading regulators agree that CRA was not responsible for predatory lending.” December 3. available at: <http://www. borrowers. “I think we can agree that a complex interplay of risky behaviors by lenders.

org/filelegacydocs/er q107_Mester. available at: <http://www. Senior Vice President and Director of Research at the Federal Reserve Bank of Philadelphia.arc.4 trillion financial behemoth after it bought FleetBoston.” Eco- . “Some Thoughts on the Evolution of the Banking System and the Process of Financial Intermediation.org/filelegacydocs/er q107_Mester. 1999.” Economic Review.” proclaimed the CEO of Bank of America in announcing its merger with NationsBank in 1998. By 2005 that number stood at 7. Mester. 172 Loretta J.1 trillion bank holding company. 2007. Mester.org/filelegacydocs/er q107_Mester. available at: <http://www. Loretta J. other deregulatory maneuvers (including repeal of Glass-Steagall) enabled these gigantic institutions to benefit from explicit and implicit federal guarantees. “Some Thoughts on the Evolution of the Banking System and the Process of Financial Intermediation.174 171 11 MERGER MANIA IN THIS SECTION: The effective abandonment of antitrust and related regulatory principles over the last two decades has enabled a remarkable concentration in the banking sector. about 11.500 bank mergers took place from 1980 through 2005.pdf >. even in advance of recent moves to combine firms as a means to preserve the functioning of the financial system.com/archives/19 99/b3646163.” Economic Review. making it the second-largest U. available at: <http://www. 174 Loretta J. Mester.pdf >. JPMorgan Chase agreed to buy Bank One. “BofA: A Megabank in the Making. First & Second Quarters. September 13. creating a $1. Merger mania in the financial industry has been all the rage for more than 25 years. Bank of America became a $1.frbatlanta. First & Second Quarters. While this should have meant they be treated as public utilities requiring heightened regulation and risk control. a nearly 50 percent decline. Mester.173 From 1975 to 1985.500.businessweek. Senior Vice President and Director of Research at the Federal Reserve Bank of Philadelphia. 2007.S.SOLD OUT 87 an average of about 440 mergers per year. even as they pursued reckless high-risk investments. Senior Vice President and Director of Research at the Federal Reserve Bank of Philadelphia.frbatlanta.” Economic Review.frbatlanta. 170 Dean Foust. The megabanks achieved too-big-to-fail status. available at: <http://www. “Bigger is indeed better. 2007.” BusinessWeek.171 The size of the mergers has increased to phenomenal levels in recent years: In 2003.pdf >. 173 Loretta J.172 In 2004.170 In the United States. “Some Thoughts on the Evolution of the Banking System and the Process of Financial Intermediation. “Some Thoughts on the Evolution of the Banking System and the Process of Financial Intermediation. Senior Vice President and Director of Research at the Federal Reserve Bank of Philadelphia.000. the number of commercial banks was relatively stable at about 14. First & Second Quarters.htm>. bank holding company in terms of assets.

175 Regulators rarely challenged bank SOLD OUT called too big to fail. In the modern era. First & Second Quarters. During congressional hearings on the matter. The current financial crisis has confirmed these fears. It constitutes a significant exception to the FDICIA’s general rule prohibiting the rescue of uninsured depositors. pointedly observed. when the federal government contributed $1 billion to save Continental Illinois Bank from default.”176 The Comptroller of the Currency agreed that the eleven largest U. TBTF. As the seventh largest bank in the United States. Comptroller of the Currency orchestrated an unprecedented rescue of the bank.e. available at: <http://www.S. In 1999. The FDICIA also acts as an implicit insurance program for large financial institutions and an incentive for banks to gain TBTF status by growing larger through merger and acquisition. 1984.” implying they would be rescued regardless of how much risk they took on. banks were “too big to fail. It is nomic Review. Hearings before the Subcommittee on Financial Institutions. and it is a wonderful bank. The failure of such a large institution could have forced many smaller banks into default. As a result. “TBTF” reared its head in 1984.S. R-Connecticut. banking law recognized TBTF with passage of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). Representative Stewart B. 2007. “We have a new kind of bank. 175 Based on data from American Banker. McKinney.S. Seven years later. economists within the Federal Reserve System warned that “some institutions may try to increase the value of their access to the government’s financial safety net (including deposit insur176 mergers and acquisitions as stock prices skyrocketed and the financial party on Wall Street drowned out the critics. But many argued that “bigger is not better” because it raised the specter that any one individual bank could become “too big to fail” (TBTF) or at least “too big to discipline adequately” by regulators. including its shareholders.pdf >. “systemic risk”) is exempt from going bankrupt and thus qualifies for a taxpayer-financed rescue.” FDICIA effectively implies that any bank whose failure poses a serious risk to the stability of the U.88 By mid-2008 — before a rash of mergers consummated amidst the financial crash — the top 5 banks held more than half the assets controlled by the top 150.org/filelegacydocs/er q107_Mester. . The Act authorizes federal regulators to rescue uninsured depositors in large failing banks if such action is needed to prevent “serious adverse effects on economic conditions or financial stability. the U. U. Continental held large amounts of deposits from hundreds of smaller banks throughout the Midwest. banking system (i.frbatlanta.S.

Vol.org/research/staff_ reports/research_papers/9506. thereby increasing the vulnerability of the entire banking system and the likelihood of massive taxpayer-funded bailouts.K. “Increased use of uninsured deposits: Implications for market discipline. Available at: <http://www. Feldman and Jason Schmidt. Demsetz and Philip E. . “The Consolidation of the Financial Services Industry: Causes. 177 179 89 increased leverage). 181 Ron J.178 Studies have shown that compared to smaller banks.e.pdf>.e.gov/pubs/feds/1 998/199846/199846pap..” March 2001. payments system guarantees) through consolidation. TBTF policy effectively operates as a government subsidy — and worse..K. Demsetz and Philip E. Research Paper 9506. “Increased use of uninsured deposits: Implications for market discipline.” J.180 higher percentages of uninsured deposits. If financial market participants perceive very large organizations to be ‘too big to fail’ — i. 23. Consequences. Board of Governors of the Federal Reserve System. Banking & Finance. large banks take on greater risk in the form of lower capital ratios (i. April 1995. Wilson. the motive to consolidate to increase the value of access to the safety net.” Banking Pol'y Rep. Federal Reserve economists found that the banking crisis of the late 1980s occurred because “large banks adopted a riskier stance.federalreserve.”177 International comparisons over a 100year period show that changes in the structure and strength of safety net guarantees may incentivize additional financial institution risk-taking. 1999. Allen N... Berger. Saunders and B. 180 Rebecca S.SOLD OUT ance. 1999. 1999.newyorkfed.pdf>. Research Paper 9506. 182 Ron J. Federal Reserve Bank of Minneapolis.cfm?id=2178>.” March 2001. and Canada.182 and lower levels of cash and marketable securities. April 1995. (Banks larger than $50 billion had an average capital ratio of seven percent while banks between $100 million to $2 billion in size had an average capital ratio of just over nine percent). and Implications for the Future. an incentive — for this kind of risk-taking. “Bank capital and bank structure: A comparative analysis of the U. Federal Reserve Bank of New York.cfm?id=2178>.minneapolisfed. and Rebecca S.org/research/staff_ reports/research_papers/9506.minneapolisfed. “The Consolidation of the Financial Services Industry: Causes.org/publication s_papers/pub_display. Berger. available at: <http://www.” J. 23. Vol..179 more investments in derivatives. See also Arnold Danielson. Strahan. Board of Governors of the Federal Reserve System..pdf> (citing A.pdf>.newyorkfed. lower levels of core deposits.org/publication s_papers/pub_display. 1999).181 higher percentages of loans. available at: <http://www.. and Rebecca S. March 15. and Implications for the Future. Strahan of the Federal Reserve Bank of New York.” J. Banking & Finance. Demsetz and Philip E. U. Feldman and Jason Schmidt. 178 Allen N. available at: <http://www.S. Available at: <http://www. Demsetz and Philip E. “Getting Ready for the 21st Century: A Look at Recent Banking Trends. Consequences.gov/pubs/feds/1 998/199846/199846pap. that explicit or implicit government guarantees will protect debtholders or shareholders of these organizations — there may be incentives to increase size through consolidation. beRebecca S. discount window access. available at: <http://www.federalreserve. Federal Reserve Bank of New York. and by extension. Strahan. Banking & Finance. Federal Reserve Bank of Minneapolis. Strahan of the Federal Reserve Bank of New York.

Consolidation and Increased Risks” 2002 U. Bank of Atlanta. Econ. Res.184 Indeed. L. “Do Mergers Improve the XEfficiency and Scale Efficiency of U. Ill.” Reliance on finanIncreased Risks” 2002 U. “Not surprisingly. 1975-2000: Competition. 1. Pilloff.S. 35. Crane.” as Federal Reserve economists put it. Rev. 186 Allen N. 297-98.” 183 SOLD OUT Evidence indicates executive compensation plays a central role in the quest for larger banks. 2 215 (2002). “Bank Mergers: Integration and Profitability. Eisenbeis. Fin. “Megamergers in Banking and the Use of Cost Efficiency as an Antitrust Defense. available at: <http://www.org/research/Q R/QR1811.pdf>. 1975-2000: Competition. Wilmarth. 33637 (1997). Ill. Wilmarth. Consequences. available at: <http://www. “The Transformation of the U. and Implications for the Future. Jane C. Humphrey. Stavros Peristiani. 117-48. 4th Qtr.ssrn.”187 Supporters of bank consolidation argue that bigger banks create greater efficiencies because of their larger economies of scale. Wilmarth.gov/pubs/feds/1 998/199846/199846pap.. 541. Demsetz and Philip E.90 yond what could sensibly be explained by scale economies. 187 Arthur E. Jr. Rev. Rev. Berger. “The Dominance of Inefficiencies Over Scale and Product Mix Economies in Banking. Res. This “empire-building. Steven J. Bank of Minneapolis Q. 308-09 (1996). Simon Kwan & Robert A.”186 George Washington University banking law professor Arthur E. agrees. Boyd and Mark Gertler. Berger and David B. occurs because compensation tends to increase with firm size.com/sol3/papers.” 29 J.S. “Mergers of Publicly Traded Banking Organizations Revisited. Banks? Evidence from the 1980s. “The Role of Large Banks in the Recent U. 184 Allen N. 1999.” he said.pdf>. Allen N.com/sol3/papers. .” 28 J.federalreserve. Servs.cfm?abs tract_id=315345>. Money. 1991. 301. and Rebecca S. Money. Winter 1994. Vol. Consolidation and In words that appear prescient today. “The Transformation of the U.S. Berger & David B. Credit & Banking 294.minneapolisfed. Linder & Dwight B.ssrn. Banking Crisis.” 7 J. 40-52 (1992). Monetary Econ.” Journal of Banking and Finance. Board of Governors of the Federal Reserve System. “so managers may hope to achieve personal financial gains by engaging in [mergers and acquisitions]. 1999. Professor Wilmarth aptly observed in 2002 that “the quest by big banks for TBTF status — like their pursuit of market power — should be viewed as a dangerous flight from discipline that will likely produce inefficient growth and greater risk. 185 Arthur E. August 28.” Fed. Rev. Financial Services Industry. “Performance Changes and Shareholder Wealth Creation Associated with Mergers of Publicly Traded Banking Institutions. Humphrey.. L. Jr. 2 215 (2002). “The Consolidation of the Financial Services Industry: Causes. 329-33.cfm?abs tract_id=315345>.S.” 37 Antitrust Bull... Strahan of the Federal Reserve Bank of New York. Financial Services Industry. Res. available at: <http://papers.” J. Credit & Banking 326. Jr.” 18 Fed. 23. “studies have shown that managerial self-interest plays a major role in determining the frequency of mergers among both corporations and banks. 554-65 (1992). most studies found that post-merger cost increases and revenue losses offset any savings that the resulting banks accrued from cutting staff or closing branches. available at: <http://papers.185 183 John H. But several studies have shown that large bank mergers during the 1980s and 1990s failed to improve overall efficiency or profitability.

treasury.S.gov/ftp/release/2008115a. Taxpayers are now footing the bill for the financial industry’s investment in risky.” available at: <http://www. “The Making of the Banking Behemoths. By the end of 2008.SOLD OUT cial derivatives.” San Francisco Chronicle. available at: <http://www. 190 188 91 Although the early consolidation of banks.shtml>.multinationalmonitor. November 26. 189 Kathleen Pender.multinationalmonitor.pdf>.org/mm2008/1 12008/interview-foer. 2008.sfgate.188 All of these banks are of a size — and most and the product of mergers — that regulators antitrust enforcers would not have tolerated a quarter century ago.com/cgibin/article. Second Quarter 2008. 192 Jake Lewis. “OCC's Quarterly Report on Bank Trading and Derivatives Activities. had some support among public interest advocates as a means to create competition in very localized markets. As with the erosion of effective banking regulation. is extremely concentrated among the largest commercial banks (the five largest commercial banks own 97 percent of the total amount of notional derivatives). available at: <http://www.html>. for example. and limited almost entirely to the biggest 25. June 1996. .04. federal government says were TBTF.192 As banking regulators fell under the spell of industry lobbyists and propagandists who alleged that bigger banks would be more efficient. December 9.DTL>.org/hype r/mm0696. November/December 2008. available at: <www. available at: <http://www. “Government bailout hits $8. including related to the authorization of interstate banking.gov/initiatives/eesa/tra nsactions. Troubled Asset Relief Program Transaction Report. 189 primarily large commercial banks.html>.” Multinational Monitor.” Multinational Monitor.191 the intensive consolidation of the last 25 years goes far beyond hance whatever competition.cgi?file=/c/a/2008/11/26/MNVN1 4C8QR. so too did antitrust enforcement agencies fail to act to slow banking consolidation. the corrosion of antitrust enforcement traces back more than three As banking regulators fell under the spell of industry lobbyists and propagandists who alleged that bigger banks would be more efficient. “An Interview with Bert Foer. so too did antitrust enforcement agencies fail to act to slow banking consolidation. overleveraged and poorly understood financial schemes. 2008.5 trillion. that the Comptroller of the Currency. Department of the Treasury. 191 See “The Centralization of Financial Power: Unintended Consequences of GovernmentAssisted Bank Mergers.treas. might Yet have been needed to enregulators averted their eyes from the well-known risks of banking consolidation.occ. 190 U.5 trillion in economic assistance for financial institutions. the federal government pledged $8.

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decades, the victim of industry lobbies and laissez-faire ideology. In the case of antitrust, a conservative, corporate-backed campaign began in the 1970s to overturn many common-sense insights on the costs of mergers. The “law-and-economics” movement came to dominate law schools, scholarly writing and, eventually, the thinking of the federal judiciary. Its principles became the guiding doctrine for the Reagan-Bush Justice Department and Federal Trade Commission, the two U.S. agencies charged with enforcing the nation's antitrust laws. Based on a theoretical understanding of market efficiency, law-and-economics holds that many outlawed or undesirable anticompetitive practices are irrational, and therefore should never occur, or are possible only in extreme and unlikely situations. Antitrust enforcers operating under these premises confined themselves to addressing extreme abuses, like overt pricefixing and hard-core cartels. Although the Clinton administration moved away from a hard-line law-and-economics approach, it watched over a period of industry consolidation that had seen no parallel since the merger wave at the start of the 20th century.193 The great banking mergers of the last
194

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quarter century were generally permitted with little quarrel from the Department of Justice, which typically mandated only the sell-off of a few overlapping banking branches.194

■ ■ ■

193

See Walter Adams and James Brock, “The Bigness Complex: Industry, Labor, and Government in the American Economy,” Palo Alto: Stanford Economics and Finance, 2004.

See James Brock, “Merger Mania and Its Discontents: The Price of Corporate Consolidation,” Multinational Monitor, July/August 2005, available at: <http://www.multinationalmonitor.org/mm2 005/072005/brock.html>. (In a brief review of mergers through 2005, Brock writes, “Banking and finance has witnessed the same scene of cumulative consolidation: Through two decades of ever-larger acquisitions, NationsBank became one of the country’s largest commercial banking concerns, absorbing C&S/Sovran (itself a merged entity), Boatmen’s Bancshares ($9.7 billion deal), BankSouth and Barnett Bank ($14.8 billion acquisition). Then, in 1998, NationsBank struck a spectacular $60 billion merger with the huge Bank of America, which itself had been busily acquiring other major banks. The merger between NationsBank and B of A created a financial colossus controlling nearly $600 billion in assets, with 5,000 branch offices and nearly 15,000 ATMs. Bank of America then proceeded to acquire Fleet Boston — which had just completed its own multi-billion dollar acquisitions of Bank Boston, Bay Bank, Fleet Financial, Shawmut, Summit Bancorp and NatWest. Giants Banc One and First Chicago NBD — their size the product of numerous serial acquisitions — merged, and the combined entity was subsequently absorbed by J.P. Morgan which, in turn, had just acquired Chase, after the latter had merged with Manufacturers Hanover and Chemical Bank in the financial business of underwriting stocks and bonds. Other megamergers include the $73 billion combination of Citicorp and Travelers Group in 1998, as well as the acquisition of leading brokerage firms by big banks, including Morgan Stanley’s ill-fated acquisition of Dean Witter.”)

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12

RAMPANT CONFLICTS OF INTEREST: CREDIT RATINGS FIRMS’ FAILURE

The stability and safety of mortgage-related assets are ostensibly monitored by private credit rating companies — overwhelmingly the three top firms, Moody’s Investors Service, Standard & Poor’s and Fitch Ratings Ltd.195 Each is supposed to issue inde-

IN THIS SECTION: Credit ratings are a key link in the financial crisis story. With Wall Street combining mortgage loans into pools of securitized assets and then slicing them up into tranches, the resultant financial instruments were attractive to many buyers because they promised high returns. But pension funds and other investors could only enter the game if the securities were highly rated. The credit rating firms enabled these investors to enter the game, by attaching high ratings to securities that actually were high risk — as subsequent events have revealed. The credit ratings firms have a bias to offering favorable ratings to new instruments because of their complex relationships with issuers, and their desire to maintain and obtain other business dealings with issuers. This institutional failure and conflict of interest might and should have been forestalled by the SEC, but the Credit Rating Agencies Reform Act of 2006 gave the SEC insufficient oversight authority. In fact, the SEC must give an approval rating to credit ratings agencies if they are adhering to their own standards — even if the SEC knows those standards to be flawed.

pendent, objective analysis on the financial soundness of mortgages and other debt traded on Wall Street. Millions of investors rely on the analyses in deciding whether to buy debt instruments like mortgage-backed securities (MBSs). As home prices skyrocketed from 2004 to 2007, each agency issued the highest quality ratings on billions of dollars in what is now unambiguously recognized as low-quality debt, including subprime-related mortgage-backed securities.196 As a result, millions of investors lost billions of dollars after purchasing (directly or through investment funds) highly rated MBSs that were, in reality, low quality, high risk and prone to default. The phenomenal losses had many wondering how the credit rating firms could have gotten it so wrong. The answer lies in the cozy relationship between the rating companies and the financial institutions whose mortgage assets they rate. Specifi-

195

Often labeled “credit ratings agencies,” these are private, for-profit corporations. 196 Edmund L. Andrews, “U.S. Treasury Secretary Calls for Stronger Regulation on Housing Finance,” International Herald Tribune, March 13, 2008, available at: <http://www.iht.com/articles/2008/03/13/bu siness/credit.php>.

94
cally, financial institutions that issue mortgage and other debt had been paying the three firms for credit ratings. In effect, the “referees” were being paid by the “players.” One rating analyst observed, “This egregious conflict of interest may be the single greatest cause of the present global economic crisis ... . With enormous fees at stake, it is not hard to see how these [credit rating] companies may have been induced, at the very least, to gloss over the possibilities of default or, at the worst, knowingly provide inflated ratings.”197 A Moody’s employee stated in a private company e-mail that “we had blinders on and never questioned the information we were given [by the institutions Moody was rating].” The CEO of Moody’s reported in a confidential presentation that his company is “continually ‘pitched’ by bankers” for the purpose of receiving high credit ratings and that sometimes “we ‘drink the kool-aid.’”
198
199

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“Originators of structured securities [e.g. banks] typically chose the agency with the lowest standards,”199 allowing banks to engage in “rating shopping” until a desired credit rating was achieved. The agencies made millions on MBS ratings and, as one Member of Congress said, “sold their independence to the highest bidder.”200 Banks paid large sums to the ratings companies for advice on how to achieve the maximum, highest quality rating. “Let’s hope we are all wealthy and retired by the time this house of cards falters,” a Standard & Poor’s employee candidly revealed in an internal email obtained by congressional investigators.201 Other evidence shows that the firms adjusted ratings out of fear of losing customers. For example, an internal e-mail between senior business managers at one of the three ratings companies calls for a “meeting” to

A former managing director of credit policy at Moody’s testified before Congress that,
197

Testimony of Sean J. Eagan, before the Committee on Oversight and Government Reform, U.S. House of Representatives, October 22, 2008, available at: <http://oversight.house.gov/documents/2008 1022102906.pdf>. 198 Opening Statement of Rep. Henry Waxman, Chairman, Committee on Oversight and Government Reform, U.S. House of Representatives, October 22, 2008, available at: <http://oversight.house.gov/documents/2008 1022102221.pdf> (quoting a confidential presentation made by Moody’s CEO Ray McDaniel to the board of directors in October 2007).

Testimony of Jerome S. Fons, Former Managing Director of Credit Policy, Moody’s, Before the Committee on Oversight and Government Reform, U.S. House of Representatives, October 22, 2008, available at: <http://oversight.house.gov/documents/2008 1022102726.pdf>. 200 Rep. Christopher Shays, Before the Committee on Oversight and Government Reform, U.S. House of Representatives, October 22, 2008, available at: <http://oversight.house.gov/documents/2008 1023162631.pdf>. 201 Opening Statement of Rep. Henry Waxman, Chairman, Committee on Oversight and Government Reform, U.S. House of Representatives, October 22, 2008, available at: <http://oversight.house.gov/documents/2008 1022102221.pdf> (quoting a confidential email from an S&P employee).

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“discuss adjusting criteria for rating CDOs [collateralized debt obligations] of real estate assets this week because of the ongoing threat of losing deals.”202 In another e-mail, following a discussion of a competitor’s share of the ratings market, an employee of the same firm states that aspects of the firm’s ratings methodology would have to be revisited in order to recapture market share from the competing firm.
203

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MBSs and CDOs — heavily weighted with toxic subprime mortgages — contributed to more than half of the company’s ratings revenue by 2006.205 Although the ratings

“With enormous fees at stake, it is not hard to see how these [credit rating] companies may have been induced, at the very least, to gloss over the possibilities of default or, at the worst, knowingly provide inflated ratings.”

firms are for-profit companies, they perform a quasi-public function. Their failure alone could be considered a regulatory failure. But the credit rating failure has a much more direct public connection. Government

The credit rating business was as spectacularly the firms profitable,

agencies explicitly relied on private credit rating firms to regulate all kinds of public and private

increasingly focused in the first part of this decade on structured finance and new complex debt products, particularly credit derivatives (complicated instruments providing a kind of insurance on mortgages and other loans). Moody’s had the highest profit margin of any company in the S&P 500 for five years in a row.204 Its ratings on

activities. And, following the failure of the credit ratings firms in the Enron and related scandals, Congress passed legislation giving the SEC regulatory power, of a sort, over the firms. However, the 2006 legislation prohibited the SEC from actually regulating the credit ratings process. The Securities and Exchange Commission was the first government agency to
man, Before the Committee on Oversight and Government Reform, October 22, 2008, available at: <http://oversight.house.gov/documents/2008 1022102221.pdf>. 205 Rep. Jackie Speier, Before the Committee on Oversight and Government Reform, U.S. House of Representatives, October 22, 2008, available at: <http://oversight.house.gov/documents/2008 1023162631.pdf>.

202

“Summary Report of Issues Identified in the Commission Staff’s Examinations of Select Credit Rating Agencies,” Securities and Exchange Commission, July 2008, available at: <http://www.sec.gov/news/studies/2008/cra examination070808.pdf>. 203 “Summary Report of Issues Identified in the Commission Staff’s Examinations of Select Credit Rating Agencies,” Securities and Exchange Commission, July 2008, available at: <http://www.sec.gov/news/studies/2008/cra examination070808.pdf>. 204 Opening Statement of Rep. Henry A. Wax-

the credit ratings firms had 207 directly into its regulations.” NBER working paper #14358). 2008. If a bank begins experiencing financial problems. the SEC promulgated Rule 15c3-1 (the net capital rule) which formally approved the use of credit rating firms as National Recognized Statistical Ratings Organizations (NRSROs). Since the SEC’s adoption of the net capital rule.e. as determined by one of the credit rating companies. 2008. but see Gretchen Moregenson. 54 Am. Before the Committee on Oversight and Government Reform. The amount of capital required to be set aside depends on the risk assessment of each bond by the credit rating firms. real estate. October 22.207 Indeed. available at: <http://oversight. Downgrading bonds can trigger a requirement imposed by regulations or private contracts that require the corporation to immediately raise capital to protect its business. Evidence of falling home values began emerging in late 2006.pdf> (citing Gary Gorton.” depending on the severity of the bank’s financial problems. Pinto.gov/documents/2008 1022102726. U.” International Herald Tribune. and insurance. high risk) bonds and a rank of “Aaa” — “triple A” — for bonds that are low risk and earn its highest rating. Comp. Fons.96 incorporate credit rating requirements SOLD OUT gives a rank of “C” for the lowest rated (i. It might downgrade from a high grade of “Aaa” to a medium grade of “Baa” or even the dreaded “C. L.” a financial “cushion” is created on which investment banks can fall in the event of bond default. “Investors in mortgage-backed securities fail to react to market plunge. banking. “Section III: Commercial and Labor Law: Control and Responsibility of Credit Rating Agencies in the United States. J. .” American Journal of Comparative Law. Moody’s Investor Service 206 Arthur R. while bonds issued by corporations with a history of financial problems earn a low rating. pensions. By requiring “capital set asides. requires a larger capital set asides than bonds that are assessed to present a low risk of default. Purchasing bonds that have a high risk of default. “The Panic of 2007. For example.house. The “risk” or probability of default is determined for each bond by a credit rating company hired by the issuer of the bond. Examples of highly rated bonds include those issued by wellcapitalized corporations. Banks might be forced to raise capital by selling securities or even the real estate it owns. Fall 2006. Moody’s may downgrade the bank’s bonds. House of Representatives.S. Moody's. Testimony of Jerome S. credit ratings have been incorporated into hundreds of government regulations in areas including securities. Supplement. February 18. but there were no downgrades of subprime mortgage-related securities by credit rating agencies until June 2007. Former Managing Director of Credit Policy. In response to the credit crisis of the early 1970s.206 Rule 15c3-1 requires investment banks to set aside certain amounts of capital whenever they purchase a bond from a corporation or government. 341.

■ ■ ■ which requires disclosure to the SEC of a general description of each firm’s procedures and methodologies for determining credit ratings.php>.iht. Infectious Greed: How Deceit and Risk Corrupted the Financial Markets 352. It also grants the 2007. Before the U. the credit rating firms were supposed to be the independent watchdogs that carefully scrutinized corporations and the financial products that they offered to investors.htm>. the firms were criticized in 2003 for failing to alert investors to the impending collapse of Enron and WorldCom. 209 15 U. available at: <http://www. . in every case” and “downgraded companies only after all the bad news was in. and the law expressly states that the SEC has no authority to regulate the “substance of the credit ratings or the procedures and methodologies” by which any firm determines credit ratings. September 26. SEC Chair Christopher Cox said. (Moody’s “downgraded only 277 subprime home equity loan tranches [in 2006]. available at: <http://www.S. In 2007. the credit rating companies failed to protect the public. Like the federal agencies and Congress. 210 Testimony of SEC Chairman Christopher Cox. and the inevitability that when the enormous bubble burst.”208 In addition.S. During the dot-com bubble of the late 1990s. New York: Times Books (2003). The current financial crisis is not the first time credit rating companies dropped the ball. § 78o-7.gov/news/testimony/2007/t s092607cc. they were the “last ones to react. intense lobbying by the rating firms blocked further reforms. just 2 percent of the home equity securities rated by the agency.com/articles/2007/02/18/yo urmoney/morgenson. including historical downgrade and default rates within each of its credit rating categories. Senate Committee on Banking.”210 In the highly deregulated financial markets of the last few decades.sec. Congress passed the Credit Rating Agency Reform Act of 2006 209 97 SEC broad authority to examine all books and records of the companies. frequently just days before a bankruptcy filing. Housing and Urban Affairs. 2007.”) 208 Frank Partnoy. As a result.SOLD OUT failed to recognize the housing bubble. However. it would lead to massive mortgage defaults and the severe depreciation in value of mortgage-backed securities.C. “it is not our role to second-guess the quality of the rating agencies’ ratings. The firms also failed to consider that many mortgage-backed securities were based on dubious subprime and exploitative predatory loans that could not conceivably be repaid.

98 SOLD OUT Part II: Wall Street’s Washington Investment .

spending more than $1.1 billion on lobbying. During the decade-long period: • Goldman Sachs spent more than $46 million on political influence buying. reporting rules require that lobby firms and individual lobbyists disclose how much they have been paid for lobbying activity. a subcategory of the securities industry. • Accounting firms spent $81 million on campaign contributions and $122 million on lobbying. The industry spent even more — topping $3. Individual firms spent tens of millions of dollars each. Democrats took just more than half of the financial sector’s 2008 election cycle contributions.SOLD OUT 99 reporting rules. but lobbying activity is defined to include direct contacts with key government officials. while investing $383 million in officially registered lobbying. and an additional nearly $600 million in lobbying. and • Securities firms invested more than $512 million in campaign contributions. Public relations efforts and various kinds of indirect lobbying are not covered by the .S. a subcategory of the securities industry. Wall Street’s Campaign Contributions and Lobbyist Expenditures The financial sector invested more than $5 billion in political influence purchasing in the United States over the last decade.738 billion in federal elections from 1998-2008. spent $34 million on campaign contributions (about half in the 2008 election cycle). During the decade-long period: • Commercial banks spent more than $154 million on campaign contributions. This total certainly underestimates by a considerable amount what the industry spent to influence policymaking. and $20 million on lobbying. or work in preparation for meeting with key government officials. Hedge funds. The entire financial sector (finance. U. • Insurance companies donated more than $220 million and spent more than $1. Primarily reflecting the balance of power over the decade. contributed $58 million to federal candidates and spent $43 million on lobbying. about 55 percent went to Republicans and 45 percent to Democrats. real estate) drowned political candidates in campaign contributions. Private equity firms. insurance.3 billion — on officially registered lobbyists during the same period. • Merrill Lynch spent more than $68 million.

Surveying only 20 leading firms in the financial sector (none from the insurance industry or real estate). These figures do not double count within the industry group. $27 million and $55 million. SOLD OUT Within the financial sector. . • JPMorgan Chase invested more than $65 million. it does not take into account lobbyists at state houses across the country.996 figure represents the number of separate individuals employed by the financial sector as lobbyists in 2007. • Finance and credit companies employed 415 lobbyists. the total number of financial sector lobby hires in 2007 was a 211 We chose 2007 as the most recent year for which full data was available at the time we conducted our research. and • Miscellaneous other financial companies employed 134 lobbyists. he counts as one for the accounting industry and one for the insurance industry.996 separate lobbyists to influence federal policy making. 211 the financial sector employed a staggering 2. • Bank of America devoted more than $39 million. • Real estate interests hired 1. but total more than the figure for the entire financial sector because we did not eliminate overlaps between industry sectors. for these totals. • Credit unions maintained 96 lobbyists. • Commercial banks employed 421 lobbyists. This figure only counts officially registered lobbyists. • Securities and investment firms maintained 1. In 2007.142 lobbyists. $32 million. The number of people working to advance the financial sector’s political objectives is startling. industry groups deployed legions of lobbyists. $37 million. That means it does not count those who offered “strategic advice” or helped mount policy-related PR campaigns for financial sector companies. and • Accounting giants Deloitte & • whopping 6. Thus.023 lobbyists. more than five for each Member of Congress. A great many of those lobbyists entered and exited through the revolving door connecting the lobbying world with government. Insurance companies had 1. respectively. If he works as a lobbyist for an accounting firm and an insurance company. We do not double count individuals who lobby for more than one company. he counts as only one lobbyist for the accounting industry.100 • Citigroup spent more than $108 million. Ernst & Young. In 2007:212 • Accounting firms employed 178 lobbyists.738. the 2.219 lobbyists working for them. KPMG and Pricewaterhouse spent. we found that 142 212 Touche. The figure counts those lobbying at the federal level. To be clear. if John Smith works as a lobbyist for two accounting firms.

and the enormously helpful data provided by the Center for Responsive Politics. In the charts that follow in this part. Our data on number of covered official . and congressional staff. Topping the list. We also provide aggregated information on number of industry lobbyists and number of industry lobbyists circling through the revolving door. Our campaign contribution data is organized by biannual Congressional election cycles. For each profiled company. Nothing evidences the revolving door — or Wall Street’s direct influence over policymaking — more than the stream of Goldman Sachs expatriates who left the Wall Street goliath. We tallied up totals from that database. securities. The Center for Responsive Politics lobbyist database lists all individual lobbyists reporting to the Senate Office of Public Records. we provide extensive information on the campaign contributions and lobbyists of 20 leading companies in the financial sector — five each from commercial banking. the lobby firms they employed each year. and the amount paid to those firms. of course. are former Treasury Secretaries Robert Rubin and Henry Paulson. we identify the top 20 recipients ■ ■ ■ 101 of their campaign contributions for each election cycle over the last decade. and covered official lobbyists they employed (i. Our figures on total and annual sector.e. or as former Members of Congress or congressional staff). Methodological Note Our information on campaign contributions and lobby expenditures comes from mandated public filings. Our data on total number of official lobbyists is compiled from data prepared by the Center for Responsive Politics. from members of the cabinet to directors of bureaus embedded in agencies). accounting and hedge fund industries. “Covered officials” are top officials in the executive branch (most political appointees. Members of Congress. industry and firm campaign contributions and lobby expenditures are drawn from the Center for Responsive Politics. and emerged to hold top regulatory positions. Thus the total for 1998 also includes contributions made in 1997. spun through the revolving door.SOLD OUT industry lobbyists during the period 19982008 had formerly worked as “covered officials” in the government. we detail campaign contributions and lobby expenditures from 1998-2008 for the overall financial sector and for the industry components of the sector. lobbyists formerly employed as top officials in the executive branch. both of whom had served as chair of Goldman Sachs before entering government. In the appendix to this report..

we compiled the information using the Center’s raw data on individual campaign contributors and information on the company’s political action committee (PAC) contributions. That is. for example. Wachovia.102 lobbyists is drawn from the original disclosure statements filed with the Senate Office of Public Records. Wells Fargo and KPMG. Lehman Brothers as an employer. SOLD OUT ■ ■ ■ 213 Our compilation is based only on the top 1. added in the Lehman Brothers PAC contributions.213 compiled them into a database. We compiled donations for Lehman Brothers. we tracked donations from every person with. In four cases where the Center had not compiled the data. and then list the top 20 recipients. Our listing of the top 20 biannual recipients of campaign contributions from our 20 profiled firms uses data compiled from the Center for Responsive Politics where possible. .000 largest contributors affiliated with each company.

178.886.840.907 Source: Center for Responsive Politics. <www.725 $209.401.032 Decade-long lobbying expenditure total (1998-2008): $3.SOLD OUT 103 Financial Sector Campaign Contributions and Lobbying Expenditures Finance.091 $155.023.740 $374.221 Campaign Contributions 2008 2006 2004 2002 2000 1998 $442.921.173.157 $259.026 $213.576. Real Estate $5.551.860 Lobbying Expenditures 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 $454.847 $233.174 $371.638.879.156.284.089.opensecrets.835.722 $308.799 $235.253 Decade-long campaign contribution total (1998-2008): $1.535.129.868 $231.133 $417.874 $324.738.org>. Insurance.698.799. .173 $338.865.802 $268.218.355 $339.440.

. <www.996 Covered official lobbyists for 20 profiled firms.opensecrets. Real Estate 2007 total official lobbyists for financial sector: 2.104 SOLD OUT Financial Sector Official Lobbyists Finance. Insurance. Decade-long total (1998-2008): 142 Source: Center for Responsive Politics.org>.

org>.637.000 $21.SOLD OUT 105 Securities Firms Decade-long campaign contribution industry total (1998-2008): $512. <www.355.550.983 $6.000 $59.367.977. .955.649 Campaign Contributions for 5 Leading Firms Bear Stearns Goldman Sachs Lehman Brothers Merrill Lynch Morgan Stanley $6.704.632 Decade-long lobbying expenditure industry total (1998-2008): $599.000 Source: Center for Responsive Politics.574 $9.816.857 Lobbying Expenditures for 5 Leading Firms Bear Stearns Goldman Sachs Lehman Brothers Merrill Lynch Morgan Stanley $9.724 $14.530 $8.737 $25.835.760 $20.opensecrets.445.076.660.

996.372.714.382 $15. Wells Fargo $11. <www.org>.opensecrets. .778.440 $88.022 Lobbying Expenditures for 5 Leading Firms Bank of America Citigroup JP Morgan Chase & Co Wachovia Corp.727 $5.637.868.943.629.392 Decade-long lobbying expenditure industry total (1998-2008): $382.460.953 $3.946.635.752 $16.260 $19.342 Campaign Contributions for 5 Leading Firms Bank of America Citigroup JP Morgan Chase & Co Wachovia Corp. Wells Fargo $28.106 SOLD OUT Commercial Banks Decade-long campaign contribution industry total (1998-2008): $154.915 $11.740 Source: Center for Responsive Politics.330.000 $49.

650 $3.000 $740.000 $680.953 $338.742.255 $1. Source: Center for Responsive Politics.000 $200.058.000 Campaign Contributions for 5 Leading Firms Bridgewater Associates DE Shaw Group Farallon Capital Management Och-Ziff Capital Management Renaissance Technologies $274.005.000 $1. <www.000 * Hedge fund contributions are included in the overall securities campaign contributions and lobbying expenditure totals.opensecrets.SOLD OUT 107 Hedge Funds* Decade-long campaign contribution industry total (1998-2008): $33.552 $1.org>.895 Lobbying Expenditures for 5 Leading Firms Bridgewater Associates DE Shaw Group Farallon Capital Management Och-Ziff Capital Management Renaissance Technologies $855.815 Decade-long lobbying expenditure industry total (1998-2008): $20.252.560. .100.

156 Campaign Contributions for 5 Leading Firms Arthur Andersen Deloitte & Touche Ernst & Young KPMG LLP Pricewaterhouse $3. .606.103.324.469.120.opensecrets.536 $19.340 $12. <www.658.108 SOLD OUT Accounting Firms Decade-long campaign contribution industry total (1998-2008): $81.291.392 $10.000 $44.000 Decade-long lobbying expenditure industry total (1998-2008): $121.084 Source: Center for Responsive Politics.455 $25.900.175 $12.108.482.org>.800.486.000 $19.407 $8.772 Lobbying Expenditures for 5 Leading Firms Arthur Andersen Deloitte & Touche Ernst & Young KPMG LLP Pricewaterhouse $1.

there is widespread agreement that deregulation went too far. The repeal of Glass-Steagall and the bank mergers already authorized cannot easily be undone. and that new regulatory initiatives are required.SOLD OUT 109 The dangers inherent in these policies were evident to any careful observer. removing the firewalls between commercial banking on the one hand and investment banking and insurance on the other. They were drowned out by the cacophony of well-paid lobbyists and the jingle of cash registers opening and closing as Wall Street handed out hundreds of millions in political contributions. federal regulators rationalized the subprime lending boom as good housing policy rather than the ticking time bomb that it self-evidently was. Consumer groups. Now. This deregulatory trend accelerated in the last decade: In 1999. with the support of the Clinton White House passed the Gramm-Leach-Bliley Act of 1999. regulatory control over the financial sector has steadily eroded. however. after the trillions of dollars in taxpayer money has been spent. Those warnings were ignored. and some regulators all sounded the alarm as each of the actions chronicled in this report were first proposed. . but both those issues require very careful scrutiny. independent economists and analysts. The leading independent investment banks have all merged into commercial banks or converted themselves into bank holding companies. and federal officials collaborated with Wall Street to permit extraordinary increases in the amount of money firms could lend or borrow for every dollar of their own capital. as fed- Conclusion and Recommendations: Principles for a New Financial Regulatory Architecture For more than 25 years. federal agencies declined to regulate financial derivatives and Congress then enshrined this head-in-the-sand policy as law. All of these deregulatory moves created the conditions for the current financial implosion. the financial industry is resisting meaningful reforms. The bank merger trend is actually escalating as a consequence of the financial crisis. some investor advocates. Congress. But as with each of the twelve steps on the road to financial ruin. and encourage dangerous and unsustainable risk-taking. the very severe risk is that the investment bank culture will again influence traditional banking operations.

110 eral regulators bless shot-gun marriages in order to avoid committing still more taxpayer money to making depositors whole. What is a hedge fund? As a legal matter. for if the existing high levels of concentration are to be permitted. This is — and should have SOLD OUT been treated as — conclusive evidence of a financial system out of control. workers and investors. We. as Bert Foer of the American Antitrust Institute points out. Beyond undoing the deregulatory maneuvers documented in this report. and their earlier profits are now revealed to be only the froth from a bubble economy and financial sleight-of-hand. and controls on big bank activity much more extensive. one that was beginning to devour rather than serve the real economy. the term references investment funds that escape Securities and Exchange Commission regulatory authority on the grounds that they serve sophisticated investors. But the evidence is once again overwhelming that sophisticated investors cannot be trusted to protect their own interests (see Bernard Madoff). Also. But more important. we concluded with overarching premises that should guide the new financial regulatory architecture. The financial sector should serve and be subordinate to the real economy. In any case. regulatory review must be much more intensive. Looking back. and many others. until the system collapsed. 2. we see that the financial economy did not increase America’s true wealth. but just the opposite: Wall Street siphoned profits from the real economy. the American economy cannot be based on finance and the trading of paper. many of the recently consummated mergers are almost certain to fail. The Wall Street operators have destroyed their own institutions. There should be no deference shown to Wall Street interests complaining that a new regulatory regime will hurt their profitability. reduce reliance on overly complicated financial instruments. It should aim to reduce the size of the financial sector. 1. and provide robust and multi-faceted protections for consumers. these nonregulated entities pose systemic risks to the . and from the checking accounts of consumers. Policymakers need to take a comprehensive assessment of banking concentration. Hedge funds and financial derivatives must be regulated. an affirmative regulatory agenda must establish a new framework for financial sector regulation. Here. But much more care should taken in authorizing additional mergers. and consumer. workers and investors were asked to foot the bill. will be proposing specific regulatory reforms over the course of the next year. From 2004-2007. financial sector profits amounted to more than a third of overall corporate profits.

org/publication. Whatever hypothetical benefit such instruments have for establishing a market price for credit default swaps is vastly outweighed by the actual and demonstrable damage they have done to the real economy.” 3. detailed reporting of holdings by all investment funds. enabling legalized.com/views/blogs/mar ket-movers/2008/11/28/understandingsynthetics>. large-scale betting by entities not party to the underlying transaction.demos. not just to the wealthy. see Robert Kuttner. Cities. Hedge funds. with guarantees of transparency. tranching of securities214) that add complexity and confusion. to whom. AIG apparently didn't even know who it had insured. But those for which a legitimate purpose can be shown must be brought into the regulatory system. with one important condition: neither party actually holds the bond. They should For further discussion of the case for prohibiting tranching. restrictions on leverage and requirements for “skin in the game. Prohibit certain financial instruments. and on what terms. available at: <http://www. colleges.” Synthetic collateralized debt obligations — a kind of credit default swap215 — are among the worst abuses of the current system. Essential.” Demos. Wall Street has proved Warren Buffett right in labeling financial derivatives “weapons of financial destruction. 215 See also this helpful discussion explaining synthetic CDOs from Portfolio’s Felix Salmon. Finally. and someone agrees to insure against failure of the bond). available at: <http://www. “Financial Regulation: After the Fall. Baseline transparency requirements must include an end to off-thebooks transactions. and every American turned out to be at risk from the machinations of the socalled sophisticated financial sector. the packaging and re-packaging of mortgages into various esoteric securities undermined the ability of the financial markets to correctly value these financial instruments. All investment vehicles must be subjected to the same regulatory requirements — and those standards must be elevated dramatically. Moreover. Enhanced standards of transparency. non-profit organizations. 214 111 Other mechanisms will enhance transparency and simplify some overly complicated financial instruments: these include “skin in the game” requirements and prohibitions on certain practices (for example.portfolio. . synthetic CDOs involve the creation of insurance on a bond (someone pays for the insurance. not all financial derivatives should be permitted to continue to trade. investment banks. through the credit default swaps it participated in. but no social value.cfm?cur rentpublicationID=B8B65B84%2D3FF4%2 D6C82%2D5F3F750B53E44E1B>. and selling and trading of all permitted financial derivatives on regulated and public exchanges. 4. insurance companies and commercial banks have engaged in such complicated and intertwined transactions that no one could track who owes what. January 2009.SOLD OUT financial sector. states.

available at: <http://www. High flyers like leveraged investments because they offer the possibility of very high returns.5 percent tax on stock trades.multinationalmonitor. until regulators can prove that it is not. They should be required to show the affirmative. Multinational Monitor. They should be specifically required to explain why the instrument does not worsen financial systemic risk. These include enhanced capital requirements for banks and investment banks (and especially the build-up of capital in good times). There should be stringent restrictions on the use of leverage by all players in the financial system.01 percent for each remaining year of maturity on a bond. 217 See “Plunge: How Banks Aim to Obscure Their Losses. This degree of leverage turns the financial system into a game of musical chairs — those left standing when the music stops are wiped out. November/December 2008. it was to hide their financing. it must be shown to be safe. Regulators should maintain a strong bias against complicated new instruments. Impose a financial transactions tax. The burden should be placed on those urging the creation or trade of exotic financial instruments — existing and those yet to be invented — to show why they should be permitted. taking into account recent experience where purported diversification of risk led to its spread and exponential increase.html> (“Wall Street typically designs these things so that they hide something from the public or their investors. and increased margin requirements. social benefit of the new instrument.org/mm2 008/112008/interview-turner. and Marc .” An Interview with Lynn Turner. It suggests that. Dean Baker. In some of the off-balance sheet special purpose entities. The entire financial system is presently at risk because the amount of leverage far exceeded the assets needed to back it up once investors sought to convert their holdings to cash. like with Enron. and comparable burdens on other transactions (for example. 5.112 be prohibited. they hide what the underlying assets are really like. before a chemical can be introduced on the market.”) 218 Pollin. or what the underlying mortgages are really like. This approach stands against the notion that a new chemical is presumed safe and permitted on the market. 7.) See Robert Pollin. But. So when you have the CDOs [collateralized debt obligations] built on top of the other CDOs. Adopt the precautionary principle for exotic financial instruments. Limit leverage. they also enable extremely risky investments that can vastly exceed an investor's actual assets. risks and bad investments. recognizing that complexity both introduces inherent uncertainty and is often used to obscure dangers. as we have seen. A small tax on each financial transaction218 216 The precautionary principle is a term most frequently used in the environmental context. for example. 217 216 SOLD OUT 6. futures or options must put up more collateral. Baker and Schaberg suggest a . so that parties buying securities. this works out to . and prove why these benefits outweigh risks.

Paid on a yearly basis.edu/236/hash/aef97 d8d65/publication/172>. The payoffs from benefiting from risky investments or a bubble are dramatic. it makes sense to take huge risks. preemption of state laws. Wall Street salaries and bonuses are out of control. but most important is imposing legal requirements that compensation be tied to long-term performance. fees and charges should all be capped (especially now that Americans who are in effect borrowing their own money from banks and credit card companies who received bailout funds). And it would be a steeply progressive tax that could raise substantial sums for useful public purposes. to a considerable extent.S. Wall Street compensation should be lowered overall. Crack down on excessive pay and the Wall Street bonus culture. on onerous terms frequently indecipherable to borrowers.umass. credit card companies. or the next hour. built their business model around abusive lending practices. however. and the Private Securities Litigation Reform Act should be withdrawn or repealed. and. and with outrageous hidden fees and charges. Predatory mortgage lenders. If they had to be bailed out. A new financial consumer protection agency should be established. Wall Street bonuses can be 10 or 20 times base salary. .SOLD OUT would discourage speculation.” 2002. bonus payments with taxpayer money is an outrageous misuse of public funds. student loan corporations — all pushed unsustainable levels of credit. Impediments to legal accountability for fraud and other unlawful conduct. slow things down. “Financial Transactions Taxes for the U. 113 for staying out. Adopt a financial consumer protection 8. The first and most simple demand is to ensure no bonus payments for firms receiving governmental bailout funds. why does anyone in the firm deserve a bonus? Even more importantly. and there’s no reward Schaberg. It would give realeconomy businesses more space to operate without worrying about how today's decisions will affect their stock price tomorrow. available at: <http://www. and commonly represent as much as four fifths of employees' pay. In this context. they would employ very different strategies. interest rates. Commercial banks and Wall Street backers have. 9. agenda. there is a need to address the Wall Street bonus culture. Economy. generally.peri. If employees had to live with the longterm consequences of their investment decisions. such as the holder in due course rule. curb the turbulence in the markets. Political Economy Research Institute. Beyond the bailouts.

Give consumers the tools to organize themselves. SOLD OUT almost every step. In one sense. as should corporations to their shareholders. The emergent consensus on the imperative to re-regulate the financial sector demonstrates that. on behalf of independent consumer organizations). With independent organizations funded by small voluntary fees. consumers could hire their own independent representatives to review financial players’ activities. public interest advocates and independent-minded regulators and Members of Congress cautioned about the hazards that lay ahead — and they were proven wrong only in underestimating how severe would be the consequences of deregulation. and reform of our political process does not appear on ■ ■ ■ the horizon. Is this agenda politically feasible? It has the advantage of being necessary: Recent years' experience shows beyond any reasonable argument that a deregulated and unrestrained financial sector will destroy itself — and threaten the U. Whether the forces that brought America’s economy to the precipice can be forced to accede to that shift — whether the public interest will prevail — remains to be seen. in the wake of the financial meltdown. Federal law should empower consumers to organize into independent financial consumers associations. but Congress will address financial re-regulation this year. Lenders should be required to facilitate such organization by their borrowers (through mailings to borrowers. and global economies in the process. and advocate for appropriate public policies.S. At ■ ■ ■ . this report can be considered a case study in the need for the elimination of special interest money from American politics. Good arguments could not compete with the combination of political influence and a reckless and fanatical zeal for deregulation. the prevailing regulatory paradigm has shifted. scour their books. $5 billion buys a lot of friends. The deregulatory decisions profiled in this report were not made on their merits.114 10.

...............................……….................... Bank of America .... 5...... Wachovia Corp.................………………………………………………….....................………........ 4...……… 1....... 2....................……….............…………..........................……...... Arthur Andersen .............. KPMG LLG ................. 148 148 155 164 171 177 Hedge Funds …………………………………………….....................…………...................................………………………………………….….........................………….. Wells Fargo .............. Merrill Lynch …....................…………...………...…………………………………………………….. DE Shaw Group .......... 199 199 203 210 217 224 ..….....…..... Och-Ziff Capital Management ...... Goldman Sachs ……………………………………………………………… 3............…………………………………………………… 3....... 115 115 121 129 135 142 Commercial Banks …………………………………………………...... 2... 1.................. 5...………….... Renaissance Technologies .……………………………………....…………………………………...….............…………………………………...... 4..................….......................................... 5........………………………………………….... Bridgewater Associates .. Pricewaterhouse …….... 2......………………………………………………………............. Ernst & Young .... 1..... Deloitte & Touche ................... 2...................…....................................................... 4........... 4. 183 183 185 189 193 196 Accounting Firms …………………………………………………… 1............ Citigroup ........................... Bear Stearns ………………………………………………................................. JP Morgan Chase & Co... 5...................…………………………………………………………… 3......... Morgan Stanley …………………………………………………. Lehman Brothers …...... Farallon Capital Management ......... ...Appendix 115 Appendix: Leading Financial Firm Profiles of Campaign Contributions and Lobbying Expenditures Securities Firms .................................. 3..........

8.500 $7.000 $5. 13.460 $98.000 $5.500 $7.600 $7. Individual recipient numbers do not include the 4th Quarter of 2008. 7. 17. 12.700 $7.355. 8.550. 17. 10.600 Rudy Giuliani (R) Hillary Clinton (D) John McCain Barack Obama (D) Christopher Dodd (D) Mitt Romney (R) Nita Lowey (D) Frank Lautenberg (D) Paul Kanjorski (D) Elizabeth Dole (R) Charles Rangel (D) John Edwards (D) Kirsten Gillibrand (D) Dick Durbin (D) Steny Hoyer (D) Bill Richardson (D) Tim Johnson (D) Spencer Bachus (R) Barney Frank (D) Christopher Shays (R) Source: Center for Responsive Politics. 3. 15.550 $12. 15. 13.250 $5. 7.300 $6.000 Bear Stearns Campaign Contributions:219 2008 Top Recipients TOTAL: 1. Chris Dodd (D) Joe Lieberman (I) Martha Rainville (R) Hillary Clinton (D) Deborah Pryce (R) Spencer Bachus (R) Rick Santorum (R) Richard Baker (R) Jim McCrery (R) Paul Kanjorski (D) Rudy Giuliani (R) Christopher Shays (R) Barney Frank (D) Pete Sessions (R) Evan Bayh (D) Mike Crapo (RD) Michael Oxley (R) Bill Thomas (R) Patrick Tiberi (R) Mike Ferguson (R) $938.116 Appendix Investment Banks: Bear Stearns Decade-long campaign contribution total (1998-2008): $6. 2. Campaign contribution totals accessed February 2009.610 $14.000 $5. 20.500 $6. 20.091 $127. 6.000 $5. 3.241. 9. 5.500 $7.850 $6.850 $49. 11. 15. 5.000 $10.000 $5. 219 2006 Top Recipients $1.200 $11. 12. 17.600 $6. 8.290 $130. 2. 15. 11.700 $31.500 $5. 16.500 $5. 13. 9.503 $48.737 Decade-long lobbying expenditure total (1998-2008): $9.000 $8.800 TOTAL: 1.400 $6. 4. .000 $5.000 $4.165 $5.500 $6.800 $13. 15. 6. 4.619 $67. 15.200 $60.000 $5.000 $4.300 $6.575 $13. 14.

000 $10. 3.250 $18.500 $4. 3.000 contributions and PAC money.458.000 $3.000 $3.900 $92. 9.500 Rick Lazio (R) Jon Corzine (D) Spencer Abraham (R) Hillary Clinton (D) Vito Fossella (R) Al Gore (D) Charles Schumer (D) George W Bush Charles Rangel (D) Orrin Hatch (R) David Lawther Johnson (D) Edolphus Towns (D) Tom Harkin (D) Marge Roukema (R) Howard Berman (D) George Allen (R) Richard Neal (D) 8. 6. 12.000 $2. 20.200 $65.500 $3.811 $5.000 $6. . 6. 12.400 $5. 15. 13. 13.500 $15. 220 117 7. 9. 9. 16. 2. 5. 2. 13.005 $198.900 $16.000 $8.250 $6. 10. Nita M (D) Erskine Bowles (D) Tom Daschle (D) James DeMint (R) John Thun.000 $20.080 $10. 19.500 $5.500 $7.990 $6.000 $8. Based on highest 1.000 $13.080 $5.000 $4. John Kerry (D) Ron Kirk (D) Tim Johnson (D) Pete Domenici (R) Michael Oxley (R) Charles Rangel (D) Artur Davis (D) Denise Majette (D) Paul Kanjorski (D) Max Baucus (D) Bill Thomas (R) Deborah Pryce (R) Joe Biden (D) $7. 16.000 $6. 5.000 $6.500 2000 Top Recipients TOTAL: 1. 4. 14. 11. 16. 8.000 $7. 4. 12.250 16.000 $5.000 $8. 5. 17.250 $5. 20.838 $94. Charles Schumer (D) Christopher Dodd (D) Chuck Grassley (R) Jack reed (R) Nita Lowey (D) Jack Conway (D) $661. George W Bush (R) John Kerry (D) Wesley Clark (D) Rick Santorum (R) Charles Schumer (D) Richard Gephardt (D) John Peterson (R) Charles Wieder Dent (R) Pete Sessions (R) Lowey. 2. 6. 3. 12.000 $23. 10.080 $8.500 $18. 9. 8.000 $6. 9.400 $41.243.000 $4.750 10.000 $3.000 $13. 13. 19. 7.000 $7. 18. 9.379 $40.Appendix 2004 Top Recipients220 TOTAL: 1. 13.500 $5. (R) David Vitter (R) Rahm Emanuel (D) Luis Fortuno (3) John Edwards (D) Charles Boustany Jr (R) Timothy Bishop (D) $1.000 $11.000 $9.000 $11.500 $12.000 $3. 12.000 $5. 16. 7. 4.000 $8.000 $6.250 $7. 2002 Top Recipients TOTAL: 1.580 $10. Pat Toomey (R) $1.000 $3.500 $11.

000 $2. 20.000 1998 Top Recipients TOTAL: 1. 17. Newt Gingrich (R) Rick White (R) Jerry Weller (R) Billy Tauzin (R) Thomas Manton (D) Amo Houghton (R) Bob Graham (D) Charles Grassley (R) Christopher Bond (R) Fritz Hollings (D) Jerry Kleczka (D) John Ensign (R) John LaFalce (D) Robert Bennett (R) $3.550 $2. 3. 17. 17. 10. 20. 15. 20. 20.500 $2.000 $2.000 $2. 20. 17. 20.250 $2. 20.000 $2. 20. 20.000 $2.000 $4.000 $2.050 $2. 15. 18.000 $3. 17.000 $2.000 $2.000 $7.000 $2. 20.000 $2.000 $2. 6.250 $6.050 $2. 9. 13.000 $6.950 $7. 7.000 $2. 17.000 $2.000 $3.000 $2.000 $2. 20. 20.000 $2.000 .000 $2. 20.000 $2.050 $7.118 Appendix 18. 17. 20.000 $2.000 $5.000 10.000 $2. 5.000 $2. Alfonse D'Amato (R) Charles Rangel (D) Blanche Lambert Lincoln (D) John Edwards (D) Tom Daschle (D) Scotty Baesler (D) Rick Lazio (R) Evan Bayh (D) John Breaux (D) Carol Moseley-Braun (D) John Kerry (D) $812. 14. 17.000 $2. 10.000 $2.800 $5.606 $38.000 $2. 3. 8.000 $2. 2. 20. Steve Forbes (R) John McCain (R) William Roth (R) Trent Lott (R) Rod Grams (R) Robert Torricelli (D) Richard Lugar (R) Phil Gramm (R) Phil Crane (R) Paul Sarbanes (D) Kent Conrad (D) John Kerry (D) Jim Maloney (D) E Clay Shaw (R) Deborah Pryce (R) Dan Quayle (R) Christopher Dodd (D) Bill McCollum (R) Amo Houghton (R) $2. 17. 20.250 $2. 20.

000 $780.000 $620.000 2002 2006 TOTAL: Bear Stearns Venable LLP Steptoe & Johnson Angus & Nickerson $1.000 $40.000 $60.Appendix Bear Stearns Lobbying Expenditures221: 2004 2008 TOTAL: Bear Stearns Steptoe & Johnson Venable LLP $460.000 $900.120.000 > $10.000 $40.000 $40.000 $20.000 $80.000 TOTAL: Bear Stearns Steptoe & Johnson Venable LLP $800.000 $40.000 $120.000 $220.000 $200.000* 2003 2007 TOTAL: Bear Stearns Steptoe & Johnson Venable LLP $1.000 $180.000 $540.000 $680. Lobbying amounts accessed February 2009.000 $200.000 * 119 TOTAL: Bear Stearns Steptoe & Johnson Venable LLP $900.000 $160.000 $80.000 $440.000 $960.000 $220.000 2001 TOTAL: 2005 TOTAL: Bear Stearns Steptoe & Johnson Venable LLP Angus & Nickerson $820.000 2000 TOTAL: Bear Stearns Steptoe & Johnson O'Connor & Hannan 221 TOTAL: Bear Stearns Steptoe & Johnson Venable LLP $920.000 $520.000 > $10.000 Source: Center for Responsive Politics. * Not included in totals .000 $420.000 $240.000 $60.200.000 $640.000 Bear Stearns Steptoe & Johnson Venable LLP O'Connor & Hannan $750.000 $190.000 $200.

000 $560.000 $120.000 .000 $500.000 $160.000 1998 TOTAL: Bear Stearns Steptoe & Johnson O'Connor & Hannan $860.120 Appendix 1999 TOTAL: Bear Stearns Steptoe & Johnson O'Connor & Hannan $760.000 $140.000 $140.

Appendix 121 Bear Stearns Covered Official Lobbyists:222 Firm / Name of Lobbyist Bear Stearns Dombo III. Accessed January 2009.gov/>. Fred Venable LLP Olchyk. E. Sam Beeman. Joint Committee on Taxation Staff 2004-2008 2006-2008 Counsel. Ray Joint Committee on Taxation Staff Legislative Counsel. Office of Congressman Michael Forbes 1999-2000 Covered Official Position Year(s) 222 Source: Senate Office of Public Records <http://soprweb. .senate.

Mary L Landrieu (D) 20.475 $229. Frank Lautenberg (D) Michael Peter Skelly 16.570 $80. . Chris Dodd (D) 7.600 $29.800 Source: Center for Responsive Politics. Rahm Emanuel (D) 11.600 $23. (D) 14.866 $138. John McCain (R) 4. Rick Santorum (R) 12. (D) 17.122 Appendix Investment Banks: Goldman Sachs Decade-long campaign contribution total (1998-2008): $25.500 $27.907 $405.150 $30.200 TOTAL: 1. Individual recipient numbers do not include the 4th Quarter of 2008.800 $33.900 $21. Kent Conrad (D) 10.900 $18.450 $47. John Edwards (D) 9.400 $21.400 $30. Jim Himes (D) 6.000 $25. Evan Bayh (D) 5. Maria Cantwell (D) 7.695 $229.364 $21.448 $110.635.100 $26.497 $52.500 $23. Susan M Collins (R) 18.000 $109. Arlen Specter (R) 10.400 $24. Mitt Romney (R) 5.675 $140. Sherrod Brown (D) 6. Thomas H Kean Jr (R) 11.750 $42.950 $33.100 $23.800 $20.600 $35.500 $22.450 $66. George Allen (R) $3. Robert Menendez (D) 3.502. Campaign contribution totals accessed February 2009.530 Goldman Sachs Campaign Contributions223 2008 Top Recipients TOTAL: 1.445. Ben Cardin (D) 9. Rudy Giuliani (R) 8. Mark Warner (D) 19. (R) 17. Barack Obama (D) 2. Max Baucus (D) 14. John Sununu (R) 12.637.580 $24. Max Baucus (D) 19.250 $31. Hillary Clinton (D) 3.500 $80.000 $24. Bill Nelson (D) Sheldon Whitehouse 13. Hillary Clinton (D) 2.600 $39. Rahm Emanuel (D) 20.983 Decade-long lobbying expenditure total (1998-2008): $21.501 $884. Eric Cantor (R) Kay Bailey Hutchison 16.700 $19. Norm Coleman (R) 223 2006 Top Recipients $5.800 $17. Harold E Ford Jr (D) 4. Mike DeWine (R) 15. Joe Lieberman (I) 8.300 $22. Jack Reed (D) 13. Richard Baker (R) 18. Tom Harkin (D) 15.

Richard Burr (R) 20.000 2000 Top Recipients TOTAL: 1. Al Gore (D) 7.300 $72.050 $88.000 $51. George W Bush (R) 2. Tony Knowles (D) 14.500 $15. Jean Carnahan (D) 15.000 .000 10.Appendix 2004 Top Recipients TOTAL: 1.000 $26.000 $30. John Cornyn (R) 16. John Edwards (D) 6.000 $55.499 $99. Evan Bayh (D) 7. John Edwards (D) 4. Tom Harkin (D) 11. Hillary Clinton (D) 11. Robert Menendez (D) 14. John McCain (R) $6. son (R) 17.970 $41. Charles Schumer (D) 8.000 $34.900 $271.355 $20.000 $16. Dylan C Glenn (R) Kay Bailey Hutchi17.510. Maria Cantwell (D) 123 $21.170 $67.496 $29. Tom Strickland (D) 6.500 $102.600 $303. Rick A Lazio (R) 4.000 $37. Robert Menendez (D) 19. Arlen Specter (R) 7. Wesley Clark (D) 17. Hillary Clinton (D) 8.500 $20.230 $18.500 $18. Erskine Bowles (D) 9.000 $32.250 $34. Arlen Specter (R) 12. Eliot L Engel (D) 10.050 $34. Dylan C Glenn (R) 16. Lamar Alexander (R) 12.000 $18. Nita M Lowey (D) Brian David 15.000 $58. Erskine Bowles (D) 13. Jack Ryan (R) 4. Rudolph Giuliani (R) 11.426.000 $33.550 $47.500 $95. Joe Lieberman (D) 15.300 $137.500 $30. George W Bush (R) 5. Max Baucus (D) $3. John E Sununu (R) 13.000 $18.000 $14.355 $18.000 $15.000 $29. Jon S Corzine (D) 2. Charles Schumer (D) 6. Frank Pallone Jr (D) 14.500 $30.000 $28. Chris Dodd (D) 8.432.250 $218. Tim Johnson (D) 8.250 $15. Saxby Chambliss (R) 20. Tom Daschle (D) 5.000 $19. Schweitzer (D) 16.200 $40.250 $14.500 $15. John Kerry (D) 3. Barack Obama (D) 10. Phil Gramm (R) 12.000 $58. John Kerry (D) 18.320 $53.000 $15.040 $58. Bill Bradley (D) 3. Max Cleland (D) 16. Dick Zimmer (R) 2002 Top Recipients TOTAL: 1. John McCain (R) 9.980 $28.161 $143. Rush Holt (D) 13.000 $29.750 $34. Norm Coleman (R) 19.250 $4. Jon Corzine (D) 3.438 $390. Howard Dean (D) 18. Bill McCollum (R) 19.000 $26.977 $554. Robert Torricelli (D) 5.035 $124.250 $18. Charles Schumer (D) 2.200 $175.

050 $33. Bob Graham (D) $1.000 $17.000 .938.000 $14.158 $14.500 $21. Evan Bayh (D) 4. son (R) 10. Charles Schumer (D) 2.495 $15.400 $10.000 $8. Shawn D Terry (R) 7. Lauch Faircloth (R) 19.500 $14.000 $10. Paul Coverdell (R) 19.500 $11. Chris Dodd (D) 5. Nita M Lowey (D) 18. Amo Houghton (R) 12. Jay R Pritzker (D) 16. Edolphus Towns (D) $14.000 $8.375 $8. Check Hagel (R) 13.750 $11. Arlen Specter (R) 17.200 $9.000 $11. Moynihan (R) 15. John McCain (R) Daniel Patrick 14. Rick A Lazio (R) 8. Alfonse D'Amato (R) 3.000 Appendix 1998 Top Recipients TOTAL: 1.124 19.166 $107. Bob Kerrey (D) 6.550 $70. John Breaux (D) Kay Bailey Hutchi9.500 $8. Geraldine Ferraro (D) 11.000 $9.

000 $60.000 $120.000 $80.000 $160.000 $120.000 Source: Center for Responsive Politics.000 $80.000 $140.000 $140.000 $110.000 > $10.000 $60. Lobbying amounts accessed February 2009.000 $160.651.280.000 2006 TOTAL: Goldman Sachs Baptista Group DLA Piper Rich Feuer Group Angus & Nickerson RR&G Duberstein Group Law Offices of John T O'Rourke Vinson & Elkins Williams & Jensen Clark & Assoc $3.000 $60.Appendix 125 Goldman Sachs Lobbying Expenditures224: 2008 TOTAL: Goldman Sachs Duberstein Group ML Strategies Baptista Group Capitol Tax Partners Williams & Jensen Rich Feuer Group Angus & Nickerson RR&G Bingham McCutchen LLP Law Offices of John T O’Rourke Sullivan & Cromwell Vinson & Elkins Mattox Woolfolk LLC Gephardt Group $5.000 $130.000* 2007 TOTAL: Goldman Sachs Baptista Group Duberstein Group Vinson & Elkins ML Strategies DLA Piper Angus & Nickerson Bigham McCutchen LLP Rich Feuer Group 224 $4.000 $260.000 $100.250 $2.000 $120.250 $80.000 $90.000 $81.000 $140.000 $140.000 $102.210.000 $120.000 $120.000 $40.000 > $10.000* $70.000 $280.000 $270.000 $400. Reid & Priest Law Offices of John T O'Rourke Rich Feuer Group * $1.000 Sullivan & Cromwell RR&G Williams & Jensen Law Offices of John T O'Rourke Maddox Strategies Capitol Tax Partners Clark & Weinstock $120.000 $50.000 $100.000 $80.000 $120.000 $60.712.000 $2.720.000 $160.000 $120.610.000 $3.000 $240.000 $600.000 $30.620. * Not included in totals Not included in totals .000 $60.000 $280.000 $200.000 2005 TOTAL: Goldman Sachs Clark Consulting Federal Policy Group Vinson & Elkins Thelen.

000 $240. Madigan et al Law Offices of John T O'Rourke PriceWaterhouseCoopers Sullivan & Cromwell Verner.000 $40. Culter & Pickering Winning Strategies Wash.000 $20. Liipfert et al Vinson & Elkins Williams & Jensen Winning Strategies Washington Appendix $910.000 $80.000 $240.000 $20.000 $60.000 $40.000 * 2000 TOTAL: Duberstein Group Law Offices of John T O'Rourke Morgan.000 $240.000 $120.000 > $10.000 $80.000 $120.000 $260.000 $160.000 $100.000 $100.000 $30.000* $200. Reid & Priest Vinson & Elkins Williams & Jensen $1.000 $60.000 $80. Liipfert et al Vinson & Elkins $810.230.000 $60.000 $100.000 $260.000 $240.000 $40. Clark Consulting Federal Policy Group Duberstein Group Johnson.000 $20.000 2002 TOTAL: Clark & Assoc.000 $80.000 $40.000 $200.000 $220.000* $40. Madigan et al Law Offices of John T O'Rourke PriceWaterhouseCoopers Verner.000 $100.000 $20.030.000 2001 TOTAL: Duberstein Group Johnson.000 $110.000 > $10.126 DCI Group Mattox Woolfolk LLC Duberstein Group Angus & Nickerson Clark & Assoc Williams & Jensen $100.000 $90.000 2003 TOTAL: Clark & Assoc Clark Consulting Federal Policy Group Duberstein Group Law Offices of John T O'Rourke Mattox Woolfolk LLC Thelen.000 $90.000 $80.000 $80.000 $40. Reid & Priest Vinson & Elkins Williams & Jensen Wilmer. $1.000 $70. Lewis & Bockius PriceWaterhouseCoopers Verner.000 $100.000 $80.000 $240.000 2004 TOTAL: Clark & Assoc Clark Consulting Federal Policy Group DCI Group Duberstein Group Law Offices of John T O'Rourke Mattox Woolfolk LLC Rich Feuer Group Thelen.000 $80. Liipfert et al Not included in totals $500.000 $40.000 .

000 $120.000 > $10.000 $32.280 $140.000* > $10.000 1998 TOTAL: Duberstein Group Law Offices of John T O'Rourke PriceWaterhouseCoopers Sullivan & Cromwell Verner.000 * Not included in totals .Appendix Vinson & Elkins $80.000 > $10. Lewis & Bockius PriceWaterhouseCoopers Sullivan & Cromwell Verner.000 > $10. Liipfert et al Vinson & Elkins Washington Counsel $710.000 127 1999 TOTAL: Duberstein Group Law Offices of John T O'Rourke Morgan.000 $115. Liipfert et al Vinson & Elkins $1.000* $60.264.000* $80.000 $140.000* $240.000 $160.000 $40.

Ways and Means Over Subcommittee 2008 2008 2008 2008 Source: Senate Office of Public Records <http://soprweb. Accessed January 2009. Staff Director.gov/>. Min Staff Director of Legal Affairs. Committee on Taxation Tax Counsel. Rep. Committee on Taxation Chief of Staff. James Griffin. Jones.128 Appendix Goldman Sachs Covered Official Lobbyists:225 Firm / Name of Lobbyist PriceWaterhouseCoopers Angus.US Treasury Staff Director. Liipfert et al Hawley. Committee on Ways and Means International Tax Counsel. 2005. Bill Archer Investigator. Rep. Johnson et al English. Joseph McKenney. William 225 Chief of Staff. Senate Appropriations. Barbara Kies. Tim Verner. Barbara Nickerson. Kenneth Hanford.2008 Assistant Treasury Secretary for Tax Policy Deputy Chief of Staff.senate. Gregory Capitol Tax Partners LLP Talisman. Donna Angus & Nickerson Angus. Subcommittee on Investigations 1999 2002 Business Tax Counsel. Dept. Noelle M. Patrick J. of Treasury 2005-2008. Johnathan Grafmeyer. JCT Tax Legislative Counsel . Frelinghuysen 2002-2003 Tax Counsel.2002 2001. Counsel on Ways and Means 1999. Perm. .2000 1999.2000 2001 Covered Official Position Year(s) Winning Strategies Washington Mullins. Richard Mikrut. Brian C.2002 Legislative Director. Madigan. White House 2001.

Christopher 2008 2008 2008 The Goldman Sachs Group. Sen Bingaman Tax Counsel. Faryar 2008 . Sen.A. Grassley. Lawrence Dennis. Director of Office of Environmental Connolly. Senate Finance Committee 129 Wilcox. Inc S. Ken Policy. Affairs 2008 Shirzad.Appendix Staff Director. Jeffords. LD. For Int’l Econ. CEPW Dept.Counsel. James Javens. Senate Republican Policy Committee Tax Counsel. Nat’l Security Adv. Robb . LD. Sen. Sen.

000 $5. 12.000 Lehman Campaign Contributions:226 2008 Top Recipients227 TOTAL: 1.600 $5.300 $5.400 $13. Joe Lieberman (I) Hillary Clinton (D) Pete Ricketts (R) Rick Santorum (R) Harold Ford Jr (D) Frank Lautenberg (D) Robert Menendez (D) Bill Nelson (D) Ron Klein (D) Rudy Giuliani (R) Mike Crapo (R) Dianne Feinstein (D) Michael Oxley (R) Orrin Hatch (R) Dennis Hastert (R) Barney Frank (D) Vito Fossella (R-NY) Claire McCaskill (D) Jon Kyl (R) Richard Baker (R) $917.761 $288. Individual recipient numbers do not include the 4th Quarter of 2008.100 $7.574 Decade-long lobbying expenditure total (1998-2008): $8. 8.600 $10. 227 Based on highest 1. 2.000 $4.300 2006 Top Recipients $2. 3. Campaign contribution totals accessed February 2009. 8.900 $7.400 $23. 2. 15. 14.300 $6. 7.000 $21. .000 $8. 19.100 $6. 226 19. 18. 6.190 $13.500 $4.800 $6. 12. 5.200 $31. 4.150 $140. 17.000 $116.100 $5.500 Barack Obama (D) Hillary Clinton (D) Rudy Giuliani (R) John McCain (R) Mitt Romney (R) Chris Dodd (D) Rahm Emanuel (D) Jack Reed (D) Joseph Biden Jr (D) John Edwards (D) Bill Richardson (D) Charles Rangel (D) Steny Hoyer (D) Jim Himes (D) Mark Warner (D) Lee Terry (R) Steve Israel (D) Jerrold Nadler (D) Norm Coleman (R) Source: Center for Responsive Politics. 18. Arlen Specter (R) $5.000 $5. 11.660. 11.300 $5. 16. 4. 7. 9. 13. 13.300 TOTAL: 1.600 $21. 13. 13.000 $5.600 $5. 13. 18. 13. 9.500 $4.300 $8.130 Appendix Investment Banks: Lehman Brothers Decade-long campaign contribution total (1998-2008): $6. 10. 5.800 $11.900 $54. 18.414 $82.500 $9.000 $5. 3.704.600 $9.600 $7. 10.900 $9.907 $96.211.000 contributions plus PAC money. 6.100 $20.538 $227.

650 $16. 8. 10. 6. 9. 11. 16. 14.000 $3. 12.000 $3.000 $6.500 $18. 8.000 $6. 7.500 $7. 16.000 $5.000 $3.000 $8.000 $4.000 2000 Top Recipients TOTAL: 1.500 $19. 16.300 $20. 2002 Top Recipients TOTAL: 1.000 $8. 4. Richard Baker (R) Billy Tauzin (R) Lamar Alexander (R) Erskine Bowles (D) Nita Lowey (D) Timothy Carden (D) Ron Kirk (D) Rick Boucher (D) Chris Dodd (D) Vito Fossella (R) Tom Harkin (D) Dennis Hastert (R) Amo Houghton (R) Tim Johnson (D) Mary Landrieu (D) Carolyn Maloney (D) Jay Rockefeller (D) John Spratt Jr (D) $5.970 $10. 16.550 $10. 7.000 $3.000 $7. 16. 2. 2. 7. 15. 6. Charles Schumer (D) Robert Torricelli (D) Max Baucus (D) Michael Castle (R) Michael Oxley (R) Tom Strickland (D) Max Cleland (D) Dan Wofford (D) $14. 4. 4.500 $14.000 $3.Appendix 2004 Top Recipients TOTAL: 1. 5. George Bush (R) John Kerry (D) Chris Dodd (D) Joe Lieberman (D) Charles Schumer (D) Wesley Clark (D) Richard Gephardt (D) John Edwards (D) Tom Daschle (D) Erskine Bowles (D) Nancy Pelosi (D) Barack Obama (D) John Spratt Jr (D) Arlen Specter (R) Mel Martinez (R) Alcee Hastings (D) Richard Baker (R) James Stork (D) Joseph Edward Driscoll (D) Judd Gregg (R) $1. 3. 20.000 $3. 8.000 $10.000 $10.985.250 $28. 11.000 $7.000 $35.500 $6. 17.000 $10. 17. 16.000 $4. 9.000 $8. 16. 13. 4. 16. 13.312 $55.780 $51. 9. 16. 5.250 $9. 16.250 $11.250 $3.062 $9.000 $5.000 $3. 11. 10. 6.200 $19. 2.750 $11. 228 131 9.718 $237.000 $4.000 $3.000 $929. 11. 16.550 Based only on campaign contributions .650 $92.500 $10. 10.000 $9. 14.000 $8. 3.800 $31.000 $3.000 Bill Bradley (D) Brendan Thomas Byrne Jr (D) Jon Corzine (D) Rick Lazio (R) George W Bush (R) Hillary Clinton (D) Dianne Feinstein (D) Charles Schumer (D) Michael Oxley (R) William Roth Jr (R) Michael Castle (R) Chris Dodd (D) Spencer Abraham (R) $231.250 $3.000 $3.000 $9.812 $8.000 $10.000 $3. 11. 16. 14.950 $35.500 $7. 19.970 228 3.

500 $3.000 $2.000 $5.000 $2. 11. 6. 15. 13. 19. 16. 15. 9.931 $10.000 $4. 3.500 $4.000 $3.500 $7. 15. 19.500 Appendix 1998 Top Recipients TOTAL: 1. 11. 15.000 . 5. Bob Kerrey (D) Dennis Hastert (R) Charles Rangel (D) Edolphus Towns (D) Richard Lugar (R) Rick Boucher (D) Rod Grams (R) Joe Lieberman (D) $6. 18.000 $2. 15.500 $2.400 $6. 7. 16.500 $4. 4.500 $3. 19. 15. 8.132 13.500 $3.050 $2. 15.200 $9.500 $7. 15.000 $3. 10. 13.000 $2.500 $5.550 $2.500 $4. 15.000 $2. Charles Schumer (D) Chris Dodd (D) Tom Daschle (D) Alfonse D'Amato (R) Rick Lazio (R) Charles Rangel (D) Brendan Thomas Byrne Jr (D) John Breaux (D) Bob Kerrey (D) Christopher Bond (R) Rick White (R) Jerry Weller (R) Thomas Manton (D) Billy Tauzin (R) Robert Bennett (R) John Ensign (R) Newt Gingrich (R) Bob Graham (D) Fritz Hollings (D) Amo Houghton (R) Jerry Kleczka (D) John LaFalce (D) $427.000 $2. 2.000 $2.000 $2.050 $2.000 $5.

Athy & Casey $600.000 $540.000 2007 TOTAL: Lehman Brothers O'Neill.000* 2001 2005 TOTAL: Lehman Brothers American Continental Group O'Neill. Athy & Casey DLA Piper $1.000 $820.000 $80.000 $620.000 $200.000 Source: Center for Responsive Politics. Liipfert et al O'Neill.000 $80. Lobbying amounts accessed February 2009.000 $80.000 $40.000 > $10.000 $920.000 $40. Athy & Casey 229 TOTAL: Lehman Brothers Verner.000 $280.000 $60. Athy & Casey DLA Piper $1.000 $590.000 $40. Liipfert et al Piper Rudnick LLP $660. Liipfert et al O'Neill.000 $40.000 $80. Athy & Casey Piper Rudnick LLP $660.000 $40.000 $40.000 2003 TOTAL: Lehman Brothers O'Neill.000 $200.000 $540.000 2004 TOTAL: Lehman Brothers O'Neill.000 $100. Athy & Casey Verner.000 $560.000 $320.000 2002 TOTAL: Lehman Brothers O'Neill.000 2006 TOTAL: Lehman Brothers American Continental Group O'Neill.000 $80. * Not included in totals .Appendix Lehman Lobbying Expenditures:229 2008 TOTAL: Lehman Brothers O'Neill. Athy & Casey Piper Rudnick LLP 133 $740.000 $80.000 $720.000 2000 TOTAL: Lehman Brothers Verner. Athy & Casey DLA Piper $720.000 $80.080.000 $140. Athy & Casey DLA Piper $840.000 $70.140.000 $80.

000 $140.000 $200.000 $560.134 1999 TOTAL: Lehman Brothers Verner. Liipfert et al O'Neill.000 $80.000 $80. Athy & Casey $860. Liipfert et al O'Neill.000 $580.000 $20.000 .000 Appendix 1998 TOTAL: Lehman Brothers Verner. Athy & Casey Palmetto Group $800.

senate. Liipfert et al Hawley. Dem. Cristina L.. Rep. Accessed January 2009. Noelle M. Krasow.Appendix 135 Lehman Covered Official Lobbyists:230 Firm / Name of Lobbyist Verner. . Covered Official Position Year(s) Legislative Director. Cloakroom 1999-2001 1999-2000 230 Source: Senate Office of Public Records <http://soprweb.gov/>. Cloakroom Asst. Bill Archer Sr. Sen.

Ron Paul (R) 231 2006 Top Recipients $2. Chuck Hagel (R) 9.724 Decade-long lobbying expenditure total (1998-2008): $59.900 $30.650 $50.000 $9.300 Source: Center for Responsive Politics.300 $16. . David Dreier (R) $1. Mike DeWine (R) 6. Rudy Giuliani (R) 4. Gregory Meeks (D) 19. Jim Matheson (D) 13.200 $17.568 $172.675 $10. Robert Menendez 7.136 Appendix Investment Banks: Merrill Lynch Decade-long campaign contribution total (1998-2008): $9.900 $14. Hillary Clinton (D) 4. Chuck Hagel (R) 18.300 $31.200 $10.500 $10. Rahm Emanuel (D) 11. Chris Dodd (D) 7.400 $11.850 $20. Joseph Biden (D) Christopher Shays 14.450 $10. Mark Pryor (D) 9. Chris Dodd (D) 2.720 $210. Campaign contribution totals accessed February 2009.347 $360. Michael McGavick (R) 18.800 $19.200 $10.001 TOTAL: 1.450 $18.900 $9. Debbie Stabenow (D) 10.450 $49. Bob Corker (R) 5. Mitch McConnell (R) 8. Ed Royce (R) 19.620 $264. George Allen (R) 11.600 $23. Rick Santorum (R) 10.800 $14.510 $33. Harold E Ford Jr (D) 3. Geoff Davis (R) 20.153.400 $10. Linda Ketner (D) 17.275 $202.780. Tim Ryan (D) 20. Individual recipient numbers do not include the 4th Quarter of 2008.700 $8.977. Sheldon Whitehouse (D) 16.600 $9.050 $12. Joe Lieberman (/I) 15.900 $23. Thomas Kean Jr (R) 17. Max Baucus (D) 13. (R) 15. John McCain (R) 2.500 $10. John Edwards (D) 12.025 $67.075 $17.076. Barack Obama (D) 3. Jack Reed (D) 16.200 $9.733 $61. Christopher Shays (R) 14.760 Merrill Lynch Campaign Contributions:231 2008 Top Recipients TOTAL: 1.800 $15. Mitt Romney (R) 6.000 $28.000 $8. Ben Nelson (D) 8.150 $9. Mike Ferguson (R) 12. Hillary Clinton (D) 5.

William Roth Jr (R) 18. Chellie Pingree (D) 11. George W Bush (R) 2. Erskine Bowles (D) 4. Rudy Giuliani (R) 12.250 $4.250 $41. Arlen Specter (R) 5. Jon S Corzine (D) 7. Joe Lieberman (D) 8. George Allen (R) 14.200 $1.000 . Bill Bradley (D) 3.000 $19.306 $76.900 $21.250 $6. (D) 17.000 $5. Spencer Abraham (R) 10.187.000 $10. Dick Zimmer (R) 13. Elizabeth Dole (R) Christopher Shays 7.000 $7.400 $9. Arlen Specter (R) 7.000 $8.675 $7. Richard C Shelby (R) 13.925 $20. Orrin Hatch (R) 15.700 $9.526 $50.780 $69.500 $5. Jim Bunning (R) 19.600 $27. Phil Gramm (R) 11. John Kerry (D) 4. Tom Strickland (D) 19.750 2000 Top Recipients TOTAL: 1.000 $6. Hillary Clinton (D) 8. Douglas Forrester (R) 10.550 $28.000 $17. Rick Santorum (R) 10.000 $7. (R) 8. Scott Paterno (R) 6. Christopher Cox (R) 18. Joe Lieberman (D) 18. David M Beasley (R) 3. Charles Schumer (D) 5.250 9. John McCain (R) 4. Hillary Clinton (D) 13.200 $4. (R) 16.000 $17. Wayne Allard (R) 11. Rick A Lazio (R) 5.000 $11.000 $7. Howard Dean (D) Christopher s 'Kit' 14.500 $13. Robert Torricelli (D) 3.500 $12.150 $7.000 $15. Lamar Alexander (R) 6.700 $4.750 $9.750 $6. Wesley Clark (D) 12. James M Talent (R) David Howard Fink 16.000 $6.500 $111.000 $4.873. Barack Obama (D) 9.242 $8. Michael R Turner (R) $2.250 $22. Charles Schumer (D) 2002 Top Recipients TOTAL: 1.000 $10. Jay Helvey (R) 17.425 $87. William Gormley (R) 16. Norm Coleman (R) 137 $6. Jim Marshall (D) 17.500 $8.400 $63. Al Gore (D) 6.200 $9.000 $29. Lamar Alexander (R) 20.750 $11.000 $10. Rob Simmons (R) 14. Kent Conrad (D) 17.250 $4.500 $4. Suzanne Terrell (R) 15. Paul S Sarbanes (D) 9.350 $14. George W Bush (R) 2. Max Baucus (D) 19. Tom Daschle (D) 11.250 $7. John Kerry (D) $955.Appendix 2004 Top Recipients TOTAL: 1.500 $24.750 $13.763 $580.004 $118.200 $8. Bond (R) Christopher Shays 15.044 $132. Charles Schumer (D) 2.500 $7.750 $8.

250 $10. Moynihan (R) 10.500 $10.000 $9.000 Appendix 1998 Top Recipients TOTAL: 1.000 $7. Alfonse D'Amato (R) 2.750 $6. (D) 4.150 $17.531 $53.750 $16. Robert Torricelli (D) $7. Paul Coverdell (R) 12. Bob Kerrey (D) 5. Ellen Tauscher (D) $1.500 . Chris Dodd (D) 6.450 $6. Geraldine Ferraro (D) 7.500 $6.400 $10. Campbell (R) 18. Spencer Abraham (R) 15.000 $9. Evan Bayh (D) Daniel Patrick 9.300 $10. Gary A Franks (R) Christopher Shays 13.500 $5. Charles Schumer (D) Carol Moseley Braun 3. David Wu (D) 19. Tom Daschle (D) 13.200 $31. James M Casso (D) 10.000 $5. Michael Coles (D) Ben Nighthorse 17.138 18.500 $6. Lauch Faircloth (R) 8. (R) 15.750 $6.027.750 $5.000 $14. Matt Fong (R) 19.

000 2004 TOTAL: Merrill Lynch Ernst & Young Piper Rudnick LLP Deloitte Tax Brownstein.700.000 > $10.000 $140.825.000 $600.000 $605.000 $604.420.000* James E Boland Jr $6.000 > $10.000 $140.000 $80.760 $3.952. Madigan et al Mayer.174.000 $80.000 $160.000 $140.770.000 $210.100.000 $80. Lobbying amounts accessed February 2009.000 $80.000 $4.000 $340.000 $600.000 $80. Hyatt et al Davis & Harman Baptista Group James E Boland Jr John Kelly Consulting $6.000 $10.000 2005 TOTAL: Merrill Lynch Ernst & Young DLA Piper Brownstein.000 $600.000 $80.000 $600.397.000 $80.000 $4.300.000 $5.000 $4.000 $4.160.000 $3.Appendix Merrill Lynch Lobbying Expenditures:232 2008 TOTAL: Merrill Lynch Ernst & Young Johnson. Hyatt et al James E Boland Jr John Kelly Consulting Baptista Group $120. Hyatt et al Davis & Harman 2006 TOTAL: Merrill Lynch Mayer. Brown et al DLA Piper Brownstein.000 $80.000.000 $150.000 $240. Brown et al Ernst & Young DLA Piper Davis & Harman 232 139 Brownstein.210.000 Source: Center for Responsive Politics.000* James E Boland Jr John Kelly Consulting Seward & Kissel $5. Hyatt et al Davis & Harman Baptista Group John Kelly Consulting $6.000 $380.760 $1.000 2003 TOTAL: Merrill Lynch Ernst & Young * Seward & Kissel $4.000 $20.480.000 $140. Hyatt et al Davis & Harman Deloitte Tax 2007 TOTAL: Merrill Lynch Ernst & Young DLA Piper Mayer.000 $120.000 $120. Not included in totals .000 $60.000 $120.000 $300.000 $120.000 $40.000 $240.000 $200. Brown et al Brownstein.000 $120.

000 $20.000 $40.000 $480.000 $140.000 $65.000 $260.000 $100.140 Piper Rudnick LLP Deloitte Tax Davis & Harman James E Boland Jr Brownstein. Liipfert et al Piper Rudnick LLP Davis & Harman James E Boland Jr Seward & Kissel Deloitte & Touche Capitol Tax Partners $4.400.000 $80.000 1999 TOTAL: Merrill Lynch Ernst & Young Swidler.000 $200. Berlin et al Wilmer.660.000 $2.940.000 > $10.000* > $10.960.000 $3.580.000 > $10.000 $620.000 $240.000 $3.000 * $5.000 $80. Liipfert et al Davis & Harman OB-C Group Ernst & Young Swidler.000 $40.000 $180.000 $160.000 $160.000 $300. Berlin et al Verner.000 $460.510.000 $200.000 $160.000 $3. Liipfert et al Rhoads Group OB-C Group Davis & Harman Seward & Kissell George C Tagg $4.000 $200.160.000 $3. Culter & Pickering Appendix $240. Hyatt et al Seward & Kissel $460.000 $60.000* 2002 TOTAL: Merrill Lynch Ernst & Young Verner.000 $600.000 $600.000 $320.000 $20.000 $580.000 1998 TOTAL: Merrill Lynch Washington Counsel Swidler.000 $300. Liipfert et al Davis & Harman OB-C Group James E Boland Jr Seward & Kissel $4.000 > $10.800.000 $40.100.000* 2001 TOTAL: Merrill Lynch Ernst & Young Verner.000 $60.000 $50.000 $140.400. Berlin et al Verner.000 $20. Liipfert et al Davis & Harman Rhoads Group Seward & Kissel George C Tagg OB-C Group $5.000 $300.000 $140.000 $160.000* Verner.000 2000 TOTAL: Merrill Lynch * Not included in totals Not included in totals .

Cristina L. Berry. Thibau. Johnathan Dep. Sen. Nick Conklin. Senator Kay Bailey Hutchison 1999 2003 Vice President. .gov/>. Louis A. Capitol Tax Partners. Mark A. Government Relations Chief of Staff. Government Relations Managing Director. Nicholas E. Government Relations Director. Costantino Jr. Lon N. William Mikrut. Liipfert et al Krasow.US Treasury Asst.Treasury Tax Legislative Counsel . Verner. Hyland. Secretary for Legislative Affairs . OB-C Group Calio. Kelly. Goldstein. Accessed January 2009. Dem. Government Relations Director. Steven K. Cloakroom Assistant. M. Senate Committee on Finance Special Assistant to the President Covered Official Position Year(s) 141 1999-2002 1999-2000 2003-2008 2004 1999-2008 1999-2005 2003-2008 2008 2008 2007-2008 2008 2000-2005 233 Source: Senate Office of Public Records <http://soprweb. Bruce E. Janelle C. Asst. Government Relations Director. Doug Giordano. Tax Counsel. Inc Thompson Jr. Joseph Talisman.Appendix Merrill Lynch Covered Official Lobbyists:233 Firm / Name of Lobbyist Ernst & Young Badger. Director of Government Relations Vice President. Cloakroom Legislative Director. Government Relations Director. Brian Merrill Lynch & Co. LLP Fant. Treasury Secretary for Tax Policy 2002 2002 2002 Assistant to the President Sr. James E. Micali. Senate Majority Whip 12/98 Minority Chief. John F.senate.

Legislative Director. Jr.C. LLP Hyland.Cong. Senator Klobuchar 2008 2003-2008 2008 . Ellen Whonder. P.Office of Sen. Policy. Legislative Asst. Sheila LD. Alfred Chube. Madigan et al Murphy. Mottur. Staff Director . Carmencita Sr. . Telecommunications Counsel .Subcommittee on House Transport and Commercial Development.142 Piper Rudnick. Legislative Corresp. . Harold Ford. Charles Schumer Johnson. James E.Commerce Committee Sr. Min Stf Dir Subcomm on Econ. Senator Hutchison Appendix 2002-2004 Brownstein Hyatt & Farber.

John McCain (R) 4. Scott Kleeb (D) $1.943. Al Franken (D) 19.350 $19. Michael N Castle (R) 13. Bob Corker (R) 16.000 Morgan Stanley Campaign Contributions:234 2008 Top Recipients TOTAL: 1.933 $14. Rahm Emanuel (D) 15. Scott Kleeb (D) 234 2006 Top Recipients $3.300 $13. Conrad Burns (R) 20.050 Source: Center for Responsive Politics.627 $425. Fred Thompson (R) 8. Individual recipient numbers do not include the 4th Quarter of 2008. Susan M Collins (R) 16. Barack Obama (D) 2. Jim Himes (D) 19. (R) 15.980 $258.750 $133.100 $14. Bill Richardson (D) 17. Hillary Clinton (D) 3. John Boehner (R) 17. Joe Lieberman (I) 5. Jon Kyl (R) 8.800 $30. Jack Reed (D) 11.850 $17.100 $11. Mike DeWine (R) 10.100 $15.367.100 $16. Max Baucus (D) 9.500 $23.573.400 $42.677 $165.200 TOTAL: 1.502 $376.550 $12.600 $14.100 $16. Niki Tsongas (D) 14.200 $12.300 $14.Appendix 143 Investment Banks: Morgan Stanley Decade-long campaign contribution total (1998-2008): $14.000 $17. Thomas Kean Jr (R) Christopher Shays 14. Mitt Romney (R) 5.850 $11.200 $24. Robert Menendez (D) 17.900 $12.450 $17. .857 Decade-long lobbying expenditure total (1998-2008): $20.200 $13.350 $12.000 $13. Rudy Giuliani (R) 6. Hillary Clinton (D) 2.150 $11.200 $15.880 $11.650 $42.835. Ned Lamont (D) 19. Harold Ford Jr (D) 3. McFarland (R) 12. Mark Kirk (R) 13.060 $43.250 $19. Mark Warner (D) 12. Tom Carper (D) 18. Orrin G Hatch (R) 7. Chris Dodd (D) 7. Rick Santorum (R) 6. Dennis Hastert (R) Kathleen Troia 11.700 $19. Chris Dodd (D) 4. Michael N Castle (R) 9.850 $21.750 $69.033 $116. Campaign contribution totals accessed February 2009.900 $14. Mark Kirk (R) 10.

Tom Campbell (R) 2002 Top Recipients TOTAL: 1.400 $24.000 $23. Erskine Bowles (D) 3.300 $41. Wesley Clark (D) 14.500 $23. John Edwards (D) 8.500 .500 $15. James M Talent (R) 14. Wayne Allard (R) 19.450 $14.400 $15. Bill Bradley (D) 5. Dennis Hastert (R) 7. Kent Conrad (D) 17.480 $180. Hillary Clinton (D) 9. William Roth Jr (R) 15.850 $52.000 $12.750 $20. Charles Schumer (D) 4.000 $11.750 $33.750 $20. George W Bush (R) 2. George W Bush (R) 2.500 $38.200 $10. Rudy Giuliani (R) 14.800 $14.000 $10. Mark Foley (R) 19.144 2004 Top Recipients TOTAL: 1.750 $19. Lindsey Graham (R) 13. Richard Baker (R) 11.000 $2.550 $18.450 10. Charles Schumer (D) 4.250 $19. Evan Bayh (D) 11.656.500 $27. Bill McCollum (R) 12.627 $148. Howard Dean (D) 10.000 $15.242 $52.050 $30. (R) 17. Phil Gramm (R) 7. Spencer Bachus (R) Appendix $14.150 $16. Robert Bennett (R) 6. Bond (R) 19.050 $32. Michael N Castle (R) Andrew McKenna 15.350 $27.000 $38. Mark Kirk (R) 17. Charles Schumer (D) 2. Charles S Robb (D) 11. Frank Lautenberg (D) 6. Arlen Specter (R) 11. Arlen Specter (R) 18.450 $126. Rick A Lazio (R) 3.050 $139.979 $57. Richard Burr (R) Christopher S 'Kit' 18.000 $16.700 $16. Erskine Bowles (D) 9. Saxby Chambliss (R) 7.000 $10.000 $18.750 $29.700 $14.000 $15.000 $14. John J LaFalce (D) 16. Carolyn Maloney (D) 19. Norm Coleman (R) $1.484 $600.549 $15.000 $46.250 $12.899. Evan Bayh (D) 19.000 $34.800 $14. Rob Portman (R) 5.000 $13.000 $17. Max Baucus (D) 8. Mike Ferguson (R) 15.286.000 $18. John Kerry (D) 3.000 $17.050 $15. Jon S Corzine (D) 9. Chris Dodd (D) 5.150 $12. Michael N Castle (R) 10.250 $10.000 2000 Top Recipients TOTAL: 1. Elizabeth Dole (R) 4. Roy Blunt (R) 17. Spencer Abraham (R) 13.000 $11. James DeMint (R) 12.000 $13.000 $97. Barack Obama (D) 13. Al Gore (D) 6. John McCain (R) 8. Billy Tauzin (R) 16. Tom Daschle (D) 15.000 $12. Mel Martinez (R) $3.

Bob Franks (R) $11.008.000 $5.844 $48.500 $6. Jon D Fox (R) 8. Barbara Mikulski (D) 6.000 $5. Alfonse D'Amato (R) 5.000 $5.500 $7.100 $31. Arlen Specter (R) 10. Lauch Faircloth (R) 2.000 $5. John J LaFalce (D) $1.225 $5.750 .250 $6. Billy Tauzin (R) 19.800 $4. Charles Schumer (D) 4.000 $5.000 $6.250 $5. Michael G Oxley (R) 12. Phil Crane (R) 12. Michael N Castle (R) 11. Rick A Lazio (R) 12.750 $31. Trent Lott (R) 12.Appendix 20.250 145 1998 Top Recipients TOTAL: 1. Chris Dodd (D) 12.750 $5.000 $5.500 $7. Robert Bennett (R) 7.000 $4. Edward Kennedy (D) 12. Evan Bayh (D) 3.500 $30. Rick White (R) 20. Larry Schneider (D) 12. Tom Daschle (D) 8.

146 Morgan Stanley Lobbying Expenditures235: 2008 TOTAL: Morgan Stanley Capitol Tax Partners Eris Group American Capitol Group Baptista Group Kate Moss Co DCI Group $3.000 $40.000 2007 TOTAL: Morgan Stanley Capitol Tax Partners Eris Group American Capitol Group Baptista Group James E Boland Jr Kate Moss Co Alston & Bird DCI Group $3.000 $120.000 $2.000 $100.000 $240.000 $60.000 $120.000 $120.000 $80.000 $40. Lobbying amounts accessed February 2009.000 $60.005.000 $120.000 $2.000* 2005 TOTAL: Morgan Stanley Capitol Tax Partners Bartlett & Bendall James E Boland Jr Kate Moss Co $2.000 TOTAL: Morgan Stanley Capitol Tax Partners Bartlett & Bendall James E Boland Jr Alston & Bird Kate Moss Co $2. * Not included in totals * Not included in totals .000 $120.000 $240.000 $120.000 2006 TOTAL: Morgan Stanley Capitol Tax Partners James E Boland Jr Bartlett & Bendall Alston & Bird Eris Group 235 2003 $3.000 > $10.000 $100.000 > $10.000 $40.000 $20.000 $120.000.000 $2.000 Source: Center for Responsive Politics.000 $40.000 * Alston & Bird 2004 TOTAL: Morgan Stanley Capitol Tax Partners Bartlett & Bendall James E Boland Jr Kate Moss Co Alston & Bird $2.000 $50.840.000 $240.000 $40.000 $60.000 $2.000 * Appendix Kate Moss Co American Capitol Group Baptista Group DCI Group $40.360.000 $2.000 $60.280.000 $40.580.000 $80.000 $200.500.000 $120.720.000 $60.000 $2.000 $40.000 $80.040.360.750.180.000 $45.000 $240.000 $240.000 > $10.

000 $80.000 $80.000 $70.000 $40.000 $80.Appendix 2002 TOTAL: Morgan Stanley Capitol Tax Partners Alston & Bird James E Boland Jr Kate Moss Co $1.000 $920.960.000 147 2001 TOTAL: Morgan Stanley James E Boland Jr Capitol Tax Partners Kate Moss Co Alston & Bird Palmetto Group George C Tagg $1.300.000 $1.000 $80.000 1998-2000 N/A .000 $80.000 $30.540.000 $60.000 $200.

Bingaman Tax Counsel. William Grafmeyer.JCT Tax Counsel.senate. Accessed January 2009. Sen. . Sen. Sen. Sen.gov/>. Christopher Bartlett & Bendall Amy D. William Mikrut. Lawrence McKenny. Feinstein 2006-2007 Tax Counsel. Grassley.148 Appendix Morgan Stanley Covered Official Lobbyists:236 Firm / Name of Lobbyist Capitol Tax Partners Fant. Paul G Eris Group Kadesh. Smith Gill. Rep.Counsel. Shane Alston & Bird Martino. Joseph Talisman. (treasury) for legislative affairs Tax Legislative Counsel . Jonathan Wilcox. Robb . Senate Republican Policy Committee Chief of Staff. Richard Dennis. Amo Hougton Deputy Chief of Staff . Senate Finance Committee 2006 Deputy Assistant Secretary. Sen. US Treasury Legislative Director. Rep. Mark Chief of Staff. Spencer Bachus 2003 2004-2005 2007 Deputy Asst Sec.US Treasury Assistant Treasury Secretary for Tax Policy Staff Director. Finance Committee 2001-2004 2001-2008 2001-2008 2006-2008 2004-2008 2003-2008 2008 2008 Covered Official Position Year (s) 236 Source: Senate Office of Public Records <http://soprweb. James Javens.

250 $17.292. Spencer Bachus (R) 9. Chris Dodd (D) 6. Pete Sessions (R) 11. (D) 8.607 $14.260 Decade-long lobbying expenditure total (1998-2008): $28. Patrick McHenry (R) Dutch Ruppersberger 12. John M. Castle (R) Dutch Ruppersberger 9. Michael N.500 $12.200 $16. Kay R. Barney Frank (D) 16. Joe Lieberman (I) 20. (D) 13.Appendix 149 Commercial Banks: Bank of America Decade-long campaign contribution total (1998-2008): $11. Mark Warner (D) 15.700 $16.900 $14. Rick Santorum (R) 7. Melissa Bean (D) Michael Fitzpatrick 15.130 $15. (R) 16.600 $13.440 BOA Campaign Contributions:237 2008 Top Recipients TOTAL: 1.533 $64. Mitt Romney (R) 7. . Olympia J. Ford Jr.550 $44.552 $126. James M. Clyburn (D) 20. Hillary Clinton (D) 3.635. Sue Myrick (R) 17. Spratt Jr.100 $52.800 $32.950 TOTAL: 1. John E.549 $14. Sununu (R) 18.000 $14.321 $11. Talent (R) $2. (D) 5.000 $25.600 $14.050 $63.600 $11. Rudy Giuliani (R) 5.000 $13. Watt (D) 14.828 $17. James E.999 $16.250 $20. Melissa Bean (D) 10. Dick Durbin (D) 13.369 $230. Sununu (R) 237 2006 Top Recipients $2.450 $16.400 $31.098. David McSweeney (R) 4. Melvin L. Tom Carper (D) 8.800 $12. John McCain (R) 3.000 $15. Castle (R) 6.175 $106. Jack Reed (D) 19. (D) 10. Rahm Emanuel (D) 12. Barack Obama (D) 2. Robert Menendez (D) 14.130 $18.500 $17.250 $21. Harold E. Snowe (R) 19.500 Source: Center for Responsive Politics. Individual recipient numbers do not include the 4th Quarter of 2008. Hillary Clinton (D) 4.750 $12. John E.500 $11.000 $10. Jack Reed (D) 10. Michael N. Hagen (D) 17. Biden Jr. Peter Roskam (R) 18. (D) 2.071 $69.212. Joseph R.085 $33. Campaign contribution totals accessed February 2009.500 $53.000 $16.

139 $16.000 $8. Pete Sessions (R) 19.193.250 $15.600 $22. Robin Hayes (R) 16. Sue Myrick (R) 12. George W. (D) 5. Spratt Jr.522 $113.150 $20.750 $7.000 $15. (D) 4. Spencer Bachus (R) 7. Tim Johnson (D) 14. Zell Miller (D) 14.761 $126.450 $11.500 $37. Charles S.888 $6. John M. John M. Elizabeth Dole (R) 18.000 $10.250 10.500 $11. Michels (R) 20.950 $10. Dianne Feinstein (D) 6. (D) 13. Ellen Tauscher (D) 10. Michael G.500 $25. Max Baucus (D) 6. Jerry Weller (R) 20. Erskine B.065 $10. Elizabeth Dole (R) 4.000 $8. Charles Schumer (D) 2.786 $195. Richard Burr (R) 5.500 $56.000 $9. Al Gore (D) 8.000 $10. Watt (D) 10.750 $7. John Linder (R) 19. Harold E. David Vitter (R) 18.700 2000 Top Recipients TOTAL: 1.500 $20. Bill Nelson (D) 11.000 $13.450 $16.100 $43. John Edwards (D) 17.000 $9. Spratt Jr.649. Oxley (R) 12. (D) 4. John McCain (R) 12. Richard Gephardt (D) 16. Richard Gephardt (D) 16. Johnny Isakson (R) $2. Tim J.660 $57. John Kerry (D) 3. Bush (R) 2. Dennis Hastert (D) 16.750 $18. Martin Frost (D) 9. John M. Richard Baker (R) 16.750 $18.700 $44.000 $7. Bowles (D) 6.500 $7. Melvin L. Ford Jr. Elizabeth Dole (R) 8. Jay Helvey (R) 14.500 $17. John Edwards (D) 9. Richard Gephardt (D) 11. Lazio (R) 2002 Top Recipients TOTAL: 1.050 $17. David Dreier (R) 11. Bill Bradley (D) 3. Sue Myrick (R) $1. John Cornyn (R) 7.150 $7.850 $16.750 .800 $28.750 $8.000 $10.550 $13. George W.800 $11. Bill McCollum (R) 13.000 $10. Martin Frost (D) 9.750 $7. Robb (D) 18.500 $8.360. Spratt Jr.500 $13.750 $15. Oxley (R) 15. Sue Myrick (R) 7. Bush (R) 2.500 $18.500 $16.000 $12.000 $7.000 $14. Phil Gramm (R) 5. Lindsey Graham (R) 14.000 $6. Ken Bentsen (D) Appendix $9.202 $50. Barack Obama (D) 7.150 2004 Top Recipients TOTAL: 1. Mike Ferguson (R) 17. Bowles (D) 3.450 $26. Mel Carnahan (D) 18. Rick A. David Dreier (R) 14. Erskine B.000 $7.500 $1.000 $12.450 $11. Charlie Gonzalez (D) 12. Michael G.

Dick Armey (R) $2. Bob Graham (D) 5. Bennett (R) 9. Paul Coverdell (R) 15.500 $17. Martin Frost (D) 14. John Linder (R) 12.000 $16.000 $15. Lazio (R) 19. Alfonse D'Amato (R) 15. Richard Baker (R) Carol Moseley Braun 8.000 $14.050 $16.Appendix 1998 Top Recipients TOTAL: 1. (D) 7.500 $17. 'Kit' 2.000 $13.000 $12.000 151 . Bond 3.114.950 $17.000 $14. Spratt Jr.000 $21.390 $56. Evan Bayh (D) 12.500 $12. Bill McCollum (R) 4. Ellen Tauscher (D) 20.500 $12. Robert F. Richard Gephardt (D) 15.300 $12. Tom Daschle (D) 11. Lauch Faircloth (R) Christopher S. Matt Fong (R) 15.550 $17.900 $18.500 $12.000 $16. (D) 9. John M.500 $12. Rick A. John McCain (R) 6.

152 BOA Lobbying Expenditures:238 2008 TOTAL: Bank of America King & Spalding Quinn.000 $60.000 $100.090.000* 2005 $4. * Not included in totals * Not included in totals .000 2007 TOTAL: Bank of America Quinn.000 $360.000 $360.000 $4.000 $300.000 $60.000 $165. Gillespie & Assoc Smith-Free Group Bryan Cave Strategies Public Strategies Clark Consulting Federal Policy group Quadripoint Strategies American Capitol Group Covington & Burling $5.000 $1.946.000 $40. Lobbying amounts accessed February 2009.000 TOTAL: Bank of America Clark Consulting Federal Policy group Quinn. Gillespie & Assoc Kilpatrick Stockton Clark Consulting Federal Policy group Smith-Free Group King & Spalding Covington & Burling Bryan Cave Strategies Quadripoint Strategies Public Strategies $1.000 $280.000 $250.000 $300.000 $20.400 $3.000 $180.000 $76.000 $360.000 $100.900.000 $100.000 $20. Gillespie & Assoc Clark Consulting Federal Policy group Smith-Free Group Covington & Burling Angus & Nickerson Cypress Advocacy Kate Moss Co Appendix $3. Gillespie & Assoc Smith & Assoc Kilpatrick Stockton Angus & Nickerson Covington & Burling Kate Moss Co Winston & Strawn 2006 TOTAL: Bank of America Kilpatrick Stockton Quinn.000 $240.000 $20.000 $20.000 $240.000 $300.000 > $10.000.000 $480.220.000 > $10.000 $240.000 $120.000* 238 Source: Center for Responsive Politics.000 $300.400 $30.755.000 $20.986.486.014 $1.000 $160.000 $90.014 $400.

Appendix 2004 TOTAL: Bank of America Clark Consulting Federal Policy group Kate Moss Co Perkins, Smith & Cohen Reed Smith LLP Covington & Burling $1,020,000 $660,000 2000 $300,000 $40,000 $20,000 > $10,000* > $10,000
*

153 Holmes, Weddle & Barcott > $10,000*

TOTAL: Bank of America PriceWaterhouseCoopers Beck, Edward A III Kate Moss Co O'Connor & Hannan Hyjek & Fix

$1,947,331 $1,567,331 $240,000 $40,000 $40,000 $40,000 $20,000 > $10,000*

2003 TOTAL: Bank of America Clark Consulting Federal Policy group Perkins, Smith & Cohen Covington & Burling Kate Moss Co Reed Smith LLP $1,196,141 $656,141 $300,000 $160,000 $40,000 $40,000 > $10,000*

Winston & Strawn

1999 TOTAL: Beck, Edward A III Covington & Burling Hyjek & Fix Kate Moss Co PriceWaterhouseCoopers $340,000 $20,000 > $10,000* $20,000 $40,000 $260,000 > $10,000*

2002 TOTAL: Bank of America Clark Consulting Federal Policy group PriceWaterhouseCoopers O'Connor & Hannan Kate Moss Co $1,179,350 $679,350 $200,000 $140,000 $120,000 $40,000

Winston & Strawn

1998 TOTAL: Bank of America NationsBank Bergner, Bockorny et al Kate Moss Co PriceWaterhouseCoopers $4,933,000 $3,960,000 $620,000 $140,000 $73,000 $60,000 $60,000 > $10,000* $20,000

2001 TOTAL: Bank of America PriceWaterhouseCoopers O'Connor & Hannan Kate Moss Co $1,932,204 $1,552,204 $240,000 $100,000 $40,000
*

Beck, Edward A III Covington & Burling Covington & Burling

Not included in totals

154 BOA Covered Official Lobbyists:239 Firm / Name of Lobbyist American Capitol Group Nate Gatten Prof. Staff, Senate Banking Comm. Leg. Asst, Sen. Bennett Staff, Sen. Budget Comm. Brian Cave Strategies LLC Waldo McMillan Intern, Rep. Chaka Fattah Floor Asst, Counsel for Bus. Affairs, Sen. Harry Reid Covered Official Position

Appendix

Year(s)

2008

2008

Federal Policy Group (Clark & Wamberg) Ken Kies Matt Dolan Pat Raffaniello King & Spalding William Clarkson Archibald Galloway III Legislative Asst, Sen. Susan Collins Sr. Defense Policy Advisor, Sen. Jeff Sessions 2007-2008 2008 Chief of Staff, Joint Comm on Taxation Counsel, Sen. David Durenberger Chief of Staff, Cong. Bill Brewster 2008 2008 2008

Quinn Gillespie & Associates Counsel, Pres. Clinton; Chief of Staff, VP Jack Quinn Gore Staff Dir/CoS, Sen Lott; CoS Rep. Kemp and Dave Hoppe Coats Jeff Connaughton Allison Giles Elizabeth Hogan Bonnie Hogue Duffy
239

2008 2008 2008 2007-2008 2005-2008 2008

Special Asst to chair of Sen. Judiciary Comm Special Asst to White House Counsel Chief of Staff, Ways & Means Comm Legislative Asst, Rep. Thomas Special Asst, Dept of Commerce Assoc. Dir, EOP; Intern, Rep. McCrery Staff, Sen. Comm on Aging

Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.

Appendix Legislative Asst, Sen. Reed Harriet James Melvin Kevin Kayes Marc Lampkin Nick Maduros Christopher McCannell Amy Jensen Cunniffee Mike Hacker Covington & Burling Holly Fechner Angus & Nickerson Barbara Angus Gregory Nickerson Cypress Advocacy Patrick Cave Kilpatrick Stockton Armand Dekeyser The Smith-Free Group Jon Deuser PricewaterhouseCoopers Tim Hanford Kenneth Kies Barbara Angus Tax Counsel, Ways and Means Comm. Chief of Staff, Joint Comm. on Taxation Business Tax Counsel, Joint Comm. on Taxation Chief of Staff, Sen. Bunning 2006 Chief of Staff, Sen. Jeff Sessions Asst Sec, Dept of Treasury 2006 Int’l Tax Counsel, Dept of Treausry Tax Counsel, Ways and Means Comm 2006 2006 Policy Dir, Sen. Edward Kennedy 2007 Prof. Staff, Rep Charles Hatcher Chief Counsel, Sen. Reid Policy Dir, Sen Coverdell Cloakroom assistant; Intern, Sen Lehman Chief of Staff, Cong. Crowley Special Asst to the Pres for Legal Affairs Comm Dir, Rep. Dingell 2008

155

2006-2008 2008 2008 2007-2008 2005-2006 2005

2005-2006

2001-2002 2000-2001 2000-2001

156

Appendix

Commercial Banks: Citigroup
Decade-long campaign contribution total (1998-2008): $19,778,382 Decade-long lobbying expenditure total (1998-2008): $88,460,000
Citigroup Campaign Contributions:240 2008 Top Recipients TOTAL: 1. Barack Obama (D) 2. Hillary Clinton (D) 3. John McCain (R) 4. Mitt Romney (R) 5. Chris Dodd (D) 6. Rudy Giuliani (R) 7. Charles B. Rangel (D) 8. John Edwards (D) 9. Saxby Chambliss (R) 10. Dick Durbin (D) 11. Spencer Bachus (R) 12. David Landrum (R) 13. Rahm Emanuel (D) 14. John E. Sununu (R) Shelley Moore Capito 15. (R) 16. Richard C. Shelby (R) 17. Max Baucus (D) 18. Chuck Hagel (R) 19. Joe Biden Jr. (D) 20. Jim Marshall (D)
240

2006 Top Recipients $4,270,678 $543,430 $423,417 $301,301 $168,550 $157,244 $151,100 $61,450 $44,600 $40,350 $40,250 $35,450 $30,450 $28,000 $26,850 $25,700 $25,200 $24,500 $24,100 $23,950 $23,050 TOTAL: 1. Hillary Clinton (D) 2. Christopher J. Dodd (D) 3. Joe Lieberman (I) 4. Tom Carper (D) 5. Kent Conrad (D) 6. John E. Sununu (R) 7. Jim McCrery (R) 8. Mitch McConnell (R) 9. Jon Kyl (R) 10. Rick Santorum (R) 11. Christopher Shays (R) 12. Mike DeWine (R) 13. Thomas H. Kean Jr. (R) 14. Harold E. Ford Jr. (D) 15. Robert Menendez (D) 16. Ben Nelson (D) 17. Doris O. Matsui (D) 18. Bob Corker (R) 19. David Yassky (D) 20. James M. Talent (R) $2,576,066 $134,610 $107,800 $59,450 $55,300 $36,000 $35,250 $34,300 $33,700 $33,400 $29,850 $23,000 $21,850 $21,550 $19,800 $19,550 $18,200 $18,050 $17,250 $16,050 $15,900

Source: Center for Responsive Politics. Campaign contribution totals accessed February 2009. Individual recipient numbers do not include the 4th Quarter of 2008.

Lazio (R) 4.250 $80. Spencer Abraham (R) 11. Rahm Emanuel (D) 14.800 $65. Max Cleland (D) 13.250 $18.758 $315.700 $50.650 $30. Bill Bradley (D) 3. Sununu (R) $3. Tim Johnson (D) 2. Bill Nelson (D) 19.926 $135.250 $15. Erskine B.550 $40.208 $22.350 $20.543 $17.050 $13. Al Gore (D) 6. Charles Schumer (D) 5.550 $34. Harry Reid (D) 11. Hillary Clinton (D) 7.500 $10.500 $17. John Kerry (D) 3.500 $39.390 $115. Bob Franks (R) 12. Mel Martinez (R) 18. Lowey (D) 17. Joe Lieberman (D) 8. (R) 14.820 $280.600 $17.000 $12. Evan Bayh (D) 19. Bush (R) 2. Nancy L. Jim Maloney (D) 16. Rudy. John McCain (R) 9.448 $17. Wesley Clark (D) 12. Lowey (D) 19. John J.500 $127.050 $16. Johnson (R) 20. William Roth Jr. Charles Schumer (D) Shelley Moore Capito 6. Bowles (D) 16. Elizabeth Dole (R) 16.296 $42. Charles Schumer (D) 2.950 $14. Barack Obama (D) 17.000 $11. Rob Portman (R) 13.250 $14. Carolyn Maloney (D) 13.500 $4. Giuliani (R) 2002 Top Recipients TOTAL: 1. Charles S.450 $32. Nita M. (R) 7.881 $91. Arlen Specter (R) 20.Appendix 2004 Top Recipients TOTAL: 1.750 10. Rangel (D) 4.250 $30.000 $15. Ron Kirk (D) 12.250 $12. Chris Dodd (D) 3.560 $41. Bill Janklow (R) 16.500 . Richard Shelby (R) 6.000 $20. Rick A. John E.725 $54.650 $55. Johnson (R) 10. Jean Carnahan (D) 5.886 $25.750 $17.003.750 $28. George W. Joe Lieberman (D) 14.015 $29.700 $37.550 $127.000 $29.250 $15. Chris Dodd (D) 8.000 $11.200 $40. Mike Crapo (R) 10. Tom Daschle (D) 7. Norm Coleman (R) 14.500 $99.500 $18. Michael G. Bush (R) 5. Howard Dean (D) 15. Oxley (R) 9. Robb (D) 15.000 $10. Nita M. George W.550 $21. James W.021. Billy Tauzin (R) 19.700 $115. Charles B. LaFalce (D) 18.750 $14. Tim Johnson (D) 16. Carolyn Maloney (D) 157 $15.650 $19.000 $11. Max Baucus (D) 9. Nancy L.750 $30.000 $56. DeMint (R) $3.250 2000 TOTAL: 1.000 $26.157. Hillary Clinton (D) 4. Amo Houghton (R) 8. Phil Gramm (R) 10.250 $14.

964 $19. Chris Dodd (D) 4. Geraldine Ferraro (D) 7. (D) Daniel Patrick Moyni17.975 $25.000 $16.724 $25.750 $12.116 $40. Lowey (D) 12. Rangel (D) 8.000 Appendix . Paul Coverdell (R) 9. Richard Gephardt (D) 13.748.500 $18. Johnson (D) 6.229 $105.000 $26.158 1998 Top Recipients TOTAL: 1.450 $14. Tom Delay (R) $2. Lazio (R) 10.775 $15. Nita M.857 $19.250 $39. Tom Daschle (D) 5.949 $14. Evan Bayh (D) 20.500 $19. Bob Kerrey (D) 14. Alfonse D'Amato (R) 2. Charles Schumer (D) 3. Nancy L.000 $13. Lauch Faircloth (R) Carol Moseley Braun 16. Bob Graham (D) 10. Rick A.500 $16. han (D) 18. Newt Gingrich (R) 15.000 $15. Richard Baker (R) 19. Charles B.914 $99.500 $19.

000 $140.000 $120.000 $120. Lobbying amounts accessed February 2009. Sivon & Natter Ogilvy Government Relations Kilpatrick Stockton Capitol Hill Strategies Avenue Solutions Capitol Tax Partners Cypress Advocacy Dewey Square Group Angus & Nickerson King & Spalding 241 2005 $10.000 $320. Gottlieb et al $5.000 $3.000 $340.000 $100. .000 $260.640.000 $9.000 $20.000 $40.000 $240.000 $340.000 TOTAL: Citigroup Inc Barnett. Sivon & Natter Federalist Group Avenue Solutions O'Melveny & Myers Capitol Hill Strategies Cypress Advocacy Capitol Tax Partners Angus & Nickerson Timmons & Co.000 $200.000 $5.000 $240.000 $300.100.000 $60.600.000 2006 TOTAL: Citigroup Inc Kilpatrick Stockton Ernst & Young Barnett.000 $200.000 $110.000 $120.000 $200.000 2007 TOTAL: Citigroup Inc Ernst & Young Barnett. Timmons & Co 159 $300.000 $320.000 $240.000 $110.000 $320. Sivon & Natter Capitol Hill Strategies Capitol Tax Partners Cypress Advocacy Ernst & Young Ogilvy Government Relations Elmendorf Strategies BGR Holding Roberti Assoc Timmons & Co $7.000 $120.000 $320.000 $170.000 $160.000 $240.000 $100.140.000 $320.000 $360.000 $180. Sivon & Natter Ogilvy Government Relations Avenue Solutions Ernst & Young Cypress Advocacy Capitol Hill Strategies Capitol Tax Partners Angus & Nickerson Kilpatrick Stockton Cleary.000 $160.000 Source: Center for Responsive Politics.520.000 $200.000 $400.000 $120.760.000 $225.000 $240.000 $60.Appendix Citigroup Lobbying Expenditures:241 2008 TOTAL: Citigroup Management Corp Avenue Solutions Barnett.875.000 $6.000 $40.000 $120.180.000 $8.000 $80.000 $320.

000 $7. Brent S $7. Gump et al Barnett.000 $70.000 $80.000 $380.000 $90. Brent S Thaxton.000 $20.000 $100.000* $40.000 $180.000 $40.000 $240.000 $120.000 $50.000 $180. Liipfert et al Avenue Solutions Barbour.000 $620.000 $60. Arps et al $8.730.000 $30.000 $220.000 $40.000 $360.000 $120.930. Sivon & Natter Ernst & Young Federalist Group Avenue Solutions Capitol Hill Strategies Capitol Tax Partners Walker. Griffith & Rogers Federalist Group Avenue Solutions Tonio Burgos & Assoc Campbell-Crane & Assoc Franzel.000 $160.000 $240.000 $150. Griffith & Rogers Mayer.400. Brown et al Capitol Tax Partners Hogan & Hartson Heidepriem & Mager Capitol Tax Partners $5.000 $40.000 2002 TOTAL: Citigroup Inc Akin. Brown et al PodestaMattoon Campbell-Crane & Assoc Thaxton.000 $40.000 $80.000 $120.000 $200. Gump et al * Tonio Burgos & Assoc Heidepriem & Mager Rhoads Group Not included in totals Not included in totals . Gillespie & Assoc Ernst & Young Van Scoyoc Assoc Barbour. Brown et al Baker & Hostetler Campbell-Crane & Assoc Franzel. Sivon & Natter Verner.800. Richard R Hogan & Hartson Franzel.000 $20.000 $20.160 2004 TOTAL: Citigroup Inc Barnett. Richard R Tonio Burgos & Assoc Van Scoyoc Assoc Venn Strategies $10.200. Sivon & Natter Quinn.100.000 $260.000 2003 TOTAL: Citigroup Inc Akin.000 $100.000 $50. Brent S Mayer.000 $40.000 $280.000 $7.000 $40.000 $80. Liipfert et al Baker & Hostetler Ernst & Young Mayer.400.000 $80.000 $4.000 $240.000 * Appendix Barnett. Sivon & Natter Ernst & Young Verner.000 $120.000 2001 TOTAL: Citigroup Inc Barnett.000 $240.520.000 * $400.000 $40.000 > $10.000 $40.000 $80.000 $440.000 > $10.000 $5. Lynda K Skadden.000 $960.000 $120.000 $360.

Gottlieb et al $60.000 $90.000 $50.000 1998 TOTAL: Citigroup Inc Verner.000* $9. Sivon & Natter Verner.000 $480. Liipfert et al Barnett.000 $20.000* $30.000 $240.000 $140.000 $300.000 $320.000 $180.000 $20.000 $60.000 $40.000 $40.000 $500.000* $120.000 $20.000 $20.000 $160.000 $80.000 $120.000* > $10. Gump et al Ernst & Young Baker & Hostetler Thaxton.000 > $10.000* > $10. Brent S Wilmer.000 * 161 Campbell-Crane & Assoc Silbey.000 $7.000 $40. Michael F Jr Heidepriem & Mager Rhoads Group Cleary.000 $35. Cutler & Pickering * Silbey.000 $120.290. Lynda K Campbell-Crane & Assoc Franzel.420.000 $120. Gump et al Walker.000 $180.000 $100.000 $60.135.000 $40.Appendix 2000 TOTAL: Citigroup Inc Associates First Capital Verner.000 $260. Nebeker & McCullough Thaxton.000 $560. Liipfert et al Barnett. Gottlieb et al Not included in totals Not included in totals . Franklin R Thaxton.000 1999 TOTAL: Citigroup Inc Associates First Capital Barnett. Michael F Jr Walker. Sivon & Natter Akin.000 $30.000 $300.000 $80.000 $120. Brent S Callister. Michael F Jr Davis & Harman Heidepriem & Mager Biklen.000 > $10.000 $80. Sivon & Natter Arter & Hadden Baker & Hostetler Akin.000 $4.000 $20.000 > $10. Richard R Barrett. Stephen C Alston & Bird Cleary.000 $80. Richard R Mayer.000 $40.000 $5. Lynda K Akin. Cutler & Pickering $6. Richard R $7.000 $480.000 $260.000 $60. Gump et al Arter & Hadden Franzel.120. Lynda K Arter & Hadden Heidepriem & Mager Rhoads Group Wilmer. Fanklin R Ely & Co Barrett.080.570. Brent S Barrett. Brown et al Campbell-Crane & Assoc Franzel.000 $420.000 $60. Liipfert et al Baker & Hostetler Walker.

Sen. Christopher Cypress Advocacy Cave. Finance Committee 2002-2008 2002-2008 2002-2008 2002-2008 2002-2008 2006-2008 2008 2008 Deputy Asst. Accessed January 2009. James C.gov/>. James Javens.JCT Chief of Staff . Treasury 2005-2007 Source: Senate Office of Public Records <http://soprweb. Sivon & Natter Barnett. Bingaman Tax Counsel. Rick McKenney. Sivon. Sec. Robb . Dennis.senate. Rivas. Amo Houghton Staff Director. Barbara Nickerson. Patrick 242 Appendix Year(s) Tax Counsel. Secr (Treasury) for Legislative Afrs Tax Legislative Counsel . Senate Republican Policy Committee Tax Counsel. Senator Ben Nelson 2007 Assoc. Jose S.Rep. 2001 President (Attorney) VP/ Secretary (Attorney) Legislative/Regulatory Specialist 1999 1999 1999 Deputy Asst. Commissioner . Sen./Acting Asst. Capitol Tax Partners Fant. Grassley.162 Citigroup Covered Official Lobbyists:242 Firm / Name of Lobbyist Covered Official Position Angus & Nickerson Angus. Joseph Talisman. Amy Baker & Hostetler Kennelly. Dept. of Treasury 2005-2007 2005-2007 Legislative Director. Committee on Ways and Means International Tax Counsel. Gregory Avenue Solutions Tejral. Lawrence G. Sen.Social Securty Admin.US Treasury Assistant Treasury Secretary for Tax Policy Deputy Chief of Staff .Counsel. William Willcox. Robert E. Sen. William Mikrut. Barbara Barnett. . Sec. Johnathan Grafmeyer. J.

Office of Senator Nickles Special Assistant to the President 163 2000-2002 2004 2003-2004 2006 2008 2005-2006 2007-2008 Ogilvy Government Relations Dammann. JCT 1999-2000 1999. Bond 2007-2008 . Martin Deputy Cos . Kenneth J.Appendix Ernst & Young Badger.. Chief of Staff. JCT Chief of Staff.Office of Sen. Sec. OMB 2001 Deputy Asst. Sen. Julie Sternhall. Treasury Chief of Staff. 2000 Executive Office of POTUS ./ Acting Asst. J. Robert D. Sec. US Senate 2007-2008 2008 Business Tax Counsel. Bond Deputy Staff Director.Office of Personnel Office of Management and Budget 2001 2001 Chief of Staff. Alexander Hogan & Hartson Kyle. Timmons & Co Shapiro. Banking Comm. Bill Nelson Secretary for the Majority. Senator Christopher S. Brian Federalist Group LLC Cave. Barbara Kies. Senator Christopher S. Doug Conklin. Kilpatrick Stockton Dekeyser. Sen. Julie PodestaMattoon Clark. Patrick Dammann. William Legislative Assistant. Daniel Paone. David PriceWaterhouseCoopers Angus. Susan Collins C/S Senator Jeff Sessions Associate Director. Bill Tornquist. Armand King & Spalding LLP Clarkson.

US Committee on Banking Appendix 2002 . Lendell Maj. Econ.164 Van Scoyoc Assoc Porterfield.

100 $31.900 $26. Mary L.694 $205. John McCain (R) 4.000 $19.950 $53.000 $31.268 $35. Oxley (R) 5. Ford Jr. Dave Camp (R) 16. Fred Thompson (R) 17. (R) 20. Campaign contribution totals accessed February 2009. Tom Carper (D) 4. Michael G.500 $22. Harry Reid (D) 8. Rudy Giuliani (R) 5.700 $41. Mitt Romney (R) 6. Tim Johnson (D) 20.300 $78. Steny H. Individual recipient numbers do not include the 4th Quarter of 2008.210 $272. Jack Reed (D) 18.399 $34.163. Shelby (R) 15.Appendix 165 Commercial Banks: JP Morgan Chase & Co.598 $47. Chris Dodd (D) 7. .915 JP Morgan Campaign Contributions:243 2008 Top Recipients TOTAL: 1.100 $27.500 $29.356 $113. Mike DeWine (R) 15. Hoyer (D) 10.000 $30. Joe Lieberman (I) 14. Harold E. Hillary Clinton (D) 3. Richard C.950 $15. Richard Baker (R) 3. Mitch McConnell (R) 7.657 $94.600 $29. Max Baucus (D) 12. John Cornyn (R) 9. Christopher Shays (R) 18. Tim Johnson (D) 9.250 $68. Debbie Stabenow (D) $2. Orrin G. Norm Coleman (R) 19.372. Landrieu (D) 12.900 $44.000 $23.600 $29.650 Source: Center for Responsive Politics. Eric Cantor (R) 243 2006 Top Recipients $4. Spencer Bachus (R) 14.247.953 Decade-long lobbying expenditure total (1998-2008): $49. Sununu (R) 16.965 $45. Chris Dodd (D) 6. Kent Conrad (D) 13.850 $26.500 $30. Decade-long campaign contribution total (1998-2008): $15. Rangel (D) 10. Hoyer (D) 13.000 $25. Charles B. Steny H. Mel Martinez (R) 8.495 $24.000 TOTAL: 1.366 $18.714. Hatch (R) 17. Rahm Emanuel (D) 11.500 $21.300 $33.300 $48.542 $17.991 $559. Hillary Clinton (D) 2.500 $27.901 $23.450 $27. John E. Barack Obama (D) 2.100 $38.300 $31. Melissa Bean (D) David McSweeney 19. (D) 11.

Michael G.146 $2. Jeb Hensarling (R) 14.850 $24.565 $187. Richard G. Chris Dodd (D) 10. Max Baucus (D) 4.750 $36.000 $16.161 2000 Top Recipients TOTAL: 1.000 $30. Martin Frost (D) 17. Tom Campbell (R) 17. Bush (R) 3. Richard Baker (R) 7. Castle (R) 18. Bowles (D) 5. Charles Schumer (D) 5.414 $133. Blanche Lincoln (D) 16. Tom Daschle (D) 11. John Kerry (D) 2.000 $15. Phil English (R) 13.399 $200. Rob Portman (R) 20. Spencer Bachus (R) $2.000 $19.500 $16.556 $37.450 $20. Bill Bradley (D) 2. Martin Frost (D) 18. Michael N. Wayne Allard (R) 8. John Edwards (D) 13.250 $35.000 $24.166 2004 Top Recipients TOTAL: 1.357 $17. Richard Baker (R) 16. Richard Baker (R) 20. John J. Rick A.750 $54.000 $85. Richard C.042. Bart Gordon (D) 13. Lugar (R) Peter Staub Wareing 11.361 $101.550 $21. Marge Roukema (R) 10. Jim Maloney (D) 11.000 $15. (R) 14.800 $16.500 $21. Pat Toomey (R) 18. Carolyn Maloney (D) 13.250 $36. Pete Sessions (R) 19.250 $17. Al Gore (D) 8. Phil Gramm (R) 7. Erskine B.000 $16. Pat Toomey (R) 17.411 $18.255 $122.250 $13. John Kerry (D) 6.000 $21.000 $13. Hillary Clinton (D) 6.000 10. Howard Dean (D) $3. Ken Bentsen (D) 13. Spencer Abraham (R) Kay Bailey Hutchison 13.000 $20. George W. LaFalce (D) 15.000 $15.150 $59.188 $160. Bush (R) 4. Charles Schumer (D) 6. Tom Carper (D) 15.000 $20.502. John Edwards (D) 18. (R) 12.000 . Michael G.400 $41.000 $16. Lazio (R) 3. Oxley (R) 8.604 $38. Bowles (D) 4.000 $15.750 $19.000 $14. Charles Schumer (D) 2. Amo Houghton (R) 8. Ron Kirk (D) 3.000 $14.550 $47. Tom Strickland (D) Appendix $17. Erskine B. Rudy Giuliani (R) 9. John McCain (R) 2002 Top Recipients TOTAL: 1.205 $89.250 $53.000 $19.277. Jay Helvey (R) 5. Barack Obama (D) 7.750 $17.750 $47. Mike Enzi (R) 11.000 $13. Oxley (R) 18.500 $28.500 $19. Shelby (R) 9. Spencer Bachus (R) 12.050 $24. George W.703 $24.500 $14.300 $36.000 $14.250 $21.500 $13.

Bill McCollum (R) 13. Sue Kelly (R) $1.023 $16.000 .250 $11.Appendix 20. Bond (R) 8.500 $16. Alfonse D'Amato (R) 2. Richard Baker (R) 15.350 $19. 'Kit' 8. Pete King (R) 15. Lazio (R) 5.250 $11.500 $10.481.500 $12. Bart Gordon (D) 17. Robert F.000 $11. LaFalce (D) Christopher S. Gillmor (R) 19. Dick Armey (R) 19.650 $24. Castle (R) 17. Chuck Hagel (R) 10.500 $19. (R) 6. Paul E.605 $32. Rick A.500 $12.500 167 1998 Top Reciepients TOTAL: 1. Bill McCollum (R) $12. Bennett (R) 10. Lauch Faircloth (R) 4. John J.850 $27. Chris Dodd (D) Kay Bailey Hutchison 6. Tom Daschle (D) 12. Charles Schumer (D) 3. Martin Frost (D) 13.000 $10.000 $13.550 $10. Michael N.500 $13.000 $12.000 $11.000 $10.

000 $20.000 $20.000 $120.500 $120.000 $120.500 $3. Richard R $20.000 $70.000 $130.000 $80.000 $74.500 $40. Richard R $4.500 $5.000 $95.000 $80.000 $60.120.000 $120.000 $100.540.000 $240.000 B&D Consulting David L Horne LLC Fennel Consulting OB-C Group Thaxton.336.000 $40.740 $20.000 $40.000 $20. Cutler & Pickering B&D Consulting $6.000 $83.000 $45.390.000 $5.000 $7.000 $80. Brown et al Triangle Assoc Zeliff Enterprises Richard F Hohlt Private/Public Solutions Angus & Nickerson 2007 TOTAL: JP Morgan Chase & Co OB-C Group BKSH & Assoc Richard F Hohit Triangle Assoc Mayer.500 $80.500 $50.040 $6.000 $140.000 $90.500 $80. Brown et al David L Horne LLC Equale & Assoc Fennel Consulting American Continental Group Walter Group Wilmer.000 $60.000 $20.000 $10.000 Source: Center for Responsive Politics.800 $62.000 $60.000 $200.000 $80.000 $36.000 $40.204.000 $88. * Not included in totals Angus & Nickerson .000 $52.000 $140.000 $147.452.000 $140.000 2005 TOTAL: JP Morgan Chase & Co Mayer. Brown et al Walter Group Fennel Consulting David L Horne LLC B&D Consulting $6.168 JP Morgan Lobbying Expenses:244 2008 TOTAL: JP Morgan Chase & Co OB-C Group Equale & Assoc BKSH & Assoc Richard F Hohlt Triangle Assoc Mayer.000 $240.448.000* 2006 TOTAL: JP Morgan Chase & Co American Continental Group Tongour Simpson Group BKSH & Assoc Mayer.000 $80.000 $100. Brown et al B&D Sagamore BKSH & Assoc Tongour Simpson Group Richard F Hohit Zeliff Enterprises Triangle Assoc Patton Boggs LLP 244 Appendix Bryan Cave LLP Thaxton.440.000 > $10. Lobbying amounts accessed February 2009.

000 $120.000 $140.246.000* $95.800 $4.000 $80.000 $20.000 1998-2000 N/A Not included in totals * Not included in totals .575 $720.000 $40.000 140.000 $80.000 $40.000 2002 2004 TOTAL: JP Morgan Chase & Co Bank One Corp Clark & Weinstock B&D Sagamore Mayer.000 $6.000 $310.300.000 $140.000 $120. Richard R Brownstein.000 $40. Hyatt et al $5.000* > $10.000 $96.500 $60.072.Appendix Clark & Weinstock Kerrigan & Assoc Thaxton.000 2003 TOTAL: JP Morgan Chase & Co BankOne Corp Patton Boggs LLP Williams & Jensen BKSH & Assoc B&D Sagamore Richard F Hohit Kerrigan & Assoc Triangle Assoc Covington & Burling * $8.000 $415.700.000 > $10.550.000* $60.000 $20. Richard R Carmen Group 169 $60. Richard R $20.000 $40.706.000* $40. Brown et al BKSH & Assoc Zeliff Enterprises Richard F Hohit Patton Boggs LLP Triangle Assoc Kerrigan & Assoc Covington & Burling Thaxton.000* $6.000 > $10.000 $80.580.000 $60.000 $120.000 $88.000 $5.500 $3.000 $62.062.800 > $10.575 $6.000 2001 TOTAL: JP Morgan Chase & Co BKSH & Assoc Richard F Hohit B&D Sagamore Williams & Jensen TOTAL: JP Morgan Chase & Co B&D Sagamore BKSH & Assoc Williams & Jensen Richard F Hohit Triangle Assoc Kerrigan & Assoc Thaxton.000 $100.000 $220.000 $66.000 > $10.000 $67.

William H. Dirksen Angus & Nickerson Angus. Asst. Pam Asst.gov/>. of Treasury Chief of Staff to Sen.senate. BKSH & Associates Turner. Sec for LA Homeland Security. Gary Wassmer. Inc Hoitsma. Anthony J. . Robert Private Public Solutions Moffett. Dept. Barbara Nickerson. OMB Covered Official Position Appendix Year(s) 2003 2003 2003 2003 2005-2006 2005-2006 2005-2006 2006 2006 2008 245 Source: Senate Office of Public Records <http://soprweb. Bill Frist Communications Director Former member of Congress: NH 19911997 Tax Counsel. Accessed January 2009. Gregory Zeliff Enterprises Zeliff. OB-C Group LLC Stevenson. 2003-2006 Dep Asst to Pres for LA 82-89 Former Member of Congress Sen. for Legal Affairs for the President Press Secretary.170 JP Morgan Covered Official Lobbyists:245 Firm / Name of Lobbyist Carmen Group. Niles Lehman. Senator Inhofe Program Examiner. Byron Dorgan Spec. Transport Branch. Victoria Clark & Wienstock Godes. Committee on Ways and Means International Tax Counsel.

Appendix Fennel Consulting Fennel. Melody Assistant Secretary. HUD 171 2005-2008 .

Chris Dodd (D) 15.000 $10.000 2006 Top Recipients TOTAL: 1. Lindsey Graham (R) 11.350 $15. Decade-long campaign contribution total (1998-2008): $3.946. Tim Johnson (D) 18. Campaign contribution totals accessed February 2009. Jon Kyl (R) 18. Spencer Bachus (R) 18.650 $26.100 $10.929 $17. Vernon Buchanan (R) 11.750 $16.381 $178.727 Decade-long lobbying expenditure total (1998-2008): $11. 247 Based on highest 1.500 $12.550 $18. Sue Myrick (R) 13.250 $10.752 Wachovia Campaign Contributions:246 2008 Top Recipients TOTAL: 1.000 $742.000 $10. Barack Obama (D) John McCain (R) Hillary Clinton (D) Rudy Giuliani (R) Mitt Romney (R) Robin Hayes (R) Eric Cantor (R) Elizabeth Dole (R) Mark Warner (D) 247 18. 9.800 10.700 $16. Robert Menendez (D) 11.000 contributions plus PAC contributions. 2. Richard Baker (R) 11.000 $9. 8.400 $15.384 $30.250 $11.000 $10.000 $10. 7.250 $13.700 $15.000 $9. Individual recipient numbers do not include the 4th Quarter of 2008.000 $10.996.400 $36. Mitch McConnell (R) 246 Source: Center for Responsive Politics. 9.470 $17.000 $10. 8.658 $77. 6. 5. 20. 4.000 $10. Jim McCrery (R) 11. 3.000 $49. John Boehner (R) 11.750 $12.600 $21.050 $10. Artur Davis (D) 16. George Allen (R) Rick Santorum (R) Robin Hayes (R) Sue Myrick (R) Eric Cantor (R) Patrick McHenry (R) Richard Burr (R) Michael Fitzpatrick (R) Michael Steele (R) $10. 3. John Boehner (R) $934. 4. David Scott (D) 18.382 $155. David Dreier (R) 11. Spencer Bachus (R) 10. Deborah Pryce (R) 11.450 $10. John Spratt Jr (D) .000 $8. 2.350 $13. James Clyburn (D) 14.500 $10. Melvin Watt (D) 16. 7.250 $10.172 Appendix Commercial Banks: Wachovia Corp. 6.550 $15. 5. Patrick McHenry (R) 11.700 $15.

7.500 $2. Jim Maloney (D) 16. 3.200 $10.250 $3.250 $4.000 $5.250 2000 Top Recipients TOTAL: 1. 8.070 $10. Ed Royce (R) 12.250 $10.175 $9. Gregory Meeks (D) 16.300 $13.000 $9. $790. George W Bush (R) Erskine Bowles (D) Richard Burr (R) John Kerry (D) Eric Cantor (R) Robin Hayes (R) Sue Myrick (R) Melvin Watt (D) Arlen Specter (R) $1.470 $12.000 11.000 $3.000 $9.000 $5. Howard Dean (D) 20. Cass Ballenger (R) 16.500 $10.250 $3. 5.000 $6.450 $8.000 $10.750 $76. 6. Max Baucus (D) 15. 4. Elizabeth Dole (R) 10.000 $18.850 $23. Richard Baker (R) Spencer Bachus (R) $10.500 $2. 6. Charles Norwood (R) Based on highest 1. George W Bush (R) 13. Floyd Spence (R) 18.500 $2.250 $12. Johnny Isakson (R) 10.000 $6.000 $5.800 $10.900 $5. Walter Jones Jr (R) 12. Charlie Condon (R) 13. 9. 4. 248 173 8. 6.825 $2. Sue Myrick (R) 16. Jim McCrery (R) $130.000 $5.000 $10.000 $2. Calder Clay (R) 16. Tom Carper (D) 16.000 $5. 3.500 $5.250 Elizabeth Dole (R) Richard Burr (R) Robin Hayes (R) Walter Jones Jr (R) John Edwards (D) Zell Miller (D) Sue Myrick (R) Al Gore (D) Bill McCullum (R) 8. 2. Pete King (R) 10. Erskine Bowles (D) Elizabeth Dole (R) Robin Hayes (R) Melvin Watt (D) Richard Burr (R) Saxby Chambliss (R) Lindsey Graham (R) Michael Oxley (R) 10. Bob Barr (R) 13. 2.237.325 $19. 2002 Top Recipients TOTAL: 1.000 $6. Roger Kahn (D) 13. Pete Sessions (R) 19. Eric Cantor (R) 12. 3.960 $95.000 $5. 7.000 contributions plus PAC contributions. Wayne Allard (R) 16.500 $11.000 $33.250 $7. Mel Martinez (R) 18. 5. Jay Helvey (R) 12. John Thune (R) 17. 6.969 $77. Melvin Watt (D) 12.000 $3. 2. Chris Dodd (D) 14.468 $223.450 $8. 5. .250 $13.700 $8.200 $31. Lindsey Graham (R) 13. 8.500 $6.500 $2.550 $14.500 $2.500 $8.460 $7.Appendix 2004 Top Recipients248 TOTAL: 1. Trent Lott (R) 13.000 8.500 $15. 4.750 $16.000 $4. 8. Johnny Isakson (R) 14.

000 1998 Top Recipients TOTAL: 1.000 $1.500 $1.500 $3.174 19. Lamar Alexander (R) 19.000 18. George Allen (R) 19.500 $3.000 $2. 5.000 $1.000 $2. John Kasich (R) 18. Saxby Chambliss (R) 19. 4. Michael Fair (R) 18. Doug Haynes (R) 19.000 $2. John Linder (R) 19. William Roth Jr (R) 19. Richard Baker (R) 19.350 $15. Bob Ethridge (D) 13. Bill Bradley (D) 19. Bob Graham (D) 18. Jesse Helms (R) 18.000 $1.000 $4. James Clyburn (D) 18. Mike McIntyre (D) 19. Jack Kingston (R) 19.000 $2. Dan Page (R) 18. 6.000 $2.000 $3. 9.000 $2. Mack Mattingly (R) 19. Ernest Hollings (D) .500 $4. John Spratt Jr (D) Appendix $1.100 $13. 8.000 $1.000 11. Melvin Watt (D) 12.000 $2.000 $2. John Linder (R) 13. Charles Taylor (R) $2. Cass Ballenger (R) 18.500 $2. Howard Coble (R) 18. Lauch Faircloth (R) Richard Burr (R) Max Cleland (D) Paul Coverdell (R) Frank Lautenberg (R) Fritz Hollings (D) Walter Jones Jr (R) Michael Coles (D) Robin Hayes (R) Mike McIntyre (D) $102.000 $2. David Price (D) 18.500 $2.500 $5.000 $2.000 $2.000 $1. Johnny Isakson (R) 17. 9.250 $3.250 $2.000 $1.000 $1.000 $7.000 $2. 3.600 $4. Sue Myrick (R) 15.250 $1. Bob Barr (R) 18. 2. 7.000 $1.000 $1. Charles Taylor (R) 15.750 $5.

Dan Public Strategies Angus & Nickerson Cypress Advocacy Sullivan & Cromwell $2. Dan Jenkins Hill Group Capitol Hill Strategies Cypress Advocacy Barnett.000 $80.Appendix Wachovia Lobbying Expenditures:249 2008 TOTAL: Wachovia Corp C2 Group Angus & Nickerson Porterfield & Lowenthal Public Strategies Dixon.000 $120.000 $200.000 $100.740.000 $840.000 $100.000 2007 TOTAL: Wachovia Corp Kilpatrick Stockton C2 Group Capitol Hill Strategies Jenkins Hill Group Dixon.000 $20.000 $220.000 $240. * Not counted in total .781.000 2005 TOTAL: Wachovia Corp C2 Group Jenkins Hill Group Kilpatrick Stockton $1.752 $240.000 $80.220.000 $60.000 $20.000 $120.000 $20.000 $60.000 $120.752 $1.000 $80.000 $20.030.000 $40. Sivon & Natter Sullivan & Cromwell $2.000* Capitol Hill Strategies 2004 TOTAL: Wachovia Corp C2 Group Jenkins Hill Group $1.000 $70.000 $365.000 $240.360.000 $80.000 * 175 2006 TOTAL: Wachovia Corp Kilpatrick Stockton C2 Group Capitol Hill Strategies Jenkins Hill Group Cypress Advocacy $1.000 $400.000 $20. Lobbying amounts accessed February 2009.000 249 Source: Center for Responsive Politics.000 $100.561.000 $900.000 $20.000 $720.000 > $10.295.000 $60.000 $240.000 $1.000 2003 TOTAL: Wachovia Corp C2 Group $320.000 > $10.000 $30.

000 $140.000 * Not included in total .000 2000 TOTAL: Wachovia Corp Williams & Jensen Groom Law Group $480.000 > $10.000* 1998 TOTAL: Groom Law Group Sullivan & Cromwell Williams & Jensen $600.000* Appendix 2001 TOTAL: Wachovia Corp Williams & Jensen $730.000 $20.000 > $10. Arant et al $600.000 $20.000* > $10.000 > $10.000 $10.000 1999 TOTAL: Wachovia Corp Williams & Jensen Groom Law Group Sullivan & Cromwell Bradley.000 $620.000 $120.000* $460.000* $580.176 2002 TOTAL: Wachovia Corp Williams & Jensen Sullivan & Cromwell $420.000 > $10.000 $20.000 $300.000 $440.

Christine C. Shahira Elliott. Patrick Deputy Asst. Accessed January 2009. Treasury 2005-2008 C/S Sen. David M. Lesley Chief of Staff to Congressman Sam Johnson Chief of Staff to Congressman Bud Cramer Special Asst. . Secretary of the Senate General Counsel . PC Bechtel.Appendix Wachovia Covered Official Lobbyists:250 Firm / Name of Lobbyist William & Jensen. LLC Hanson. Jefferies Litterst. Jeff Sessions 2005-2007 Member of Congress 2005 250 Source: Senate Office of Public Records <http://soprweb. to the President for Leg Affairs Senior Advisor to Chair of Ways & Means Committee Deputy Chief of Staff.Senate Banking Committee Legislative Counsel for Lauch Faircloth Special Assistant to Trent Lott Covered Official Position 177 Year(s) 1999-2002 1999-2002 1999-2002 2003-2008 2003-2008 2004-2008 2006-2008 2007-2008 Golden West Financial Corp LaFalce. C2 Group.gov/>. McCarlle. Sec. John Kilpatrick Stockton LLP Dekeyser. Michael Murray. J.. Phillip Landers. Sec. Nelson Knight. Armand Cypress Advocacy Cave.senate./ Acting Asst.

000 $10.000 $9.700 $12.750 $14.000 $10.000 $11. Earl Pomeroy (D) 18. John Barrasso (R) $10.000 $9.500 $11. George Miller (D) 15. Joe Lieberman (I) 18.900 $13. Nancy Pelosi (D) 11. 6. 5.492 $21. Jeffery Lamberti (R) 11.000 $10. 2. 3.054. Paul Kanjorski (D) 12.450 $16.000 $10.585 $14. Tom Latham (R) 15. Robert Byrd (D) 11.000 $10.000 $10.000 2006 Top Recipients TOTAL: 1. 9. Nancy Pelosi (D) 15. Spencer Bachus (R) Source: Center for Responsive Politics.000 $10. 252 Based on highest 1. Collin Peterson (D) 15.350 $10.250 $13.000 $10.000 15. 4. John Cornyn (R) 13. Spencer Bachus (R) 15.200 $19.700 $12. Jim McCrery (R) 11. 6.436 $36.500 $33. .000 $10. Barack Obama (D) Hillary Clinton (D) John McCain (R) Norm Coleman (R) Mitt Romney (R) Rudy Giuliani (R) John Edwards (D) Max Baucus (D) Erik Paulsen (R) $1. 4.022 Decade-long lobbying expenditure total (1998-2008): $16.750 $18.740 Wells Fargo Campaign Contributions:251 2008 Top Recipients252 TOTAL: 1.000 $10.000 $10. Ed Royce (R) 10.200 $9. Tom Latham (R) 17. Pete Sessions (R) 15. 8. John Sununu (R) 13. Dianne Feinstein (D) Amy Klobuchar (D) Rick Santorum (R) Michael McGavick (R) Orrin Hatch (R) Richard Baker (R) Ed Royce (R) Jon Kyl (R) Christopher Shays (R) $1.000 contributions plus PAC contributions.637. Deborah Pryce (R) 11.197 $160.178 Appendix Commercial Banks: Wells Fargo Decade-long campaign contribution total (1998-2008): $5. 7.250 $11. 8.000 $10.322 $42.950 $14. 7.000 $10. Individual recipient numbers do not include the 4th Quarter of 2008.300 $12.750 $9.000 $11. James Clyburn (D) 15. 9. 3. 5. Campaign contribution totals accessed February 2009.300 $11.448.330.500 $13. Conrad Burns (R) 16. 2. Steny Hoyer (D) 251 10. James Clyburn (D) 15.089 $103.000 10.

000 $13. 19. 15. 3.500 $8.500 $16. $613. 15.500 $6. 5.000 $9. Wayne Allard (R) Norm Coleman (R) John Thune (R) Richard Baker (R) Tim Johnson (D) 11.000 $6.500 $12. Ben Nelson (D) 2004 Top Recipients253 TOTAL: 1.550 $18. Conrad Burns (R) 12. 6. 2002 Top Recipients TOTAL: 1. Barney Frank (D) 11.000 $13.750 $4.900 $4.262 $23. Michael Oxley (R) 13.000 $8.000 $13.000 $11. 3.000 $6.500 $8.250 $16. 3.750 6.950 $8.250 $19.000 $9. Richard Shelby (R) 18.250 $10. 19. 8.190. 11.500 $4. 19. Mark Kennedy (R) $676. Lisa Murkowski (R) 13. 2. John Kerry (D) George W Bush (R) Chuck Grassley (R) Tom Daschle (D) Nancy Pelosi (D) Howard Dean (D) Jim Bunning (R) Randy Neugebauer (R) Richard Baker (R) $1.250 2000 Top Recipients TOTAL: 1. Al Gore (D) 12.500 $10. John Thune (R) 19. 4. 7. . 14. 253 179 $8.000 $4. Pete Domenici (R) 17. 8. 5.500 $4. 18.000 $10. 3. 7.750 $9. 9.250 Dianne Feinstein (D) Jim Ramstad (R) Bill Bradley (D) Kent Conrad (D) Jon Kyl (R) George W Bush (R) Rod Grams (R) Bob Kerrey (D) Bruce Vento (D) Kay Bailey Hutchison (R) 5. Max Baucus (D) John Cornyn (R) Chuck Hagel (R) Jim Ramstad (R) Gordon Smith (R) Larry Craig (R) Mike Enzi (R) Jack Reed (D) Earl Pomeroy (D) Dick Armey (R) Chuck Grassley (R) Mark Kennedy (R) Nancy Pelosi (D) Ron Kirk (D) Silvestre Reyes (D) Ted Stevens (R) Michael Oxley (R) Charlie Gonzalez (D) $9. 2.800 $11. 10.750 $6. 4. 7.550 $7. 11.226 $67.400 $10.500 $4. John Ensign (R) Based on highest 1. 8.400 $9. 19.000 contributions plus PAC contributions. Bob Beuprez (R) 12. Jeb Hensarling (R) 20.250 $10.250 $7. 7.250 $7.500 10.500 $8.000 $10. 17.000 $10. 19.000 $8. 2. Spencer Bachus (R) 13.000 $10.000 $5.750 $5.650 6. Robert Bennett (R) 13.750 $13.735 $21.000 $5.676 $24. 11. 7. 8.000 $11.Appendix 20.500 $10.500 $4.700 $63.000 $11.000 $6.

500 $5.500 $5. Buck McKeon (R) 15.180 14. Charlie Gonzalez (D) 18.500 $3. 8.000 $5. Robert Greenlee (R) 18. David Dreier (R) 18. Richard Baker (R) 12. 5. Jeff Bingaman (D) 15. John McCain (R) 18.000 $3.500 $5.750 $4.000 $3.000 $3. Rick Lazio (R) 18. Mark Baker (R) 18. 3.500 $6.000 $4. Armando Falcon (D) 18.000 $3.750 $6. Hillary Clinton (D) 18.500 $6.500 $3. 7. Bruce Vento (D) 12. Ray LaHood (R) .000 $7. 8. Scott McInnis (R) 18. Tom Daschle (D) 15. Paul Sarbanes (D) 17.000 10.000 $3. Slade Gorton (R) 15. Pete Sessions (R) 12. 4.900 $6.000 $5. Robert Bennet (R) Chuck Grassley (R) Chris Dodd (D) Byron Dorgan (D) Rod Grams (R) Jeff Sessions (R) Matt Fong (R) Bill Clinton (D) Bob Kerrey (D) $347. 6.000 $3.000 1998 Top Recipients TOTAL: 1.000 $3.500 $4. 2. Chuck Hagel (R) Appendix $3.000 $8.460 $5.500 $5. Steven Kuykendall (R) 12. Max Baucus (D) 18.300 $3.500 18.000 $4. Blanche Lincoln (D) 17.000 $4.000 $3.550 $10. Rick Lazio (R) 18. Earl Pomeroy (D) 18. Jerry Kleczka (D) 18.169 $10.750 $6.000 $3. Tom Carper (D) $6.

Appendix Wells Fargo Lobbying Expenditures:254 2008 TOTAL: Wells Fargo Doremus, Theodore A Jr Chesapeake Enterprises $1,674,740 $1,200,740 $444,000 $30,000 2003 TOTAL: Wells Fargo Doremus, Theodore A Jr Davis, Polk & Wardwell

181

$1,560,000 $960,000 $400,000 $200,000

2007 TOTAL: Wells Fargo Doremus, Theodore A Jr $2,347,000 $1,919,000 $428,000

2002 TOTAL: Wells Fargo Doremus, Theodore A Jr $820,000 $620,000 $200,000

2006 TOTAL: Wells Fargo Doremus, Theodore A Jr Kilpatrick Stockton $2,565,000 $1,765,000 $400,000 $400,000

2001 TOTAL: Wells Fargo HD Vest Financial Services Davis, Pol & Wardwell Doremus, Theodore A Jr Kirkpatrick & Lockhart $2,050,000 $1,590,000 $400,000 $60,000 2000 TOTAL: Wells Fargo Davis, Pol & Wardwell $800,000 $720,000 $80,000 $870,000 $650,000 $20,000 $100,000 $100,000 > $10,000*

2005 TOTAL: Wells Fargo Doremus, Theodore A Jr Kilpatrick Stockton

2004 TOTAL: Wells Fargo Doremus, Theodore A Jr $1,680,000 $1,280,000 $400,000 1999 TOTAL: Wells Fargo Davis, Polk & Wardwell $671,000 $471,000 $200,000

254

Source: Center for Responsive Politics. Lobbying amounts accessed February 2009.

*

Not included in the total amount

182 1998 TOTAL: Norwest Corp Canfield & Assoc Hogan & Hartson Davis, Polk & Wardwell Miller & Chevalier Vickers, Linda $1,600,000 $1,180,000 $20,000 > $10,000* $200,000 $20,000 $180,000

Appendix

*

Not included in the total amount

Appendix

183

Wells Fargo Covered Official Lobbyists:255 Firm / Name of Lobbyist Kilpatrick Stockton LLP Dekeyser, Armand Covered Official Position Year(s)

C/S Sen. Jeff Sessions

2005-2006

255

Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.

184

Appendix

Hedge Funds: Bridgewater Associates
Decade-long campaign contribution total (1998-2008): $274,650 Decade-long lobbying expenditure total (1998-2008): $855,000
Bridgewater Campaign Contributions:256 2008 All Recipients TOTAL: 1. John McCain (R) 2. Barack Obama (D) David John Cappiello 3. (R) 4. Rudolph Giuliani (R) 5. Mitt Romney (R) 5. Paul Hodes (D) 7. Christopher Shays (R) 8. Patrick Murphy $239,400 $69,050 $13,700 $4,600 $3,300 $2,300 $2,300 $2,000 $200 2002 N/A 2000 All Recipients TOTAL: 1. Stephanie Hunter Sanchez (D) $1,000 $1,000 2004 All Recipients TOTAL: 1. George W Bush (R) 1. Wesley Clark (D) $25,500 $250 $250

2006 All Recipients TOTAL: 1. Christopher Shays (D) 2. Ned Lamont (D) 3. Paul Hodes (D) 4. Jon Tester (D) 5. Diane Goss Farrell (D) 5. James Webb (D) $8,750 $2,250 $1,250 $1,000 $750 $250 $250

1998-1999 N/A

256

Source: Center for Responsive Politics. Campaign contribution totals accessed February 2009. Individual recipient numbers do not include the 4th Quarter of 2008.

Rich Feuer Group $220.000 $160.000 2006 TOTAL: Quinn.000 $340. . Lobbying amounts accessed January 2009 and may not include 4th Quarter amounts.000 1998-2004 N/A Bridgewater Covered Official Lobbyists: N/A 257 Source: Center for Responsive Politics.000 $60.000 2005 TOTAL: Rich Feuer Group $60. Gillespie & Assoc. Gillespie & Assoc.000 $60.000 2007 TOTAL: Quinn.000 $100.Appendix 185 Bridgewater Lobbying Expenses:257 2008 TOTAL: Rich Feuer Group $135.000 $135. Rich Feuer Group $440.

000 $1. 5. .100 $4. 5.000 $1. 4. 8. 17.600 $3. 17.300 $2.650 $13.000 $2.000 $2.000 $2. Steny Hoyer (D) 17.000 $2.000 $1. Mitch McConnell (R) 15. 8. 17.255 Decade-long lobbying expenditure total (1998-2008): $680.000 2006 All Recipients TOTAL: 1.000 $1. Max Baucus (D) 4. 8. Andrew Rice (D) 5. Chellie Pingree (D) 5.000 $1. 3.000 $1. Barack Obama (D) 3. Darcy Burner (D) 5.300 $2. Mary Landrieu (D) 13.300 $2. Bob Casey (D) Maria Cantwell (D) Robert Menendez (D) Healther Wilson (R) Tim Mahoney (D) Ben Nelson (D) Evan Bayh (D) Jo Bonner (R) Chet Edwards (D) Joe Lieberman (I) Mike Ferguson (R) Clay Shaw (R) Mark Pryor (D) Baron Hill (D) Darcy Burner (D) Patricia Madrid (D) Edwin Perlmutter (D) Olympia Snowe (R) Max Baucus (D) Nancy Johnson (R) $485. Jeff Merkley (D) 5. Ron Klein (D) 16. James Risch (R) 17.300 $2.000 Source: Center for Responsive Politics.000 $841. Ron Paul (R) 17.200 $4.100.000 $2.541 $18. Hillary Clinton (D) 2. 17.000 $2.300 $2. Individual recipient numbers do not include the 4th Quarter of 2008.100 $1.100 $2. Micahel Johanns (R) 258 17.000 $2.000 $2. 8.000 $3.000 $1. 5.500 $1.000 DE Shaw Campaign Contributions:258 2008 All Recipients TOTAL: 1.300 $2.300 $2.100 $2.000 $1. 8.000 $1.186 Appendix Hedge Funds: DE Shaw Group Decade-long campaign contribution total (1998-2008): $3. Heather Wilson (R) 17.700 $2.100 $2. Jerry McNerney (D) 5. 2. Norm Coleman (R) $1. Campaign contribution totals accessed February 2009. Kay Hagan (D) 5. 8. Jeanne Shaheen (D) 5.300 $2. 8.000 $2.000 $2. 8.250 $2. Roger Wicker (R) 17. Susan Collins (R) 14.000 $2.320 $3. 8. Bob Inglis (R) 13. Jim Himes (D) 5.

250 $4. 2.000 $2. 2.Appendix 2004 All Recipients TOTAL: 1.000 $1. Richard Gephardt (D) John McCain (R) $503.296 $1.000 $750 1998 TOTAL: $244.250 $6.000 $500 187 2002 All Recipients TOTAL: 1.000 $1. 5.000 No contributions to individual candidates . John Kerry (D) Blanche Lincoln (D) Patty Murray (D) Hillary Clinton (D) Erskine Bowles (D) Joseph Hoeffel (D) Charles Rangel (D) Joe Lieberman (D) $256. 4. 2. 1. 5.000 $1. Erskine Bowles (D) Jeanne Shaheen $769. 8.968 $1. 5.000 2000 TOTAL: 1.000 $4.000 $1.

000 TOTAL: DE Shaw & Co Commonwealth Group 2005 TOTAL: Mehlman Vogel Castagnetti Inc Navigant Consulting $110.000 2000 2007 N/A TOTAL: DE Shaw & Co Commonwealth Group 2006 TOTAL: Mehlman Vogel Castagnetti Inc Navigant Consulting $70.000 1999 $30. .000 $20.000 $20.000 $20.000 $160.000 $40.188 DE Shaw Lobbying Expenses:259 2008 TOTAL: Mehlman Vogel Castagnetti Inc $20.000 $40.000 $120.000 $40.000 $40.000 $80.000 $60.000 $80. Lobbying amounts accessed February 2009.000 $80.000 $40.000 2004 TOTAL: Mehlman Vogel Castagnetti Inc Navigant Consulting $80.000 $30.000 2003 TOTAL: Navigant Consulting $20.000 2002 N/A 259 Source: Center for Responsive Politics.000 1998 TOTAL: DE Shaw & Co Commonwealth Group 2001 TOTAL: Commonwealth Group Appendix $20.000 $20.000 $120.

senate.Appendix 189 DE Shaw Covered Official Lobbyists:260 Firm / Name of Lobbyist Covered Position Year(s) Mehlman Vogel Castagnetti Inc Kelly Bingel Elise Finley Pickering Dean Rosen David Thomas C. Zoe Lofgren Asst Sec for Homeland Security Chief Council. . RPC Health Policy Director. Senate Majority Leader Chief of Staff. Senate Majority Leader 2005-2006 2006 2005-2006 2006 2005 2005 260 Source: Senate Office of Public Records <http://soprweb. Stewart Verdery Jr Alex Vogel Chief of Staff. Accessed January 2009. Rep. Exec Director. Shaddegg.gov/>. Rep. Blanche Lincoln Chief of Staff. Sen.

2.100 $2.000 $4.950 $14.000 $1.550 $13.500 $2.100 $2.005. 8.400 $4. 261 3. 8. 15.000 $6.200 $8.890 $33.000 $500 10.600 $7.900 $8.000 $4.200 $2.100 $2. 3.863 $94.000 $500 $250 2004 All Recipients TOTAL: 1.953 Decade-long lobbying expenditure total (1998-2008): $1. Individual recipient numbers do not include the 4th Quarter of 2008. 3. Hillary Clinton (D) Kent Conrad (D) Source: Center for Responsive Politics. 15.200 $4.000 $9. Charles Rangel (D) 12. 3. 4. 8. 5. 8.400 3.100 $1. 5.100 $2. 6. 7. 3. Donna Edwards (D) 11.000 $4. 8.100 $2.600 $3.190 $8. Allyson Schwartz (D) 13.000 $1. 8.600 $15. 6.000 $2.000 Farallon Campaign Contributions:261 2008 All Recipients TOTAL: 1.800 $10. 3.600 $4. $328. Campaign contribution totals accessed February 2009. 7. 2006 All Recipients TOTAL: 1. Rahm Emanuel (D) Evan Bayh (D) John Thune (R) Judy Aydelott (D) John Hall (D) Joe Sestak (D) Ken Lucas (D) Chris Carney (D) Michael Arcuri (D) Edwin Perlmutter (D) Charles Brown (D) Chris Murphy (D) Dianne Feinstein (D) Howard Berman (D) Patrick Murphy (D) $8. Hillary Clinton (D) Barack Obama (D) David Obey (D) Chris Dodd (D) Rahm Emanuel (D) John McCain (R) Howard Berman (D) John Thune (R) Tim Johnson (D) Gary Trauner (D) Mark Warner (D) $372. 16. 8. 8. 9.190 Appendix Hedge Funds: Farallon Capital Management Decade-long campaign contribution total (1998-2008): $1.000 John Kerry (D) Tom Daschle (D) Russell Feingold (D) Chris John (D) Tony Knowles (D) Brad Carson (D) Lisa Quigley (D) Erskine Bowles (D) Howard Dean (D) 2. 4. 8. 8.300 $4. Mitt Romney (R) $233.800 $13.100 $2. 6.058.000 $2. 2.300 $2.100 $4.250 $4. 8. .

3. 8.000 $1.000 $1.500 $4.200 $1.000 $5.000 $1. 5. 3. John Kerry (D) Tom Daschle (D) John P Murtha (D) Howard Berman (D) Robert Bennett (R) Rahm Emanuel (D) Howard Berman (D) John Thune (R) Steven Peter Andreasen (D) $97. 1.500 $9.000 $2.000 $750 2000 All Recipients TOTAL: 1. 4. 3. 16.000 $2.000 $1. 8. 8.000 $1. Ken Salazar (D) Inez Tenenbaum (D) Joe Lieberman (D) Harold Ford.000 $750 $250 2002 All Recipients TOTAL: 1.000 .250 $17. 17.000 $2. 9.000 $500 1998 All Recipients TOTAL: 1. John McCain (R) Matt Fong (R) Dick Lane (D) Matt Fong (R) 191 $7. 5. 5. 15.000 $2. 5.000 $2. 4. 2.000 $1.500 $1.000 $1.500 $1. 8. 3.Appendix 8.000 $1.000 $7. Jr (D) Betty Castor (D) Rob Bishop (R) Robert Bennett (R) Jamie Metzl (D) $2. 2. Norm Dicks (D) Bill Bradley (D) John McCain (R) Ed Bernstein (D) Nancy Pelosi (D) $18. 3.

$310.000 $310.192 Farallon Lobbying Expenses:262 2004-2008 N/A Appendix 2003 TOTAL: Timmons & Co. $335.000 $320.000 $40. $360. Lobbying amounts accessed February 2009.000 2002 TOTAL: Timmons & Co.000 $335.000 1998-2000 N/A 262 Source: Center for Responsive Politics.000 2001 TOTAL: Fleischman & Walsh Timmons & Co. .

2003-2005 Covered Position Year(s) 263 Source: Senate Office of Public Records <http://soprweb. Richard Tarplin Asst Secretary for Legislation.senate. Business Rights & Competition 2001. Accessed January 2009. Dept of HHS 2001-2004 Senate Judiciary Subcommittee on Antitrust.gov/>.Appendix 193 Farallon Covered Official Lobbyists:263 Firm / Name of Lobbyist Fleischman & Walsh Louis Dupart Timmons & Co. .

000 $2.000 $1. Individual recipient numbers do not include the 4th Quarter of 2008.000 $2. 2006 All Recipients TOTAL: Sheldon Whitehouse 1. Patty Murray (D) 10. 5. (D) 2.000 Och-Ziff Campaign Contributions:264 2008 All Recipients TOTAL: 1. 2. Chris Shays (R) $95. 2. 2.000 $1.000 $1.002 $14.000 $3. . Rahm Emanuel (D) 7. Eric Cantor (R) 7. John Thune (R) 5. 5.000 $1. $82.000 $1. Hillary Clinton (D) 4.000 4.000 $1. Norm Coleman (R) 7. Mark Pryor (D) 2. 4.000 $2. 5.000 $1.000 $1.000 $2.000 $2. Daniel Inouye (D) 10.194 Appendix Hedge Funds: Och-Ziff Capital Management Decade-long campaign contribution total (1998-2008): $338.650 $3.000 $1.552 Decade-long lobbying expenditure total (1998-2008): $200.000 $2. Campaign contribution totals accessed February 2009.500 $7.802 $3. James DeMint (R) 10.000 $250 11. 2.000 $2.000 $2.300 $1. John McCain (R) 10. Denise Majette (D) Olympia Snowe (R) James Talent (R) George Allen (R) Mitch McConnell (R) Eric Cantor (R) Rahm Emanuel (D) Robert Menendez (D) Source: Center for Responsive Politics. 10. Joe Biden (D) $106. 4. Peter Deutsch (D) 10. Barbara Boxer (D) 10.900 $6. Jamie Metzl (D) 10.600 $2. 5.000 $1.800 $4. Mitt Romney (R) 5. 4. 4.000 $1.000 2004 All Recipients TOTAL: 1.300 $11.000 $1.000 John Kerry (D) Tom Daschle (D) Charles Schumer (D) Evan Bayh (D) Steny Hoyer (D) Charles Rangel (D) Rahm Emanuel (D) Barack Obama (D) Joe Lieberman (D) 4. Barack Obama (D) 3. 264 5. 5.000 $1.000 $1.000 $1.300 $2.000 $2. Jon Kyl (R) Bill Nelson (D) $1.

Conrad Burns (R) $26.000 .000 $1.000 $8.000 $2.000 $1.000 $1.Appendix 2002 All Recipients TOTAL: 1. Charles Schumer (D) 2.000 $2.000 195 2000 All Recipients TOTAL: 1.000 1998 All Recipients TOTAL: 1. Russell Feingold $2.600 $3. Denise Majette (D) 3. Charles Schumer (D) 1.000 $1.000 $1. Tom Harkin (D) 3. Hillary Clinton (D) 3. Arlen Specter (R) $26. Charles Schumer (D) 2.

000 $20. Lobbying amounts accessed February 2009.000 $60.000 2004 TOTAL: Navigant Consulting $60.196 Och-Ziff Lobbying Expenses:265 2007-2008 N/A Appendix 2006 TOTAL: Navigant Consulting $40.000 2005 TOTAL: Navigant Consulting $80.000 $40.000 1998-2002 N/A Och-Ziff Covered Official Lobbyists: N/A 265 Source: Center for Responsive Politics. .000 $80.000 2003 TOTAL: Navigant Consulting $20.

300 $2.300 $2. 2.900 $6. 15. 15. Individual recipient numbers do not include the 4th Quarter of 2008.100 Source: Center for Responsive Politics.300 $2.600 $4.250 $16. 15.700 $21. 4. 2.300 $2.Appendix 197 Hedge Funds: Renaissance Technologies Decade-long campaign contribution total (1998-2008): $1. 15. 7.850 $4.300 $2. Hillary Clinton (D) Timothy Bishop (D) Chris Dodd (D) Michael McGavick (R) Ben Cardin (D) Steve Israel (D) John Yarmuth (D) Michael Steele (R) John Gard (R) $364. 9.300 $2.200 $4.600 $4. 15. Dina Titus (D) Bart Gordon (D) Dan Maffei (D) Jerry McNerney (D) Rahm Emanuel (D) Steve Buehrer (R) Andy Harris (R) Paul Broun Jr (R) Bob Schaffer (R) Charlie Ross (R) Woody Jenkins (R) Christopher L Hackett (R) Kirsten Gillibrand (D) $2.600 $4. 15.100 $2. 7. 3.600 $4.000 $6.600 $4. 2.100 $2. 15.100 $5.300 $2. 15. 5. 15. 15.300 $2.000 Renaissance Campaign Contributions:266 2008 Top Recipients TOTAL: 1. 7. 266 15.100 $4.200 $4.300 $2.300 $2. 9.200 $4.560.895 Decade-long lobbying expenditure total (1998-2008): $740.300 $2. . 9. 15.300 $2.300 $2.100 $2.125 $4.300 Hillary Clinton (D) Barack Obama (D) Chris Dodd (D) Timothy Bishop (D) Tom McClintock (R) Jeff Merkley (D) John McCain (R) Rudy Giuliani (R) Nancy Pelosi (D) Charles Rangel (D) Sean Parnell (R) Steve Pearce (R) Steve Israel (D) Gary Ackerman (D) Scott Kleeb (D) Jeanne Shaheen (D) Gabrielle Giffords (D) Harry Mitchell (D) Bob Lord (D) Ann Kirkpatrick (D) 2006 All Recipients TOTAL: 1. 15. 9.300 $2. 15.600 $39.300 $721.300 $2. 15. Campaign contribution totals accessed February 2009. 9. 15. 7. 15.250 $59. 8.300 $2. 15. 6. 15.200 $4. 2. 6. 9.450 $12. 2.300 $2.600 $2.

2002 All Recipients TOTAL: 1. 8. 8.100 $2.000 $2. 7.200 $7. 8. 12.000 $2. 2.445 $15. 5. Bill Bradley (D) 8.000 $4.500 $7. Hillary Clinton (D) 2.100 $2.000 $1.000 $1. 20. 12.000 $4.000 $1. 17. 5.000 $2. 4.000 $1.000 $1.000 $1.000 $2. 5.000 $500 $500 $500 7. 20. 9. Charles Schumer (D) Vivian Viloria-Fisher (D) Steve Israel (D) Denise Majette (D) Hillary Clinton (D) Frank Lautenberg (D) Jill Long Thompson (D) Martha Fuller Clark (D) Carol Roberts (D) Stephanie Herseth (D) Jim Maloney (D) Rick Larsen (D) Rush Holt (D) Jay Inslee (D) Appendix $92. John McCain (R) 2. 12. John Kerry (D) Timothy Bishop (D) Hillary Clinton (D) George Bush (R) Betty Castor (D) Joe Lieberman (D) Michael Oxley (R) Steve Israel (D) Stephanie Herseth (D) Patricia Lamarch (3) Howard Dean (D) Inez Tenenbaum (D) Daniel Montiardo (D) Allyson Schwartz (D) Tom Daschle (D) $239. Michael Bouchard (R) Sharron Angle (R) Adrian Smith (R) Rick O'Donnell (R) William Sali (R) Chris Chocola (R) John Sununu (R) Francine Busby (D) Claire McCaskill (D) Debbie Stabenow (D) Kirsten Gillibrand (D) Scott Kleeb (D) Tammy Duckworth (D) $2. 7. 5. Charles Schumer (D) 2000 All Recipients TOTAL: 1. 2004 All Recipients TOTAL: 1. 7.100 $2. 3.000 $2. 8. 7. 9. 11. 5.100 $2. 2. 8. 16. 8.000 $1. 7.950 $8.198 7.000 $2. 17. 12. 20.500 $4.000 $300 $250 $250 $250 $250 $250 $250 $250 $49. 5. 2.000 $1.550 $14.000 $93.000 . 17.000 $550 $500 $500 $500 $500 1998 All Recipients TOTAL: 1. 3.700 $1.100 $2.100 $2.

000* > $10.000 2002 TOTAL: Liz Robbins Assoc.000 $220.000 2003 TOTAL: Liz Robbins Assoc.000 $220. $220. $220.000 2001 TOTAL: Liz Robbins Assoc.000 1998-2000 N/A Renaissance Official Covered Lobbyists: N/A 267 Source: Center for Responsive Politics. $200. * Not included in totals . Lobbying amounts accessed February 2009. $100.Appendix Renaissance Lobbying Expenditures:267 2008 TOTAL: E-Copernicus >$10.000 $100.000 $200.000* 199 2005-2006 N/A 2004 TOTAL: Liz Robbins Assoc.

500 $5.200 Appendix Accounting Firms: Arthur Andersen Decade-long campaign contribution total (1998-2008): $3.000 $5. David Scott (D) 268 2002 Top Recipients TOTAL: 1.000 Arthur Andersen Campaign Contributions:268 2006-2008 N/A 2004 Top Recipients TOTAL: 1.000 $7. Orrin G Hatch (R) 4. David Vitter (R) 9. Jim McCrery (R) Charles "Chip" 10. Rahm Emanuel (D) $86. Christopher Cox (R) 13.000 $4. Martin Frost (D) 15.000 $1. John Shadegg (R) 15.950 $7.750 $1. Jim Moran (D) 4.900.000 $6.500 $7. Bob Graham (D) 9.000 $1. Campaign contribution totals accessed February 2009. Barbara Mikulski (D) George Nethercutt Jr 13. . Dick Armey (R) 14. John Edwards (D) 3. Ron Wyden (D) 6.050 $6.000 $1. George Allen (R) 4.175 Decade-long lobbying expenditure total (1998-2008): $1. Wayne Allard (R) 5. Billy Tauzin (R) 3.750 $4. Mike Ferguson (R) 7.250 $6.250 $10.586 $12.000 $5. Paul Kanjorski (D) 4. Walter B Jones Jr (R) 9. Ken Bentsen (D) 10.000 $5.324. Pete Sessions (R) 12.000 $5. Pickering Jr (R) 12. Nancy Johnson (R) 9.000 $9. Earl Pomeroy (D) 13.000 $1.500 Source: Center for Responsive Politics. Jim Moran (D) 15. Tom Harkin (D) 4. Harry Reid (D) 19. (R) 13. Dennis Moore (D) 20. Mike Ferguson (R) 13. Barack Obama (D) 13.250 $5.500 $6.500 $6. Max Baucus (D) 7.335 $5. George W Bush (R) 2.000 $500 $500 $500 $300 $250 $250 $250 $250 $250 2.263 $11. Dennis Hastert (R) 15. Vito Fosella (R) $705.000 $6. John Kerry (D) 4.950 $6.

Rudy Giuliani (R) 16.350 $17.000 $14.250 $8. (D) 7. Lamar Alexander (R) 17. John Ashcroft (R) 11.750 $9. Mel Carnahan (D) 12.000 $7.000 $7. Paul Coverdell (R) 5.874 $6. Peter Fitzgerald (R) 20. John McCain (R) 10.250 $8. Cal Dooley (D) 19. John Ensign (R) 9.350 $8.460 $7. Charles Schumer (D) 4. George W Bush (R) 2.500 $9.650 $9.700 $10. Rod Grams (R) 17.500 $8.187 $8.101 $19.650 $17.900 $44.750 $11. George Allen (R) $1. Robert F Bennett (R) 14. Sherrod Brown (D) 11. Billy Tauzin (R) 13. E Clay Shaw Jr (R) 15.565 $7.270 $150.564.350 $8. Joe Barton (R) 15. Jim Bunning (R) Christopher S 'Kit' 20. (R) 17.Appendix 2000 Top Recipients TOTAL: 1. Ron Wyden (D) Carol Moseley Braun 6. Matt Fong (R) 4.805 $7.750 $13.200 $7. Rick White (R) 18. Billy Tauzin (R) 14. Al Gore (D) 7. (R) 10. Fritz Holings (D) Leslie Ann Touma 16. Peter Fitzgerald (R) 8.536 $10. Bill Bradley (D) 5.000 $6.250 .334 $30. Rick A Lazio (R) 3.550 $34.199 $8. Bond (R) 201 $968.250 $7. John Ensign (R) George Voinovich 9.056 $27.500 1998 Top Recipients TOTAL: 1.000 $8. Lauch Faircloth (R) 11.600 $20.500 $7. Jon Kyl (R) 6. Alfonse D'Amato (R) 2. Spencer Abraham (R) 8. Barbara Mikulski (D) 19.000 $8.000 $9.000 $13. Evan Bayh (D) 3.500 $10.000 $8. Chris Dodd (D) 12.

600.900.000 $40.202 Arthur Andersen Lobbying Expenditures:269 1999-2008 N/A 1998 TOTAL: Arthur Andersen & Co Johnson. Madigan et al Mayer. .000 $1.000 $120.000 $140. Lobbying amounts accessed February 2009. Brown et al OB-C Group $1.000 Appendix 269 Source: Center for Responsive Politics.

House Ways & Means Comm. Charles J Aide. Accessed January 2009.senate. Brown et al Rothfeld. 1998 House Sub Comm on Select US Role/Iranian Arms Transfers to Croatia & Bosnia 1998 Covered Official Position Year (s) 270 Source: Senate Office of Public Records <http://soprweb.gov/>. .Appendix 203 Arthur Andersen Covered Official Lobbyists:270 Firm / Name of Lobbyist Mayer. Charles A OB-C Group Mellody.

000 $12. Mitt Romney (R) 5. Campaign contribution totals accessed February 2009. Individual recipient numbers do not include the 4th Quarter of 2008.000 $10.500 $10. Allen Boyd (D) 15. (R) 5. Mike Conaway (R) 13.000 $10. Vito Fossella (R) 9.160 $18.000 $12.000 $11. Hillary Clinton (D) 4.950 $16. John Boehner (R) 15. Hillary Clinton (D) 11.250 $26. Jon Kyl (R) 14. David Dreier (R) 18.120.750 $24.100 $32.921 $20.400 $18.598 $90. Spencer Bachus (R) 15.000 $22. Max Baucus (D) 10.800 $21.500 $13. Barney Frank (D) 10.000 $10.498 $12.800 $12. Sherrod Brown (D) 8. . John Campbell (R) 13.300 $58.420.550 $51.000 $12.455 Deloitte Campaign Contributions:271 2008 Top Recipients TOTAL: 1. Deborah Pryce (R) 18.500 $14.000 $17. Henry Bonilla (R) 10.970 $16. Mark Kennedy (R) 2. Richard Baker (R) 6. Joe Lieberman ( I) 16.000 $10. George Allen (R) 15. Chris Dodd (D) 6. Michael McCaul (R) 13.294 $42.112 $177.340 Decade-long lobbying expenditure total (1998-2008): $19.000 $10. Christopher Shays (R) 9.204 Appendix Accounting Firms: Deloitte & Touche Decade-long campaign contribution total (1998-2008): $12. Eric Cantor (R) 18.000 $10.606. Spencer Bachus (R) 3.500 $10.000 $11. Roy Blunt (R) 15.000 $13.850 $68. Rick Santorum (R) 12. Ben Nelson (D) $2. Norm Coleman (R) 7. Barack Obama (D) 2.000 $19. Rudy Giuliani (R) 8. Tom Price (R) 7.000 2006 Top Recipients TOTAL: 1. Daniel K Akaka (D) 17.180.300 $11. Saxby Chambliss (R) 10.000 271 Source: Center for Responsive Politics. John McCain (R) 3. Chris Dodd (D) Christopher Shays 4.900 $20. Chris Cannon (R) $2.600 $14. John Campbell (R) 15. Vito Fossella (R) 15.500 $29.

011 $44.000 $10.750 $14. 12.483 $290. 5. 14.200 $11.000 $10. 12. Charles Schumer (D) 3. 15.999 $1.000 $12.000 $10.873. 7.884 $12. 10.500 $13.000 $10. 13.250 $10. 13. 19. 9.000 .172 $14. 6.050 $12. John McCain (R) 9. 3.000 $18.750 $12.233. Rudy Giuliani (R) 6.500 $10. 13.450 $10. Mike Enzi (R) Vito Fossella (R) Connie Morella (R) Mark Kennedy (R) Eric Cantor (R) Norm Coleman (R) Elizabeth Dole (R) Billy Tauzin (R) John Thune (R) $1. John Ashcroft (R) 19. Brad Sherman (D) 18.000 $10.000 $10.724 $10.000 $11.999 $12.000 $9. Felix Grucci Jr (R) James Talent (R) Anne Northup (R) Max Baucus (D) Thad Cochran (R) Susan Collins (R) J D Hayworth (R) Tim Hutchinson (R) Dennis Moore (D) Charles “Chip” Pickering Jr (R) Sue Kelly (R) 205 $11.500 $10.450 $73.500 $10.000 $11.826 $83.500 $27. 18. 8. Jim Maloney (D) 16. 6. 17. 10.300 $19. Bill Bradley (D) 8.999 $28.750 $23. George W Bush (R) John Kerry (D) Charles Schumer (D) Richard C Shelby (R) Chris Dodd (D) Vito Fossella (R) Mark Kennedy (R) John Thune (R) Robert "Bob" Conaway (D) James W DeMint (R) Daniel K Inouye (D) Eric Cantor (R) Patty Murray (D) Tom Latham (R) Joseph Crowley (D) David Vitter (R) Richard Burr (R) Tom Davis (R) Erskine Bowles (D) Spencer Bachus (R) $2. Rick A Lazio (R) 4. 4. E Clay Shaw.000 $13. 13. Edolphus Towns (D) 14.000 $10.500 $15.Appendix 2004 Top Recipients TOTAL: 1.750 $11.000 $11. 2.800 $10. 13. 11. Steven Kuykendall (R) 20.000 $10. James M Jeffords (R) 19. 7.650 $12. Spencer Abraham (R) 7.700 $15. 9.798 $10.500 $48.000 $10. 4.750 $38. James E Rogan (R) 16.000 $10. 15. Jr (R) 15. Mike DeWine (R) 12. Charles Rangel (D) 2002 Top Recipients TOTAL: 1.000 $25. 3. $15. 13.500 $13. 13. 5.850 $13.152 $39.200 $14.500 $10. Hillary Clinton (D) 5. 2.250 $40.982. George W Bush (R) 2. Chris Dodd (D) 11.000 $12.850 $48.000 2000 Top Recipients TOTAL: 1. 11.700 $30.249 $16. 8. Vito Fossella (R) 13. 20.800 10.450 13.

206 1998 Top Recipients TOTAL: 1. Chris Dodd (D) 2. Alfonse D'Amato (R) 3. Charles Schumer (D) 4. Ron Wyden (D) 5. Vito Fossella (R) 6. Matt Fong (R) 7. Lauch Faircloth (R) George Voinovich 8. (R) 9. Chuck Grassley (R) 10. Anna Eshoo (D) 10. Rick White (R) 12. Don Nickles (R) Christopher S 'Kit' 13. Bond (R) 13. Collin C Peterson (D) 13. Heather Wilson (R) Carol Moseley Braun 16. (D) 17. Robert F Bennett (R) Ben Nighthorse 17. Campbell (R) 17. Trent Lott (R) 20. Paul Coverdell (R) $1,430,614 $66,145 $45,000 $28,450 $22,850 $20,050 $13,050 $12,875 $12,000 $11,500 $10,000 $10,000 $9,500 $9,000 $9,000 $9,000 $8,800 $8,000 $8,000 $8,000 $7,500

Appendix

Appendix Deloitte Lobbing Expenditures:272 2008 TOTAL: Deloitte & Touche Clark & Assoc Clark & Weinstock Johnson, Madigan et al Mayer, Brown et al BGR Holding $1,140,000 $650,000 $50,000 $80,000 $240,000 > $10,000
*

207 Tew Cardenas LLP $200,000

2005 TOTAL: Clark & Assoc Clark & Weinstock Deloitte Tax Johnson, Madigan et al Barbour, Griffith & Rogers Tew Cardenas LLP $1,440,000 $20,000 $80,000 $860,000 $240,000 $120,000 $120,000

$120,000

2007 TOTAL: Deloitte & Touche Clark & Assoc Clark & Weinstock Deloitte LLP Johnson, Madigan et al Mayer, Brown et al BGR Holding Tew Cardenas $2,220,000 $440,000 $40,000 $80,000 $1,060,000 $240,000 $40,000 $120,000 $200,000 2004 TOTAL: Deloitte Tax Barbour, Griffith & Rogers Holland & Knight Tew Cardenas LLP Clark & Assoc Clark & Weinstock Deloitte Tax Johnson, Madigan et al 2006 TOTAL: Deloitte & Touche Clark & Assoc Clark & Weinstock Deloitte LLP Johnson, Madigan et al Mayer, Brown et al MWW Group Barbour, Griffith & Rogers
272

$1,520,000 $20,000 $120,000 $100,000 $60,000 $20,000 $80,000 $840,000 $240,000 $40,000

Public Strategies $1,960,000 $360,000 $40,000 $80,000 $840,000 $240,000 $80,000 > $10,000* $120,000 2003 TOTAL: Deloitte Tax Holland & Knight Clark & Assoc Clark & Weinstock Johnson, Madigan et al

$1,125,000 $660,000 $145,000 $20,000 $60,000 $240,000

Source: Center for Responsive Politics. Lobbying amounts accessed February 2009. * Not included in totals

208 2002 TOTAL: Deloitte & Touche Clark & Assoc Clark & Weinstock Thelen, Reid et al Velasquez Group Johnson, Madigan et al $1,677,455 $1,107,455 $60,000 $100,000 $10,000 $240,000 $160,000 1998 TOTAL: Deloitte & Touche Deloitte & Touche Latham & Watkins 2001 TOTAL: Deloitte & Touche Deloitte & Touche Dewey Ballantine LLP Ickes & Enright Group Johnson, Madigan et al Velasquez Group $2,625,000 $300,000 $160,000 $1,600,000 $25,000 $320,000 $220,000 Mayer, Brown et al Ickes & Enright Group Deloitte LLP Mayer, Brown et al

Appendix $20,000 $240,000 $40,000

$420,000 $360,000 > $10,000* $20,000 $40,000

2000 TOTAL: Deloitte & Touche Deloitte & Touche Dewey Ballantne LLP Greenberg Traurig LLP Ickes & Enright Group Johnson, Madigan et al Clark & Weinstock Mayer, Brown et al Velasquez Group $4,609,000 $2,524,000 $240,000 $1,180,000 $60,000 $65,000 $280,000 $80,000 $60,000 $120,000

1999 TOTAL: Deloitte & Touche Greenberg Traurig LLP $870,000 $440,000 $130,000
*

Not included in totals

Appendix Deloitte Covered Official Lobbyists:273 Firm / Name of Lobbyist Clark & Assoc. Sam Geduldig Dir of Coalitions, House Fin. Serv. Comm Sr. Advisor, Majority Whip Roy Blunt Clark & Weinstock Ed Kutler Vin Weber Jon Schwantes Margaret McGlinch Asst, Office of the Speaker, House of Reps Asst, House Republic Whip Member of Congress (MN) Gen. Counsel, Sen. Judiciary Comm. Chief of Staff, Rep. Tim Walz Leg. Director, Rep. Richard Neal Leg. Counsel, Sen. Harry Reid Leg. Aide, Sen. Daniel Moynihan Sandra Stuart Brian Bieron Kent Bonham Juleanna Glover Weiss Timothy Morrison Clark Lytle & Geduldig Sam Geduldig Dir. Of Coalitions, House Fin. Serv Comm Sr Advisor, Majority Whip Roy Blunt Deloitte & Touche LLP Janet Hale William Ezzell Cindy Stevens Charles Heeter Undersecretary for Mgt, DHS Partner Director Principal 2007 2007 2007 2007 2007 Asst Sec for Leg Affairs, Dept. of Defense Chief of Staff, Rep. Vic Fazio Policy Director, House Rules Comm. Policy Director, Sen. Chuck Hagel Press Secretary to the Vice President Assoc. Dir, Presidential Personnel 2002 2002 2003 2003 2008 Covered Official Position Year(s)

209

2006-2008 2006-2008 2007-2008 2007-2008

2006-2008

273

Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.

Sen. John Warner Chief of Staff.210 Holland & Knight Leigh A. Dept of Veterans Affairs Former U. Tillie Fowelr Appendix 2003 2003 2003 2003 2001-2000 . Sen Breaux Gen Counsel.S. Aide. Brown et al Jeffrey Lewis Legislative Asst. Representative Leg. Rep. Bradley Tillie Fowler Chris DeLacy David Gilliland Mayer.

Tom DeLay (R) 14. (R) $1. Richard Baker (R) 5. John Boehner (R) 9.592.536 Ernst & Young Campaign Contributions:274 2008 Top Recipients TOTAL: 1. Anne Northrup (R) Michael Fitzpatrick 20.350 $165.500 $13.392 $292.750 $37.000 $10.300 $13. Susan M Collins (R) 12.500 $46.100 $11. Hillary Clinton (D) 3.200 $23.170.999 $11. Barack Obama (D) 4.250 $20.606 $70.650 $15.000 $11. John Boehner (R) 7. Chris Van Hollen (D) 15.650 $14.Appendix 211 Accounting Firms: Ernst & Young Decade-long campaign contribution total (1998-2008): $12.100 $19.482. Ben Cardin (D) 4.100 $11. Deborah Pryce (R) 11.000 $10.800 $19.287 $12. Jay Rockefeller (D) 274 16. Eric Cantor (R) 14. James M Talent (R) 15. Eric Cantor (R) 18.207 $105.550 $18.200 $11. Rudy Giuliani (R) 2.200 $13. Chris Dodd (D) 6.850 $13. Spencer Bachus (R) 16. Mike DeWine (R) 6. Mark Kennedy (R) 10.300 $16.500 $12. Jim McCrery (R) 17.003 $20.000 $10. Norm Coleman (R) 11.000 $10. Rudy Giuliani (R) 3. Elizabeth Dole (R) 16. .700 $15.500 $13. John McCain (R) 5. Individual recipient numbers do not include the 4th Quarter of 2008.750 $11.000 TOTAL: 1. Joe Lieberman (I) 12. Barney Frank (D) 16. Mitt Romney (R) 7. John Campbell (R) 18.500 $11. Campaign contribution totals accessed February 2009.000 2006 Top Recipients $2. Max Baucus (D) 9. Barney Frank (D) 16. John Cornyn (R) 8.900 $10. Hillary Clinton (D) 2. George Allen (R) 9. Charles B Rangel (D) 13.407 Decade-long lobbying expenditure total (1998-2008): $25. Steny H Hoyer (D) 16.250 $14.108.692 $150.550 $81.500 Source: Center for Responsive Politics.000 $10. David Scott (D) $10. Rick Santorum (R) 8. Jon Kyl (R) 13.

525 $14.800 $17.450 $12.150 $15.200 $10.500 $10. George Allen (R) 2002 Top Recipients TOTAL: 1.012. Dianne Feinstein (D) 7.850 $30. Al Gore (D) 3.500 $12.500 $12.999 $13. E Clay Shaw.000 $13.949 $136. Saxby Chambliss (R) 5.550 $16.600 $38. Lisa Murkowski (R) 17.000 $10.250 $12. Bush (R) 2. Jr (R) 20. John Cornyn (R) 3.425 $43. Chris John (D) 10. Charles Schumer (D) 2. Roy Blunt (R) 15.000 $14.000 $10. Bill Bradley (D) 4. Susan M Collins (R) 15. Oxley (R) 9.700 $16.700 $24. Connie Morella (R) 11.000 $13. Evan Bayh (D) 18.261 $12.750 $9. John R Kasich (R) 9.000 10.750 $30.864 $305. Pete Sessions (R) 8. Richard Burr (R) 7.500 $16.140. Richard Gephardt (D) 17. Arlen Specter (R) Christopher S 'Kit' 15. Hillary Clinton (D) 6. George W. Anna Eshoo (D) 11.212 2004 Top Recipients TOTAL: 1.450 $14. Charles Schumer (D) 5. John Tanner (D) $2.061 $20.261 $15. James DeMint (R) 18. Mary L Landrieu (D) 8.250 $33.999 $10. Dennis Moore (D) 14.000 $12.500 2000 Top Recipients TOTAL: 1.000 $13. Sherrod Brown (D) 10.500 $10. Charles S. Max Baucus (D) 4. Bond (R) 15.450 $17.750 $14.916 $9. John Kerry (D) George Voinovich 3. John Thune (R) 13. Jay Rockefeller (D) 5. Robert Torricelli (D) Appendix $11. Orrin G Hatch (R) 19.000 $11.500 $10.000 $9.336 $181. Tom Daschle (D) 14. Spencer Abraham (R) 14.000 $12.097 $19. Rob Portman (R) 13.978 $16. Bush (R) 2.845.250 $12. Michael G Oxley (R) 18. Robb (D) 16. John Ashcroft (R) 13.169 $10. John Thune (R) 10.000 $10.675 $67. Norm Coleman (R) 7.500 $12.500 . (R) 4. George W. Bill Frist (R) 15.000 $14.000 $11.550 $12. Mark Kennedy (R) 15. Steny H Hoyer (D) 18. Mike DeWine (R) 8. Robert Torricelli (D) 12.300 $10. Richard C Shelby (R) 6. Michael G. James M Talent (R) $2. Hillary Clinton (D) 11. Rick A Lazio (R) 5.750 $13. Chris Dodd (D) 17.978 $63.500 $10. Mel Martinez (R) 12. John McCain (R) 9.250 $2.140 $101. Jennifer Dunn (R) 19.

000 $9.000 $10. Fritz Hollings (D) 20.249 $10. John Linder (R) George Voinovich 6.750 $11.999 .250 213 1998 Top Recipients TOTAL: 1. Evan Bayh (D) 11. Jennifer Dunn (R) 11.720.450 $11.000 $10. Paul Coverdell (R) 11.500 $10.450 $11. Tom DeLay (R) 11. Thomas Bliley Jr (R) 11.000 $10. John Ensign (R) 11. Alfonse D'Amato (R) 3.000 $10.281 $26.000 $10.000 $11.000 $10. (R) $11.000 $10. Barbara Boxer (D) 9. Anna Eshoo (D) $1.750 $12. John Breaux (D) 11. Newt Gingrich (R) Christopher S 'Kit' 4. Martin Frost (D) 11. E Clay Shaw.700 $13. Rick White (R) 8.Appendix 20. Chuck Grassley (R) 11.000 $10. Peter Fitzgerald (R) 10. Jr.750 $11. Charles Schumer (D) 2. Bond (R) 4.000 $10. (R) 6.

000 $140.000 $40.000 Source: Center for Responsive Politics.000 $140.480 $240.000 $40.000 $60.000 $200.000 $200.000 * Appendix Glover Park Group Alpine Group American Continental Group Mayer.000 $120.000 $40.056 $2.214 Ernst & Young Lobbying Expenditures:275 2008 TOTAL: Ernst & Young RR&G Elmendrof Strategies Glover Park Group American Continental Group Clark & Weinstock Clark & Assoc Mayer.640 $1.056 $240. Brown et al Clark & Weinstock Clark & Assoc Jolly/Rissler Inc $140.000 $40. Brown et al Jolly/Rissler Inc $3.000 2007 TOTAL: Ernst & Young RR&G Glover Park Group Elmendorf Strategies American Continental Group Clark & Weinstock Clark & Assoc Mayer.440.000 $140.000 $120.000 $40.549.000 $120.000 $80.173.000 2006 TOTAL: Ernst & Young RR&G 275 $1.000 $200.640 $200.480 $2.000 $80.000 $80.500 $160.000 $20. Reid & Priest Jolly/Rissler Inc $2.560.790.000 $40.000 2004 TOTAL: Ernst & Young Alpine Group Harbour Group Clark & Weinstock American Continental Group Clark & Assoc Public Strategies Jolly/Rissler Inc $2.103.000 $60.000 $140.000 $210.741.000 $120.000 $220.000 2005 TOTAL: Ernst & Young Alpine Group Glover Park Group American Continental Group Clark & Weinstock Bryan Cave Strategies Clark & Assoc Thelen.000 $120. Brown et al Jolly/Rissler $3.000 $80.749.000 $1.000 $160.000 $80. Lobbying amounts accessed February 2009.000 >$10.000 $120.500 $861.650.000 $160. * Not included in totals .000 $200.000 $140.

Brown et al * $1.980.000 $10.340.000 $1.000 $1. Brown et al 1999 TOTAL: Ernst & Young Fleishman-Hillard Mayer.000 $80.000 2000 TOTAL: Ernst & Young American Continental Group Mayer.000 $100.000 $1.000 $180.400.000 $100.860 $2.000 $180.000 $120.000 $1.573.000 Not included in totals .000* 2001 TOTAL: Ernst & Young American Continental Group Mayer.600. Michael F.343.000 $40.200.000 $80.000 $60. Brown et al 215 $1.320.860 $120.000 $80.000 $60.000 $1.000 $100.000 $40.420.000 > $10.200.000 $80.000 1998 TOTAL: Ernst & Young Fleishman-Hillard Mayer.000 $160.000 2002 TOTAL: Ernst & Young American Continental Group Clark & Weinstock Thelen.000 $1. Jr $2. Reid et al Clark & Assoc $2.Appendix 2003 TOTAL: Ernst & Young Public Strategies Clark & Weinstock Alpine Group American Continental Group Clark & Assoc Jolly/Rissler Inc Harbour Group Barrett.000 $60.640.880.000 $180. Brown et al $1.

gov/>. Senate Judiciary Committee Assistant Office of the Speaker House of Reps Assistant. Democratic Leadership Committee. Accessed January 2009. Director. Vic Fazio Member of Congress (MN) Chief of Staff. Counsel. Rep. Jolly Glover Park Group Joyce Brayboy Joel Johnson Chief of Staff. & Platt Jeffery Lewis Clark and Weinstock Brian Bieron Kent Bonham Juleanna Glover Weiss Jonathan Schwantes Ed Kutler Sandra Stuart Vin Weber Margaret McGlinch Policy Director. Thomas R. Rep. Rep. for Leg Affairs. Sen. Director. House Rules Committee Policy Director for Sen. Mel Watt Chief of Staff.216 Ernst & Young Covered Official Lobbyists:276 Firm / Name of Lobbyist Mayer. House Republic Whip Asst. DoD Chief of Staff. Sen Harry Reid Jolly/Rissler Inc.senate. Rep. Brown. Sec. Special Assistant to the PresiChairman Legislative Assitant to Senator Breaux Covered Official Position Appendix Year(s) 1999-2001 2002 2002-2003 2002-2003 2007 2008 2008 2008 2008 2003-2004 2007 2008 276 Source: Senate Office of Public Records <http://soprweb. Howard Metzenbaum. Leg. . Sen Daniel Moynihan Leg. Tim Walz. Richard Neal Legislative Aide. Chuck Hagel Press Secretary to the Vice President General Counsel. House Democratic Study Group Assistant Secretary of the Minority US Senate Staff Director. Exec.

Communications Susan Brophy Chief of Staff. & Geduldig Sam Geduldig Dir of Coalitions. Majority Whip Roy Blunt 2008 2008 217 . Sr Advisor.Appendix dent for Policy. Byron Dorgan Chief of Staff Senator Tim Wirth Deputy Assistant to the President for Legislative Affairs Clark. House Fin Serv Com. Lytle. Rep.

300 $10. . 9.300 $10.486.000 $10.218 Appendix Accounting Firms: KPMG LLP Decade-long campaign contribution total (1998-2008): $8.000 $10. 9.000 $10.000 $10. 7.000 contributions and PAC money. 3.103. 9.000 $10.000 $12. 9.000 $10. 9.000 $10.000 $10. 9.746.000 $10.000 $1. 2. 9.000 $10.000 Barack Obama (D) Hillary Clinton (D) John McCain (R) Chris Dodd (D) Elizabeth Dole (R) Steve Chabot (R) Jim Ryun (R) Michele Marie Bachmann (R) Melissa Bean (D) Allen Boyd (D) John Campbell (R) Michael Castle (R) James Clyburn (D) Norm Coleman (R) Susan Collins (R) Mike Conaway (R) John Cornyn (R) Joseph Crowley (D) Artur Davis (D) Source: Center for Responsive Politics.000 $10. 9.300 $10.000 $10. 9.900 $22.000 $10. 278 Based on highest 1.000 $10. 5. 9.392 Decade-long lobbying expenditure total (1998-2008): $19. 9.000 $10. 9. 9.000 $10. 8.000 $10. 9. 9. 277 9. 9.000 $10.000 $10.000 KPMG Campaign Contributions:277 2008 Top Recipients278 TOTAL: 1. Lincoln Davis (D) Barney Frank (D) Jim Gerlach (R) Jeb Hensarling (R) Michael Johanns (R) Paul Kanjorski (D) Ron Kind (D) Ron Klein (D) Tim Mahoney (D) Carolyn Maloney (D) Jim Marshall (D) Jim Matheson (D) Dennis Moore (D) Chris Murphy (D) Steve Pearce (R) Edwin Perlmutter (D) Charles Rangel (D) Harry Reid (D) Peter Roskam (R) Ed Royce (R) Paul Ryan (R) David Scott (D) Christopher Shays (R) Lamar Smith (R) John Tanner (D) Mike Thompson (D) $10.000 $10.000 $10. 9. 9. 4. 9.000 $10.000 $10. 9. 9.000 $10.000 $10. 9. 6. 9.000 $10.000 $10. 9. 9.490 $21. 9.000 $10. Individual recipient numbers do not include the 4th Quarter of 2008. 9.000 $10. 9. 9.000 $10.000 $10.000 $10.500 $40. 9. Campaign contribution totals accessed February 2009.000 $10. 9.000 $10.293 $67. 9.000 $10.000 $10. 9. 9. 9. 9.

7.000 contributions and PAC money.740.000 $12. 2.050 $14. 3. 7.000 $10.000 $18. 7.000 $10. 7.000 $10. 7. 10.000 $10.500 $11. 10.500 $12. 3.500 Based on highest 1. 13. 6. 7. 14. 7.000 $13. 14.000 $16. 7. . 6.200 $10. Saxby Chambliss (R) Mike Ferguson (R) Norm Coleman (R) Felix J Grucci Jr (R) $1.000 $10.000 $10.000 $22.000 $10.459. 7. 7. 14. 7. 14.303 $32.000 $11.000 $10. 14.000 $12. 7.000 $15. 3.000 $10.000 2.000 $10. 279 219 $1. 14. 2.500 $12.000 $10.000 1. Melvin Watt (D) $10.000 $11.000 $10.000 $10.000 $10. 7. 14. 7.000 $10. 8.000 $10.000 $10. 14.000 $10. 14.139 $16.000 $10.000 $10.000 $25.000 $10.000 $13. 7. 7.000 $10. 14.000 $10. 14.000 $10.704 $10. 3. 7. 4.000 $10. $1.233 $13.000 $10. 3.320. 7. 12.000 $10.750 $19. Charles Schumer (D) Richard Shelby (R) John Kerry (D) Chris Dodd (D) Peter Coors (R) Mike Conaway (R) James DeMint (R) Richard Baker (R) Jeb Hensarling (R) Christopher S 'Kit' Bond (R) George W Bush (R) Gresham Barrett (R) Mel Martinez (R) Spencer Bachus (R) Bob Beauprez (R) Roy Blunt (R) Eric Cantor (R) Shelley Moore Capito (R) Vito Fossella (R) Katherine Harris (R) Bill Jones (R) Sue Kelly (R) Michael Oxley (R) Jim Ryun (R) Heather Wilson (R) Max Baucus (D) Chris Dodd (D) James Talent (R) Rick Santorum (R) Patrick McHenry (R) Spencer Bachus (R) Roy Blunt (R) Conrad Burns (R) Eric Cantor (R) Hillary Clinton (D) Bob Corker (R) Michael Fitzpatrick (R) Barney Frank (D) Jeb Hensarling (R) Jon Kyl (R) Jim Matheson (D) Raymond Meier (R) Dennis Moore (D) Marilyn Musgrave (R) Rick O'Donnell (R) Rick Renzi (R) Tom Reynolds (R) David Scott (D) E Clay Shaw Jr (R) Gordon Smith (R) Patrick Tiberi (R) 2002 Top Recipients TOTAL: 1.000 $10. 5. 7.201 $15. 7. 8. 5.000 $15. 7.000 $10.000 2004 Top Recipients TOTAL: 2006 Top Recipients279 TOTAL: 1.683 $15. 7.Appendix 9.000 $10.000 $10.

225 $6. Jim McCrery (R) Phil Gramm (R) Connie Morella (R) Lamar Alexander (R) Charles "Chip" Pickering Jr (R) Roy Blunt (R) Shelley Moore Capito (R) Vito Fossella (R) Robin Hayes (R) Tim Hutchinson (R) Chris John (D) Sue Kelly (R) Mark Kennedy (R) Candice Miller (R) Dennis Moore (D) Michael Oxley (R) Mike Rogers (R) John Shadegg (R) Rob Simmons (R) John Sununu (R) John Thune (R) $11.725 $7.775 $7.750 $5.000 $6. 10. 15.000 $10.000 $5.000 $10. 8.000 $5.500 $6. 10. 7. 8. 15. 7.500 $7. 15.000 $10. 10.500 $8. George W Bush (R) Charles Schumer (D) Spencer Abraham (R) Rick Lazio (R) Chris Dodd (D) George Allen (R) William Roth Jr (R) John Ashcroft (R) Slade Gorton (R) $1. Thomas Bliley Jr (R) Billy Tauzin (R) Barbara Mikulski (D) Lauch Faircloth (R) Ron Wyden (D) Paul Coverdell (R) Rick White (R) Robert Bennett (R) John Boehner (R) Molly Bordonaro (R) Heather Wilson (R) Matt Fong (R) Don Nickles (R) Alfonse D'Amato (R) Dick Armey (R) Brian Bilbray (R) Jim Bunning (R) Christopher Cox (R) Tom DeLay (R) Peter Fitzgerald (R) 8. 5. 10. 15.500 $5.000 $7.000 $10. 12.999 $8. 2000 Top Recipients TOTAL: 1. 10.750 $11.000 $10.567 $42. 10.000 $8.225 $848. 2. 12. 10. 10. 15.250 $10. 8.000 $6. 11.000 $5. 10.450 $10.300 $5.000 $10.815 $10. 17. Rod Grams (R) Rick Santorum (R) Rudy Giuliani (R) Conrad Burns (R) David Phelps (D) John Ensign (R) James Rogan (R) Dick Armey (R) Jane Harman (D) Al Gore (D) Heather Wilson (R) Appendix $10.000 $10. 10.000 $5.000 $10.000 $5.000 $7.948 $14. 6. 6. 8.000 .000 $10.000 $10. 7.000 $6. 4.000 1998 Top Recipients TOTAL: 1. 14.219 $8. 19. 3. 20.000 $10.000 $9. 10.400 $7.159 $89. 3. 1.371.000 $10. 14.999 $14. 8.000 $10.000 $10. 10. 5. 15. 16.220 5. 10.000 $10.000 $10.550 $14. 13.000 $10.000 $8.795 $7. 10.000 8.300 $7. 18. 4. 10.500 $10. 6.943 $10.000 $10. 10. 8.250 $10. 8.000 $5. 13.000 $10. 15.

000 221 .000 $5. Newt Gingrich (R) Trent Lott (R) Bill Redmond (R) $5.000 $5. 15.Appendix 15. 15.

590.000 $90.000 $80.000 $80.000 > $10.130.000 $925.000 $40.000 $2.000 $40.000 TOTAL: KPMG LPP KPMG LPP KPMG LPP Clark & Weinstock Velasquez Group Public Strategies Clark & Assoc $1.000 > $10.000 > $10.000 $180.000 $40.000* $200.000 TOTAL: KPMG LLP KPMG LLP KPMG LLP Clark & Weinstock Velasquez Group Public Strategies McGovern & Smith Clark & Assoc $1. Lobbying amounts accessed February 2009.000* $180.985.650.000 $40.368.000 $40.000 $80.000 $130.000 $40.000 > $10.222 KPMG Lobbying Expenses:280 2008 TOTAL: KPMG LLP KPMG LLP Velasquez Group Public Strategies Clark & Weinstock Clark & Assoc Mayer.000* 280 Source: Center for Responsive Politics.000 $160.000 $120.000 * Appendix 2005 TOTAL: KPMG LLP KPMG LLP Public Strategies Clark & Weinstock Clark & Assoc Velasquez Group $1.000 $60.000 $1. * Not included in totals * Not included in totals .000 $180.000 $20.838.000 $140.000 > $10.000 $80.000 > $10.000* $200.190.000 2003 2006 TOTAL: KPMG LLP KPMG LLP Velasquez Group Public Strategies Mayer.000 $890.575.000 $180.000 $2. Brown et al Clark & Weinstock Clark & Assoc $2.000* 2004 2007 TOTAL: KPMG LLP KPMG LLP Velasquez Group Public Strategies Clark & Weinstock Clark & Assoc Mayer.000 $120.000 $80.000 $40.210.525.000 $50. Brown et al $2.000 $50.000 $120. Brown et al $2.000 $1.000 $40.

000 $1.000 $40.000 $60.Appendix 2002 TOTAL: KPMG LLP KPMG LLP KPMG LLP KPMG LLP Public Strategies Clark & Weinstock McGovern & Smith Capitol Tax Partners Thelen.000 $10.190.000 $20.850.000 $600.000 $640.175.000 2000 TOTAL: KPMG LLP KPMG LLP Palmetto Group Mayer. Brown et al * $1.000 $1.000 1999 TOTAL: KPMG LLP Palmetto Group Mayer.000 $160.000* 2001 TOTAL: KPMG LLP KPMG LLP KPMG LLP Public Strategies Palmetto Group $1.000 * Not included in totals Not included in totals .340.580.000 $120. Brown et al Spectrum Group Spectrum Group 223 $20.000 $850.000 $280. Reid et al Clark & Assoc $1.430.000 $100. Brown et al $1.000 $40.000* $80.000 $1.455.000 > $10.000 $80.000 > $10.000 $100.000 $80.000 > $10.000 $60.000 $40.000 $10.000 $20.000* 1998 TOTAL: KPMG LLP Mayer.

Rep. Robert Kerrey 2002-2003 2002-2003 2002 2002 2002 Deputy Asst Sc for Leg Affairs. Senate Judiciary Comm Asst Sec for Legislative Affairs. Presidential Personnel Legislative Dir. Treasury Asst Treasury Secretary for Tax Policy 2002-2003 2002-2003 2002-2003 Counsel. Sen. Sr Advisor. Vice President Policy Director. House Fin. Vic Fazio Member of Congress (MN) Chief of Staff. Majority Whip Roy Blunt Clark & Weinstock Ed Kutler Johathan Schwantes Sandra Stuart Vin Weber Margaret McGlinch Asst. Harry Reid Kent Bonham Juleanna Glover Weiss Brian Bieron Timothy Morrison Anne Urban Capital Tax Partners William Fant Joseph Mikrut Jonathan Talisman Public Strategies.senate.gov/>. Sen Chuck Hagel Press Secretary. House of Reps Asst. Tim Walz Legislative Dir. Brown & Platt Jeffrey Lewis 281 Appendix Covered Official Position Year(s) 2007-2008 2007-2008 2007-2008 2008 2007-2008 2008 Policy Dir. Rep. Tauzin 2001-2002 Legislative Asst. Sen. Inc Wallace Henderson Mayer. Office of Speaker. Serv Comm. Assoc Dir.224 KPMG Covered Official Lobbyists:281 Firm / Name of Lobbyist Clark & Assoc. DoD Chief of Staff. Rep. . House Rulse Comm. House Republican Whip Gen Counsel. Richard Neal Legislative Counsel. Rep. Breaux 1999-2000 Source: Senate Office of Public Records <http://soprweb. Sam Geduldig Dir of Coalitions. Accessed January 2009. Sen. Treasury Tax Legislative Counsel.

Steny H Hoyer (D) 11.050 $12.000 $10.000 $17.500 $10.000 TOTAL: 1. Jon Kyl (R) 15.971 $205. James M Talent (R) 12.546 $23.250 $10.000 $11.388. Judy Biggert (R) 282 15.499 $20. E Clay Shaw Jr (R) $1. Campaign contribution totals accessed February 2009. Individual recipient numbers do not include the 4th Quarter of 2008.488 $20.250 $10. Chris Dodd (D) 6. George Allen (R) 11. Spencer Bachus (R) 7.000 $11. Rudy Giuliani (R) 7. (R) 13. Mitt Romney (R) 5.600 $11.000 $10. Keith S Fimian (R) 14. Mike Conaway (R) 13. Bachmann (R) 15. John Edwards (D) Michele Marie 15.850 $13.000 $10. Max Baucus (D) 15.500 $10.000 $10. Deborah Pryce (R) 9.Appendix 225 Accounting Firms: Pricewaterhouse Decade-long campaign contribution total (1998-2008): $10.084 Pricewaterhouse Campaign Contributions:282 2008 Top Recipients TOTAL: 1.500 $10. Richard Baker (R) 5.200 $10.970 $90. Tom Reynolds (R) Christopher Shays 16. Tom Davis (R) 2.250 $10.150 $13. Hillary Clinton (D) 3.000 $11. Barney Frank (D) 16.000 $10. Elizabeth Dole (R) 10. Nancy L Johnson (R) 16. Dean F Andal (R) 11. Melissa Bean (D) 15.291.000 $14.204 Source: Center for Responsive Politics.100 $13. John McCain (R) 4.800.250 $16.000 2006 Top Recipients $2.100 $10. Susan M Collins (R) 8. John Boehner (R) $10. Mark Kennedy (R) 3. Tom Carper (D) 6. Spencer Bachus (R) 15.150 $64.800 $16.750 $14. Joe Lieberman (I) 8.600 $23. (R) 20. Mike DeWine (R) Michael Fitzpatrick 13.200 $166.604 $71.772 Decade-long lobbying expenditure total (1998-2008): $44. Norm Coleman (R) 9.000 $10. . Mike Ferguson (R) 10.250 $10. Barack Obama (D) 2.652. Tom DeLay (R) 16.208 $35.318 $190. Rick Santorum (R) 4.

John Kerry (D) 3.080 $12. James M Talent (R) 9. Roy Blunt (R) 3. E Clay Shaw Jr (R) 17.250 $11.750 $10.950 $7.000 $12.000 $9.999 . Rod Grams (R) 17. Billy Tauzin (R) 20.000 $10.000 $61. Elizabeth Dole (R) $1.000 $10.000 $10.000 $9. Al Gore (D) 8.500 $10.086 $51.000 $7.950 $11.250 $50. Susan M Collins (R) 16.550 $23. Max Baucus (D) 12. Michael G Oxley (R) 8.000 $8. John Thune (R) 12.750 $10.550 $27.868. Dennis Hastert (R) 5.500 $7.226 2004 Top Recipients TOTAL: 1. James E Rogan (R) 11.000 $10.500 $7.000 $10.500 $11. Bush (R) 2. Mark Kennedy (R) 5. Sherrod Brown (D) 9.000 $1.750 $7. George W Bush (R) 2. Wayne Allard (R) 16.950 $9.500 10. James W DeMint (R) 8.674 $131. John Thune (R) 11.000 $10. Rick A Lazio (R) 3. William Jefferson (D) Appendix $9.500 2000 Top Recipients TOTAL: 1. Bill Bradley (D) 4. Max Burns (R) 18.500 $10.974 $29.550 $41. Rick Renzi (R) 19. Spencer Bachus (R) 14.500 $12.000 $12.357.000 $10. George W. Richard C Shelby (R) 4. Phil Crane (R) 13. Tim Hutchinson (R) 14. John E Sununu (R) 5.750 $9.000 $11. Michael G Oxley (R) 5. Charles Schumer (D) 6.000 $7.750 $11.353 $513.500 $7.476 $17.350 $12.500 $12. Ernie Fletcher (R) Steven Kuykendall 15. Spencer Abraham (R) 7. Robin Hayes (R) 19.750 $73.000 $12.950 $11. Dennis Moore (D) 19. William Roth Jr (R) 13.000 $9. Norm Coleman (R) 2.480 $13. (R) 16. Jim Mcrery (R) 16. Mark Kennedy (R) 14. Charles Schumer (D) 6.630 $19. Connie Morella (R) 4.000 $10.000 $10.566 $8. Ken Lucas (D) 15.500 $9. John Ashcroft(R) 2002 Top Recipients TOTAL: 1. Richard Burr (R) 20. Chuck Grassley (R) 9.798 $53. Arlen Specter (R) 9. Mike Conaway (R) 7. Richard Baker (R) 14. Eric Cantor (R) $1.000 $10. Roy Blunt (R) 14.882.150 $33. Rudy Giuliani (R) 5.270 $10. Scott Paterno (R) 9. Dennis Hastert (R) 17. John McCain (R) 9. Johnny Isakson (R) 13.000 $10. Edward Kennedy (D) 11. Chris Dodd (D) 14.

500 $11. Lauch Faircloth (R) 5.800 $15. Ron Wyden (D) 13.750 $11.111 227 . Martin Frost (D) 7. (R) 3. Robert F Bennett (R) 13. Don Nickles (R) 19.500 $11.000 $13.800 $13.Appendix 1998 Top Recipients TOTAL: 1.650. Michael Coles (D) Christopher S 'Kit' 17. (R) 16. Matt Fong (R) 15. Sherrod Brown (D) 8. Paul Coverdell (R) 10. Chris Dodd (D) George Voinovich 3. Anna Eshoo(D) 10.000 $14.690 $25. Bond (R) 18.500 $13.500 $15. Newt Gingrich (R) 10. Billy Tauzin (R) 5.500 $13.948 $13.825 $13. Rick White (R) 9. Thomas Bliley Jr.000 $9. Christopher Cox (R) $1. Alfonse D'Amato (R) 2.000 $10.000 $13.000 $14. Harry Reid (D) 20.500 $13.970 $17.000 $12.

000 283 Source: Center for Responsive Politics.000 $2. Brown et al Clark & Assoc Donna McLean Assoc $4.000 $80. Gillespie & Assoc Rich Feuer Group Clark & Weinstock American Capitol Group Clark & Assoc Donna McLean Assoc Mayer. Gillespie & Assoc Patton Boggs LLP Clark & Weinstock Mayer.000 2007 TOTAL: PriceWaterhouseCoopers Quinn.000 > $10.000 $20.000 $20.000 $40.584 $600.000 $40.165.000 $60.000 $200.000 $40. Brown et al Patton Boggs LLP $3.000* > $10.000 $240.000* $580.000 $80.000 $80. Gillespie & Assoc Patton Boggs LLP Clark & Weinstock $13.000* $40.000 $80. Brown et al Patton Boggs LLP Cypress Advocacy $3.000 $60.000 $80.500 $3. Lobbying amounts accessed February 2009.584 $2.660.000 $40.000* > $10.000 $1.000 > $10.000 $12.000 $160.650.000 $40.000 * * Appendix 2006 TOTAL: PriceWaterHouseCoopers Quinn.500 $600.000 $40.000 $80.413.000 $40.000 $105.000 $80. * Not included in totals * Not included in totals . Redi & Priest Donna McLean Assoc Clark & Assoc 2004 TOTAL: PriceWaterhouseCoopers PriceWaterhouseCoopers Quinn.600.000 $370. Reid & Priest Clark & Weinstock Public Strategies Donna McLean Assoc Clark & Assoc $2.000 $50.340.630.580.505.000 $125.000 > $10.000 $40. Gillespie & Assoc Thelen.228 Pricewaterhouse Lobbying Expenditures:283 2008 TOTAL: PriceWaterhouseCoopers Quinn.333.000 2005 TOTAL: PriceWaterhouseCoopers Quinn.000 > $10.000 Thelen. Gillespie & Assoc Rich Feuer Group American Capitol Group Clark & Weinstock Clark & Assoc Commonwealth Group Covington & Burling Donna McLean Assoc Mayer.000 $40.000 $600.

000 > $10.000 $40. Reid et al Clark & Assoc 1999 TOTAL: PriceWaterhouseCoopers PriceWaterhouseCoopers Mayer.220.560.000 $840. Gillespie & Assoc Cathy Abernathy Consult.000 $1.000 $340. Gillespie & Assoc Mayer.000 $1. Wortley et al Downey McGrath Group $2.000 $80.000 $60.240.000* 2002 TOTAL: PriceWaterhouseCoopers PriceWaterhouseCoopers PriceWaterhouseCoopers PriceWaterhouseCoopers Alcalde & Fay Quinn.000 $560. Gillespie & Assoc Clark & Weinstock Thelen.000* $200.000 $540.000 > $10.Appendix 2003 TOTAL: PriceWaterhouseCoopers PriceWaterhouseCoopers Quinn.000 * $2.000 $120. * TOTAL: $4.000* > $10.000 $60.000 $36.000* > $10.445. Brown et al Downey Chandler Inc Not included in totals Not included in totals .000 > $10.000 $360.000 * 229 2000 TOTAL: PriceWaterhouseCoopers PriceWaterhouseCoopers PriceWaterhouseCoopers Quinn.000 $260.000 $800. Brown et al Fleishman-Hillard Inc Downey-McGrath Group Alcalde & Fay $4.000 $1.080. Fleishman-Hillard Inc McDonald.000* 1998 2001 TOTAL: PriceWaterhouseCoopers PriceWaterhouseCoopers PriceWaterhouseCoopers PriceWaterhouseCoopers PriceWaterhouseCoopers PriceWaterhouseCoopers Alcalde & Fay Quinn.000 > $10.000 $20.390.000* $560.000 $3. Jack H Dierman.000 $700.000 $40.000 $580.316.000 $70.680.186.000 $620.000 $360.000 $36.160.000.000 $20.000 $60.000 * $1.000 $10. Brown et al.000 > $10.000 $460.000 $155.000 $220.000 $20.000 $1.000 $100.000 $350. Reid & Priest Clark & Assoc $2.000 > $10. Gillespie & Assoc Clark & Weinstock Arnold & Porter Thelen.000 PriceWaterhouseCoopers PriceWaterhouseCoopers Coopers & Lybrand Mayer.

Committee on Ways and Means 2001 Tax Counsel. Barabara M. . Committee on Ways and Means 2001 Chairman National Credit Union Admin 2002 Policy Director. Angus Kenneth J. Chief of Staff to VP Legislative Director. Committee on Ways and Means 2001 2001 Tax Counsel. Kies Mayer.gov/>. Committee on Ways and Means Special Counsel. Joint Committee on Taxation 1999 1999 Legislative Assitant to Senator Breaux 1999-2000 White House Counsel. Wortley et al Norman D'Amours Clark & Weinstock Brian Bieron 284 Appendix Covered Official Position Year(s) Business Tax Counsel. Tim Holden 2000 2000 Tax Counsel. Rep. Quinn Bruce Andrews Section 170 Coalition Tim Hanford PwC Structured Finance Coalition Tim Hanford John Meager PwC Leasing Coalition Tim Hanford Dierman. Joint Committee on Taxation Chief of Staff. Brown. & Platt Jeffery Lewis Quinn Gillespie Associates LLC John M. Accessed January 2009.senate.230 Pricewaterhouse Covered Official Lobbyists:284 Firm / Name of Lobbyist PWC Leasing Corp. House Rules Committee 2002 Source: Senate Office of Public Records <http://soprweb.

& Geduldig Sam Geduldig Dir of Coalitions. to the Pres for Leg. TSA 2005 Communications Dir. House Ways and Means Committee Chief of Staff. House Fin Serv Com Sr Advisor. (Rep. Lytle. of Transportation. Affairs Speical Asst. Asst Sec for Budeget & Programs & CFO Administrative Assistant. John Dingell) Special Asst. Majority Whip Roy Blunt Deputy Administrator. Dept of Commerce Chief Counsel Senator Reid Chief of Staff. Chuck Hagel Press Secretary to the Vice President General Counsel. Rep. Senate Judiciary Committee 231 2002-2003 2002-2003 2007 2005-2006 2005-2006 2005-2006 2004-2006 2004-2005 2005-2006 2005-2006 2006-2007 2007 2007 2007-2008 2007-2008 . Don Johnson 2003 Deputy Director of Public Affairs Managing Executive External Affairs Legislative Affairs Specialist Policy Director for Sen.Appendix Kent Bonham Juleanna Glover Weiss Jonathan Schwantes Pricewaterhouse Coopers Beverly Bell Amy Best Laura Cox Michael O'Brien Donna Mclean Assoc. Congressman Joe Crowley US Dept. Donna Mclean Quinn Gillespie Associates LLC Mike Hacker Amy Cunniffe Elizabeth Hogan Kevin Kayes Allison Giles Christopher Mccannell Patton Boggs LLP Stephen Mchale Clark.

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