The Shock Doctrine

Disaster Capitalism in Action: lobbyists

White House Assures PhRMA It Will Drop Plans to Negotiate Medicare Drug Prices

Tom Hamburger, Los Angeles Times, August 4, 2009

"As a candidate for president, Barack Obama lambasted drug companies and the influence they wielded in Washington. He even ran a television ad targeting the industry's chief lobbyist, former Louisiana congressman Billy Tauzin, and the role Tauzin played in preventing Medicare from negotiating for lower drug prices. Since the election, Tauzin has morphed into the president's partner. He has been invited to the White House half a dozen times in recent months. There, he says, he eventually secured an agreement that the administration wouldn't try to overturn the very Medicare drug policy that Obama had criticized on the campaign trail....

"In an interview, Tauzin said he carefully negotiated his agreements with the White House, offering the $80-billion discount program in return for assurances that there would be no government price-setting in Medicare Part D, the drug program for seniors. It was important, he said, to block the threat of Medicare price negotiations, which he called tantamount to price-setting and a threat to the industry. In addition, Tauzin said the industry asked the administration not to allow the import of cheaper drugs because of safety concerns....

" 'Since Obama came into office, the drug industry has received everything it wants, domestic and foreign,' said James Love, who leads an international nonprofit promoting low-cost distribution of drugs to fight the world's most devastating diseases....

"This year, for the first time in two decades, Democrats have so far picked up more of the industry's campaign cash -- 54% -- than Republicans, according to the Center for Responsive Politics."

Financial Firms Lobby to Cut Cost of TARP Exit

Damian Paletta and Deborah Solomon, Wall Street Journal, April 22, 2009

"The banking industry is aggressively lobbying the Treasury Department to make it less costly for financial institutions to get out of the Troubled Asset Relief Program. The move could prove controversial for the banking industry, which is busy deflecting criticism about higher fees it is charging consumers for credit cards and other products and services.

"At issue are 'warrants' the government received when it bought preferred stock in roughly 500 banks over the past six months as part of TARP. The warrants allow the government to buy common stock in the banks at a later date so taxpayers can receive more of a return on their investment when the banking industry recovers.

"Many banks want to return their TARP money and, as part of that effort, want to expunge the warrants. To do that, banks must either buy them back from the government or allow the Treasury to sell them to private investors. Today, most of the warrants are essentially worthless, because their exercise price is higher than where most banks' stocks are trading. But the government believes the warrants still have value, since they give the Treasury the right to buy common stock at a set price for 10 years."

See Also:
Letter from the American Bankers Association urging the Treasury Department to break provisions in existing contracts with the banks.

100 Former Govt Employees Now Working as Bank Lobbyists on Bailout

Daniel Schulman and Jonathan Stein, Mother Jones, April 9, 2009

"In late March, as public outrage over bonuses paid to executives of bailed-out financial firms exploded, Citigroup CEO Vikram Pandit met with Senate majority leader Harry Reid. Accompanying the under-fire CEO to the meeting was Jimmy Ryan, one of the banking conglomerate's top in-house lobbyists. Ryan was a familiar face to Reid and his staff. Up until 2003, he was the Nevada senator's chief counsel, and since then he has remained close to Reid. The senator, according to Reid spokesman Jim Manley, merely discussed with Pandit the financial state of Citigroup and the economy in general. If Pandit and Ryan had hoped that Reid would take action to benefit their company, Manley maintained, this effort was unsuccessful.

"Whether or not Ryan was able to win any sympathy (or anything else) from his old boss, the episode highlights one aspect of Washington bailout politics: Financial firms seeking big bucks and favorable terms from Congress and the White House are deploying Capitol Hill aides turned lobbyists to win favorable treatment from the congressional lawmakers who are managing various aspects of the financial recovery—overseeing or appropriating nearly $3 trillion in spending and lending. And some lawmakers—including Sen. Chris Dodd (D-Conn.), the chairman of the Senate banking committee—have declined to disclose whether they have had contact with former aides now lobbying for the financial sector.

"Corporations hiring departed congressional staffers as lobbyists is a ho-hum practice on K Street. But the stakes are particularly high when these Capitol Hill vets are sicced on programs and legislation that are crucial to the country's financial recovery and that involve massive amounts of government spending. In the past year, top bailout recipients, from Goldman Sachs to Bank of America to JPMorgan Chase, have dispatched more than 100 past congressional staffers and ex-government officials to shape the bailouts to their liking. This crew of well-connected lobbyists includes ex-employees of the congressional committees on banking, finance, and commerce; one-time aides to Democratic and Republican leaders; former Treasury officials; and a past aide to Rahm Emanuel, now the White House chief of staff."

After Lobbying for Years, Banks Likely to Achieve Accounting Rules Change

Ian Katz and Jesse Westbrook, Bloomberg News, March 30, 2009

"Four days after U.S. lawmakers berated Financial Accounting Standards Board Chairman Robert Herz and threatened to take rulemaking out of his hands, FASB proposed an overhaul of fair-value accounting that may improve profits at banks such as Citigroup Inc. by more than 20 percent. The changes proposed on March 16 to fair-value, also known as mark-to-market accounting, would allow companies to use 'significant judgment' in valuing assets and reduce the amount of writedowns they must take on so-called impaired investments, including mortgage-backed securities. A final vote on the resolutions, which would apply to first-quarter financial statements, is scheduled for April 2....

“What disturbs me most about the FASB action is they appear to be bowing to outrageous threats from members of Congress who are beholden to corporate supporters,” said [former SEC Chairman Arthur] Levitt, now a senior adviser at buyout firm Carlyle Group....

"Conrad Hewitt, a former chief accountant at the SEC who stepped down in January, said representatives from the ABA, American International Group Inc., Fannie Mae and Freddie Mac all lobbied him over the past two years to suspend the fair- value rule. Executives 'would come to me in the afternoon with the argument, "You've got to suspend it,"' Hewitt said in a March 25 interview. The SEC, which oversees FASB, would reject their demands, and “the next morning their lobbyists would go to Congress,” he said.

Update on April 2: Government Gives in to Pressure and Eases Mark to Market Rules, Bloomberg News

Bailed Out Banks Make Campaign Contributions to Politicians Overseeing TARP

Michael Isikoff and Dina Fine Maron, Newsweek, March 21, 2009

"A NEWSWEEK review of recent filings with the Federal Election Commission found that the political action committees of five big TARP recipients doled out $85,300 to members in the first two months of this year—with most of the cash going to those who serves on committees who oversee the TARP program. Among them: Bank of America (which got $15 billion in bailout money) sent out $24,500 in the first two months of 2009, including $1,500 to House Majority Leader Steny Hoyer and another $15,000 to members of the House and Senate banking panels. Citigroup ($25 billion) dished out $29,620, including $2,500 to House GOPWhip Eric Cantor, who also got $10,000 from UBS which, while not a TARP recipient, got $5 billion in bailout funds as an AIG 'counterparty.' 'This certainly appears to be a case of TARP funds being recycled into campaign contributions,' says Brett Kappel, a D.C. lawyer who tracks donations. (A spokesman for Cantor did not respond to requests for comment. A spokeswoman for Hoyer said it's his 'policy to accept legal contributions.')"

Defense Industry, Agribusiness Lobbyists Boost Efforts to Defeat Obama's Agenda

Brody Mullins and Scott Kilman, Wall Street Journal, February 26, 2009

"Industries from health care to agribusiness to mining that stand to lose under President Barack Obama's policy agenda are ramping up lobbying campaigns to derail or modify his plans....

"The agriculture lobby quickly recoiled Wednesday against President Obama's vow to 'end direct payments to large agribusinesses that don't need them,' though industry leaders and farm-state legislators weren't sure which government payments they'll have to defend....

"Even before Mr. Obama's speech, the defense industry had stepped up its advertising and lobbying efforts this week in response to the president's vow to crack down on defense-project cost overruns, and to separate proposals in Congress to cut off certain expensive weapons programs. Mr. Obama's criticism, industry officials fear, is a foreshadowing of deep cuts to come. The Aerospace Industries Association of America has spent $2 million so far on an ad campaign urging that defense spending shouldn't be slashed to offset shortfalls in other areas."

Firms Getting Bailout Funds Spent $114 Million on Lobbying and Campaign Contributions in 2008

Reuters, Reuters, February 4, 2009

"Banks, automakers and other companies that have received U.S. bailout money spent $114 million on lobbying and campaign contributions last year, a watchdog group said on Wednesday. The Center for Responsive Politics said that amounted to a healthy return on investment for companies such as Bank of America and General Motors that were among those that received a total of $295 billion in federal support. "Even in the best economic times, you won't find an investment with a greater payoff than what these companies have been getting," executive director Sheila Krumholz said in a statement.

"Roughly 350 companies have gotten payouts under the government's $700 billion bailout program. Of those, 25 spent a total of $76.7 million on lobbying, the watchdog group said. Lobbying activity declined in the fourth quarter, when the bailout efforts were approved, as the companies felt the effects of the global recession."

See Also: Center for Responsive Politic's Report

Bailed-Out Companies Spend Millions to Lobby Congress

Elizabeth Williamson and Brody Mullins, Wall Street Journal, January 23, 2009

"Troubled financial institutions and the Detroit auto makers continue to spend heavily on lobbying Congress while accepting billions of dollars in U.S. government money, reports to Congress suggest....

"Bank of America Corp., whose heavy losses prompted it to appeal to the government for a second bailout this month, spent $4.1 million on lobbying last year, nearly $1 million more than in 2007. The bank spent $820,000 on lobbying in the last quarter, about one-fifth less than in the third quarter. Bank of America is in line to receive a total of $45 billion from the government, including $20 billion committed by the Treasury this month....

"Congressional filings show that lobbying by American International Group, which the government took control of in September, continued in the fourth quarter, despite the government's holding 78.8% of the company. Congressional filings show that AIG spent $1.08 million in the fourth quarter. AIG's 2008 lobbying spending was $9.5 million, $1 million less than in 2007....

"In October, after the Wall Street Journal reported that AIG was lobbying states for more favorable interpretations of a law that would place new controls on mortgage originators, Sen. Feinstein and Republican Sen. Mel Martinez of Florida introduced legislation that would ban recipients of taxpayer money from lobbying. The two lawmakers are seeking sponsors for a House version of the bill."

Lobbyists Urge Bailout Money for Insurers, Automakers

Edmund L. Andrews and Eric Dash, New York Times, October 25, 2008

"The chase for a piece of the Treasury Department’s $700 billion bailout program intensified Friday as the government considered extending it to include insurance companies as well as banks, and the auto industry stepped up efforts to secure a share of the money....

"The Financial Services Roundtable, a lobbying group for financial services companies, asked the Treasury Department on Friday to open its program to broker-dealers, insurance companies, car companies and financial institutions owned by foreign corporations....

"Although the insurance industry is under pressure because of investment losses, some analysts said they did not understand why insurers needed immediate government help....Virtually all insurers have suffered investment losses, which in turn have driven down their stock prices, sometimes sharply, as investors dumped shares to avoid dilution while companies raise new money. And the credit rating agencies have been reviewing and downgrading many insurers’ debt this month.

"But neither of those trends implies an urgent liquidity crisis that would leave insurers unable to pay claims, analysts said. Insurers are generally considered immune to run-on-the-bank panics because they do not take deposits. Policyholders cannot usually pull out their money without incurring losses."

See also:

Hedge Funds Make Plea for Bailout Cash "Insurance companies, automakers, hedge funds and foreign-owned banks are all making appeals to be included in the rescue package, contending that they need assistance as well."

Lobbyists Target 80 House Members on Bailout Vote

Jeanne Cummings and Victoria McGrane, Politico, October 2, 2008

"Lists of House members who opposed the package were scoured, traded and passed on. About 80 were identified as primary targets after being deemed potential vote switchers, one insider said....

"If a taxpayer-backed, revolving megafund is ultimately created to end the credit crunch, credit would go to both the lawmakers who cobbled the deal together and the extraordinary, spontaneous lobbying effort by those most desperate to see it become law. Given the public's dislike of the package, their hurdle was high. And the business community's task was made even tougher by anti-tax groups earlier in the week that helped flood Capitol Hill with calls opposing the plan.

"There wasn't time to create any sort of business war room. So the strategy was mapped out through a steady flow of conference calls and e-mails. One key tactic that emerged was for the financial services industry to lower its profile. Main Street voices were chosen to take the lead. 'We realize that we're not the best messengers right now,' said one financial services lobbyist.

"John Castellani, head of the Business Roundtable, representing the nation's major corporations, held a conference call Tuesday with 90 CEOs urging them to call their local congressmen, go on television and activate other allied business groups. 'They are going to associations not engaged and saying, "You need to get engaged,"' Castellani said. 'This is not a drill.'"

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