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101  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Iran lays low on: December 18, 2011, 02:25:14 AM
 Post 2

 After Deadly Attacks in Iraq, Iran Lays Low While U.S. Plans Withdrawal
By Jennifer Griffin & Justin Fishel

Published October 03, 2011

A failed Improvised Rocket-Assisted Missile attack on a U.S. military outpost in eastern Iraq led an explosives team to this nearby weapons cache in July. Analysis indicates that the 107mm rockets are unique to Iranian design and manufacturing, validating U.S. assertions that the Iranian Regime has been playing an increasingly nefarious role within Iraqs borders.
U.S. intelligence officials suspect that Iran, after deadly attacks by proxy militia in Iraq, is laying low until U.S. troops leave Iraq at the end of the year.

An Iranian militia on July 12 attempted to fire 41 Iranian-made rockets at a U.S. military post in eastern Iraq near the border with Iran. Seventeen of the 107 mm rockets were confiscated by U.S. and Iraqi forces before they could be launched, but the rest missed the U.S. base known as COS Garry Owen in Maysan province just north of Basra and instead hit the base for the Iraqi 10th Army division, killing several Iraqi women and children.

U.S. defense officials familiar with the incident tell Fox News that in response an angry Prime Minister Nouri Al Maliki issued a communiqu warning his Iranian counterparts that should such destabilizing operations continue he would be forced to ask U.S. forces to remain in Iraq past December 31, the current deadline for all U.S. forces to leave.

Since then, the number of Iranian proxy attacks by Asaib ahl al-Haq (AAH), or the League of the Righteous, against U.S. forces has dropped significantly. The reduced attacks led U.S. intelligence officials to conclude that Irans short term strategy may now be to wait for U.S. troops to leave at the end of the year before trying to reassert itself through the militias which have been trained by the Iranian Revolutionary Guards Corps - Quds Force.

Until the misfire in July the Iranian strategy, according to U.S. military commanders, was to step up the number of attacks on U.S. forces in order to make it look as though U.S. troops were being forced to leave the region. The July incident appears to mark a shift in strategy, according to one senior defense official. The Revolutionary Guard asked the Asaib Ahl al-Haq militia to stand down while Maliki completes a difficult round of negotiations with the U.S. ambassador and State Department, determining how many, if any, U.S. troops will stay past December.

The 107 mm rockets fired at the U.S. base had writing on them that linked them to Iran and color bands on the munitions that also link them to Iraqs next door neighbor, according to classified weapons manuals shared by Iraqi and U.S. forces.

AAH, the group that fired the rockets, is led by the notorious. Shiite cleric Qais Khazali who founded the group in 2006 after splitting from Muqtada al Sadr at the height of the Iraq civil war, according to the Institute for the Study of War. Khazali led a daring raid on U.S. forces in January 2007 in Karbala using American vehicles, uniforms and identification cards that left 5 U.S. soldiers dead. He and his brother and a Lebanese Hezbollah operative were captured by U.S. troops two months later.

AAH then carried out a coordinated attack on Iraqs Finance ministry, kidnapping a British consultant. Khazali was released by U.S. forces in 2009 as part of a prisoner swap and attempt by the Maliki government to bring the Shiite militia into the political process.

Recently Khazali was photographed at a conference sponsored by the Iranian government in Iran celebrating the Islamic Awakening, Irans answer to the Arab Spring. He sat 4 rows behind President Mahmoud Ahmadinejad and the Supreme Leader Ayatollah Ali Khamenei, raising eyebrows among U.S. military officials who have faced dozens of attacks by his Shiite Iraqi militia since his release in 2009.

In June of this year, 9 U.S. soldiers were killed as a result of Iranian rockets. U.S. troops were attacked 6 times this year by militias firing Iranian rockets, twice as many times as the year before. Admiral Mike Mullen before retiring as Chairman of the Joint Chiefs last week warned, If they [Iran] keep killing our troops that will not be something that we will sit idly by and watch. Now it seems that Irans leadership has made a new calculation that it may be more beneficial to slow the attacks until the government of Iraq finalizes its request for how many U.S. troops it will ask to remain.

                                                      P.C.
102  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Iran's Plan for Mayhem on: December 18, 2011, 02:23:22 AM
Post 1

    Iran's Secret Plan For Mayhem
By ELI LAKE, Staff Reporter of the Sun | January 3, 2007

http://www.nysun.com/foreign/irans-secret-plan-for-mayhem/46032/

 
WASHINGTON Iran is supporting both Sunni and Shiite terrorists in the Iraqi civil war, according to secret Iranian documents captured by Americans in Iraq.

The news that American forces had captured Iranians in Iraq was widely reported last month, but less well known is that the Iranians were carrying documents that offered Americans insight into Iranian activities in Iraq.

An American intelligence official said the new material, which has been authenticated within the intelligence community, confirms "that Iran is working closely with both the Shiite militias and Sunni Jihadist groups." The source was careful to stress that the Iranian plans do not extend to cooperation with Baathist groups fighting the government in Baghdad, and said the documents rather show how the Quds Force the arm of Iran's revolutionary guard that supports Shiite Hezbollah, Sunni Hamas, and Shiite death squads is working with individuals affiliated with Al Qaeda in Iraq and Ansar al-Sunna.

Another American official who has seen the summaries of the reporting affiliated with the arrests said it comprised a "smoking gun." "We found plans for attacks, phone numbers affiliated with Sunni bad guys, a lot of things that filled in the blanks on what these guys are up to," the official said.

One of the documents captured in the raids, according to two American officials and one Iraqi official, is an assessment of the Iraq civil war and new strategy from the Quds Force. According to the Iraqi source, that assessment is the equivalent of "Iran's Iraq Study Group," a reference to the bipartisan American commission that released war strategy recommendations after the November 7 elections. The document concludes, according to these sources, that Iraq's Sunni neighbors will step up their efforts to aid insurgent groups and that it is imperative for Iran to redouble efforts to retain influence with them, as well as with Shiite militias.

Rough translations of the Iranian assessment and strategy, as well as a summary of the intelligence haul, have been widely distributed throughout the policy community and are likely to influence the Iraq speech President Bush is expected to deliver in the coming days regarding the way forward for the war, according to two Bush administration officials.

The news that Iran's elite Quds Force would be in contact, and clandestinely cooperating, with Sunni Jihadists who attacked the Golden Mosque in Samarra (one of the holiest shrines in Shiism) on February 22, could shake the alliance Iraq's ruling Shiites have forged in recent years with Tehran. Many Iraq analysts believe the bombing vaulted Iraq into the current stage of its civil war.

The top Quds Force commander known as Chizari, according to a December 30 story in the Washington Post was captured inside a compound belonging to Abdul Aziz Hakim, the Shiite leader President Bush last month pressed to help forge a new ruling coalition that excludes a firebrand Shiite cleric, Moqtada al-Sadr.

According to one Iraqi official, the two Quds commanders were in Iraq at the behest of the Iraqi government, which had requested more senior Iranian points of contact when the government complained about Shiite death squad activity. The negotiations were part of an Iraqi effort to establish new rules of the road between Baghdad and Tehran. This arrangement was ironed out by Iraq's president, Jalal Talabani, when he was in Tehran at the end of November.

While Iran has openly supported Iraqi Shiite militias involved in attacks on American soldiers, the Quds Force connection to Sunni insurgents has been murkier.

In 2003, coalition forces captured a playbook outlining Iranian intentions to support insurgents of both stripes, but its authenticity was disputed.

American intelligence reports have suggested that export/import operations run by Sunni terrorists in Fallujah in 2004 received goods from the revolutionary guard.

"We have seen bits and piece of things before, but it was highly compartmentalized suggesting the Iranian link to Sunni groups," a military official said.

A former Iran analyst for the Pentagon who also worked as an adviser to the Coalition Provisional Authority, Michael Rubin, said yesterday: "There has been lots of information suggesting that Iran has not limited its outreach just to the Shiites, but this has been disputed."

He added, "When documents like this are found, usually intelligence officials may confirm their authenticity but argue they prove nothing because they do not reflect a decision to operationalize things."

A former State Department senior analyst on Iraq and Iran who left government service in 2005, Wayne White, said he did not think it was likely the Quds Force was supporting Sunni terrorists who were targeting Shiite political leaders and civilians, but stressed he did not know.

"I have no doubt whatsoever that al-Quds forces are on the ground and active in Iraq," he said. "That's about it. I saw evidence that Moqtada al Sadr was in contact with Sunni Arab insurgents in western Iraq, but I never saw evidence of Iran in that loop."

Mr. White added, "One problem that we all have is that people consistently conduct analysis assuming that the actor is going to act predictably or rationally based on their overall mindset or ideology. Sometimes people don't.

"One example of a mindset that may hinder analysis of Iranian involvement is the belief that Iran would never have any dealings with militant Sunni Arabs. But they allowed hundreds of Al Qaeda operatives to escape from Afghanistan across their territory in 2002," he said.


                                                         P.C.
103  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Lowes protest on: December 17, 2011, 09:15:45 PM
By JEFF KAROUB
 
updated 12/17/2011 6:25:14 PM ET 2011-12-17T23:25:14
ALLEN PARK, Mich. Protesters descended on a Lowe's store in one of the country's largest Arab-American communities on Saturday, calling for a boycott after the home improvement chain pulled its ads from a reality television show about five Muslim families living in Michigan.
 
About 100 people gathered outside the store in Allen Park, a Detroit suburb adjacent to the city where "All-American Muslim" is filmed. Lowe's said this week that the TLC show had become a "lightning rod" for complaints, following an email campaign by a conservative Christian group.

Protesters including Christian clergy and lawmakers called for unity and held signs that read "Boycott Bigotry" and chanted "God Bless America, shame on Lowe's" during the rally, which was organized by a coalition of Christian, Muslim and civil rights groups.

Rep. Rashida Tlaib, a Detroit Democrat and the first Muslim woman elected to the Michigan Legislature, said it was "disgusting" for Lowe's to stop supporting a show that reflects America the conservatives, liberals and even "the Kim Kardashians" in the Muslim community, she said.

"We're asking the company to change their mind," said protester Ray Holman, a legislative liaison for a United Auto Workers local. He said he was dismayed that the retailer "pulled sponsorship of a positive program."

A local rabbi extended his support to clergy at the protest and local Arab Americans, saying he and other Jews would have been at the protest had it not fallen during the Jewish Sabbath.

"I hope that they would likewise stand up and demonstrate should something outrageous like this take place against another religion," Rabbi Jason Miller said in a statement.

Lowe's spokeswoman Karen Cobb said Saturday that the company respected the protesters' opinion.

"We appreciate and respect everyone's right to express their opinion peacefully," she said.

The show premiered last month and chronicles the lives of families living in and around Dearborn, a suburb of Detroit at the heart of one of the largest Arab-American populations outside the Middle East.

Dearborn is home to the Islamic Center of America, one of the largest mosques in North America. Overall, the Detroit area has about 150,000 Muslims of many different ethnicities and is served by about 40 mosques.

It airs Sundays and ends its first season Jan. 8.

The Florida Family Association has said more than 60 companies it emailed, from Amazon to McDonalds, pulled their ads from the show, but Lowe's is the only major company so far to confirm that it had done so. The group accused the show of being "propaganda that riskily hides the Islamic agenda's clear and present danger to American liberties and traditional values."

The travel planning site Kayak.com also pulled its ads, though its marketing chief said the decision was made because the company was dissatisfied by the show's quality and TLC wasn't upfront with advertisers about how the show would be presented.

Saturday's rally was met by about 20 counter-protesters including John White, who lives in nearby Livonia and called those protesting against Lowe's "terribly misdirected." He acknowledged that he hadn't watched the show, saying he'd seen previews and read about it, but believed the company made a decision based on business, not bigotry.

 
An interfaith group of Muslim, Baptist and other religious leaders picket a Lowe's home improvement store to protest the chain' action in pulling its advertising from the "All-American Muslim" TV reality show. "Americans are not suspicious ... of baseball-playing, apple-pie eating Muslims," he said. "It's the ones you see on the news."

The manager of the Lowe's store, Doug Casey, said the company wasn't influenced by any outside group or ideology. He said those who criticized Lowe's have a right to their opinion, but that "it's not the opinion of most of the customers I spoke to in the store today."

"I'm deeply sorry if it's caused any divide in our community," he said. "It was never our intention to offend or alienate anyone."

The hubbub didn't keep people from shopping at the store. Keith Rissman, who was buying finishing boards for windows he's installing in his mother's garage, said he supported the company.

"It's a decision they're allowed to make," the 57-year-old said. "If (people) don't want to shop here, they don't have to."

Karen Lundquist, 65, came to the store with her son even though she didn't support Lowe's decision. "It just seems like they yielded to a Christian hate group," she said.



                                                       P.C.
104  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Iraq on: December 17, 2011, 07:22:35 PM
Woof JDN,
 That is the genius behind the Lefts' political correctness. They can define anything, in part or as a whole, for any amount of time, as being some terrible thing. Political correctness is going to insure our ultimate defeat in any war we have to undertake if we don't secure the victory. And if you can find anywhere in the history of man where at least a short term form of occupation or form of imperialism wasn't used to successfully do it, I'd like you to name it. You completely ignored what I actually said and redefined it as being oil for blood. I said the Iraqi's should pay for what we have spent there, meaning the cost of their reconstruction, not the cost of our blood and treasure or for our profit and I clarified that in a follow up post which you ignored all together so you could continue your attack and add to it the asinine crap about Cuba just to further distort the debate and malign me personally; all the while not directly addressing me. That is a very disrespectful way of debate and verge's on being dishonest. However, time will tell as to what is going to be the out come in Iraq, the die has been cast, and I'm afraid it's going to be much worse than if we had kept at least a presence there. @JDN THERE WILL BE NO FURTHER DEBATE BETWEEN ME AND YOU ON THIS SUBJECT.
              P.C.
105  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Iraq on: December 17, 2011, 04:54:47 PM
We should be building more bases in Iraq, right in Iran's backyard, not shutting them down. Iraq should be paying us in oil for every cent we have spent there too. History has shown us that you must win a peace and that you cannot retreat your way to it. Retreats, most often end in massacre's. For you Liberal, so called, peace activist's out there that have facilitated this result, and are celebrating this as being the end of the Iraq war; the war there is just starting, thanks to you.
                                             P.C.

Sounds like Colonialism and Imperialism at it's finest.  
Woof JDN,
 I don't deny that, and I know those labels, just like being called Hitler or racist can be applied broadly enough to discredit any solution to any problem. Nothing happens in war without some pain but that doesn't mean the pain lasts forever. The reality is, one: Iraq should pay for it's own reconstruction because they can afford it, and it is they that benefit from it not us. I didn't say load up the ships then set fire to what's left or let's make a profit off the deal, but quite frankly we couldn't afford to do this on our own, and two: our enemies are going to grab the oil for themselves after we leave and they are going to set fire to the place. So short term name calling or long term failure. The President has picked failure.
                                                     P.C.
 
106  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Iraq on: December 17, 2011, 03:05:48 AM
Woof,
 
 I said way back when, that we would give them a chance at a free society and in the end we would just walk away from it and leave them to their own designs. I also said that they didn't have a chance in hell of keeping it free after we left. I'm glad Saddam is gone, I'm glad we killed a lot of terrorist fighters there. I feel sorry for the Iraqi people that do want freedom. We should have done it like we did Japan, but there were too many people invested in it's failure back here at home to have had that kind of success. It takes commitment to do things right, unfortunately our News Media and Press are committed to an ideology that breeds failures like this then they will turn their back on the massacre to come and have no shame in saying they are not to blame, much like the million or so slaughtered after we pulled out of Vietnam. It won't come as immediate as Vietnam but in time it will.

 The President was correct in not celebrating this as victory in Iraq, because it is not a victory, it's a retreat from the frontlines of the war on Western civilization by the Islamic Fascist's. We should be building more bases in Iraq, right in Iran's backyard, not shutting them down. Iraq should be paying us in oil for every cent we have spent there too. History has shown us that you must win a peace and that you cannot retreat your way to it. Retreats, most often end in massacre's. For you Liberal, so called, peace activist's out there that have facilitated this result, and are celebrating this as being the end of the Iraq war; the war there is just starting, thanks to you.
                                             P.C.
107  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Captured narco had arenal on: December 16, 2011, 09:38:29 PM

Mexico says captured cartel leader had arsenal
By E. EDUARDO CASTILLO | AP Tue, Dec 13, 2011Email

MEXICO CITY (AP) Mexican authorities said Tuesday that an alleged founder of the Zetas drug cartel had an arsenal of 169 weapons when he was captured Monday, and may have been linked to the abduction of nine Mexican marines.

Navy spokesman Jose Luis Vergara said suspect Raul Lucio Hernandez Lechuga oversaw Zetas operations around the Gulf coast state of Veracruz, where nine marines disappeared earlier this year.

Vergara said a suspect was killed and a marine wounded in a firefight that erupted during Hernandez Lechuga's capture Monday in the Veracruz state city of Cordoba. The bust was the result of a yearlong intelligence operation, Vergara said.

Marines found 133 rifles, five grenade launchers, 29 grenades and 36 pistols at the scene of the raid near a highway. Marines also found bulletproof vests with the letter "Z'', the zetas symbol, on the front.

Vergara said Hernandez Lechuga was one of Mexico's 37 most wanted drug traffickers, and that with his arrest, 22 of those 37 have either been killed or detained.

The Zetas have been linked to some of the apparent abductions of Mexican marines, but Vergara didn't say what specific evidence authorities had of Hernandez Lechuga's involvement in the cases.

The apparent abductions of Mexican navy personnel have been shrouded in mystery, with the navy previously acknowledging that three marines and a navy cadet were abducted by suspected drug cartel gunmen in August in Veracruz, the state's largest city.

Later that month, the navy said it had found four bodies in a pit on the outskirts of Veracruz city, and that the remains might be those of the missing marines, but it never publicly confirmed that was the case.

At a Tuesday news conference where Hernandez Lechuga and four alleged associates were paraded before the media, Vergara said a total of nine marines had disappeared, but didn't say whether any of them had been found.

Mexican drug cartels have kidnapped and killed military personnel before, but such incidents remain relatively rare.

Hernandez Lechuga was the leader of the Zetas in about 10 states, including Veracruz. The federal government had offered a reward of 15 million pesos, or about $1.2 million, for information leading to his arrest. Vergara said the U.S. Drug Enforcement Administration was also offering a $1 million reward for Hernandez Lechuga, known by the nickname "Lucky."

The Zetas organization was formed by a small group of elite soldiers based in Tamaulipas state, across the border from Texas, who deserted to work for the Gulf drug cartel in the 1990s.

The Zetas split from their former allies in the Gulf cartel last year, setting off bloody fights throughout Mexico as they sought to expand south.

In Veracruz, the Zetas are believed to be locked in a bloody turf battle with groups allied with the Sinaloa cartel.

Also Tuesday, gunmen killed a town's deputy mayor and her bodyguard and wounded the town's police chief and his family while they were in the northern city of Chihuahua, authorities said.

Attackers opened fire on the two cars being used by the officials from the town of Gran Morelos, said the Chihuahua state prosecutors' spokesman, Carlos Gonzalez.

He said deputy mayor Idalia Ayala and her bodyguard died in one car. Police chief Miguel Gomez was in the second with his wife and two children, and all were wounded and taken to a hospital, Gonzalez said.

Gomez was named police chief after last month's arrest of Gran Morelos' top cop. Authorities said soldiers caught the police chief while he and police officers from the nearby town of Belisario Dominguez met with a boss for La Linea, a gang of hit men for the Juarez Cartel.

In neighboring Coahuila state, gunmen killed the director of the prison in the capital city of Saltillo, authorities said.

Serafin Pena Santos was ambushed Tuesday afternoon as he drove through a residential area of the northern city, state prosecutors said in a statement.

Prosecutors didn't give a motive in the killing, but said the assailants used automatic rifles, weapons commonly used by Mexico's drug traffickers.

___

Associated Press writers Ricardo Chavez in Ciudad Juarez and Oscar Villalba in Piedras Negras contributed to this report.

                                                          P.C.
108  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Drone, tricked into landing on: December 16, 2011, 07:16:03 PM

Exclusive: Iran hijacked US drone, says Iranian engineer
In an exclusive interview, an engineer working to unlock the secrets of the captured RQ-170 Sentinel says they exploited a known vulnerability and tricked the US drone into landing in Iran.
By Scott Peterson, Payam Faramarzi* | Christian Science Monitor 11 hrs agoEmail

Iran guided the CIA's "lost" stealth drone to an intact landing inside hostile territory by exploiting a navigational weakness long-known to the US military, according to an Iranian engineer now working on the captured drone's systems inside Iran.

Iranian electronic warfare specialists were able to cut off communications links of the American bat-wing RQ-170 Sentinel, says the engineer, who works for one of many Iranian military and civilian teams currently trying to unravel the drones stealth and intelligence secrets, and who could not be named for his safety.

Using knowledge gleaned from previous downed American drones and a technique proudly claimed by Iranian commanders in September, the Iranian specialists then reconfigured the drone's GPS coordinates to make it land in Iran at what the drone thought was its actual home base in Afghanistan.


"The GPS navigation is the weakest point," the Iranian engineer told the Monitor, giving the most detailed description yet published of Iran's "electronic ambush" of the highly classified US drone. "By putting noise [jamming] on the communications, you force the bird into autopilot. This is where the bird loses its brain."

The spoofing technique that the Iranians used which took into account precise landing altitudes, as well as latitudinal and longitudinal data made the drone land on its own where we wanted it to, without having to crack the remote-control signals and communications from the US control center, says the engineer.

The revelations about Iran's apparent electronic prowess come as the US, Israel, and some European nations appear to be engaged in an ever-widening covert war with Iran, which has seen assassinations of Iranian nuclear scientists, explosions at Iran's missile and industrial facilities, and the Stuxnet computer virus that set back Irans nuclear program.

Now this engineers account of how Iran took over one of Americas most sophisticated drones suggests Tehran has found a way to hit back. The techniques were developed from reverse-engineering several less sophisticated American drones captured or shot down in recent years, the engineer says, and by taking advantage of weak, easily manipulated GPS signals, which calculate location and speed from multiple satellites.

Western military experts and a number of published papers on GPS spoofing indicate that the scenario described by the Iranian engineer is plausible.

"Even modern combat-grade GPS [is] very susceptible to manipulation, says former US Navy electronic warfare specialist Robert Densmore, adding that it is certainly possible to recalibrate the GPS on a drone so that it flies on a different course. I wouldn't say it's easy, but the technology is there.

In 2009, Iran-backed Shiite militants in Iraq were found to have downloaded live, unencrypted video streams from American Predator drones with inexpensive, off-the-shelf software. But Irans apparent ability now to actually take control of a drone is far more significant.

Iran asserted its ability to do this in September, as pressure mounted over its nuclear program.

Gen. Moharam Gholizadeh, the deputy for electronic warfare at the air defense headquarters of the Islamic Revolutionary Guard Corps (IRGC), described to Fars News how Iran could alter the path of a GPS-guided missile a tactic more easily applied to a slower-moving drone.

We have a project on hand that is one step ahead of jamming, meaning deception of the aggressive systems, said Gholizadeh, such that we can define our own desired information for it so the path of the missile would change to our desired destination.

Gholizadeh said that all the movements of these [enemy drones] were being watched, and obstructing their work was always on our agenda.

That interview has since been pulled from Fars Persian-language website. And last month, the relatively young Gholizadeh died of a heart attack, which some Iranian news sites called suspicious suggesting the electronic warfare expert may have been a casualty in the covert war against Iran.

Iran's growing electronic capabilities
Iranian lawmakers say the drone capture is a "great epic" and claim to be "in the final steps of breaking into the aircraft's secret code."

Secretary of Defense Leon Panetta told Fox News on Dec. 13 that the US will "absolutely" continue the drone campaign over Iran, looking for evidence of any nuclear weapons work. But the stakes are higher for such surveillance, now that Iran can apparently disrupt the work of US drones.

US officials skeptical of Irans capabilities blame a malfunction, but so far can't explain how Iran acquired the drone intact. One American analyst ridiculed Irans capability, telling Defense News that the loss was like dropping a Ferrari into an ox-cart technology culture.

Yet Irans claims to the contrary resonate more in light of new details about how it brought down the drone and other markers that signal growing electronic expertise.

A former senior Iranian official who asked not to be named said: "There are a lot of human resources in Iran.... Iran is not like Pakistan."

Technologically, our distance from the Americans, the Zionists, and other advanced countries is not so far to make the downing of this plane seem like a dream for us but it could be amazing for others, deputy IRGC commander Gen. Hossein Salami said this week.

According to a European intelligence source, Iran shocked Western intelligence agencies in a previously unreported incident that took place sometime in the past two years, when it managed to blind a CIA spy satellite by aiming a laser burst quite accurately.

More recently, Iran was able to hack Google security certificates, says the engineer. In September, the Google accounts of 300,000 Iranians were made accessible by hackers. The targeted company said "circumstantial evidence" pointed to a "state-driven attack" coming from Iran, meant to snoop on users.

Cracking the protected GPS coordinates on the Sentinel drone was no more difficult, asserts the engineer.

US knew of GPS systems' vulnerability
Use of drones has become more risky as adversaries like Iran hone countermeasures. The US military has reportedly been aware of vulnerabilities with pirating unencrypted drone data streams since the Bosnia campaign in the mid-1990s.

Top US officials said in 2009 that they were working to encrypt all drone data streams in Iraq, Pakistan, and Afghanistan after finding militant laptops loaded with days' worth of data in Iraq and acknowledged that they were "subject to listening and exploitation."

Perhaps as easily exploited are the GPS navigational systems upon which so much of the modern military depends.

"GPS signals are weak and can be easily outpunched [overridden] by poorly controlled signals from television towers, devices such as laptops and MP3 players, or even mobile satellite services," Andrew Dempster, a professor from the University of New South Wales School of Surveying and Spatial Information Systems, told a March conference on GPS vulnerability in Australia.

"This is not only a significant hazard for military, industrial, and civilian transport and communication systems, but criminals have worked out how they can jam GPS," he says.

The US military has sought for years to fortify or find alternatives to the GPS system of satellites, which are used for both military and civilian purposes. In 2003, a Vulnerability Assessment Team at Los Alamos National Laboratory published research explaining how weak GPS signals were easily overwhelmed with a stronger local signal.

A more pernicious attack involves feeding the GPS receiver fake GPS signals so that it believes it is located somewhere in space and time that it is not, reads the Los Alamos report. In a sophisticated spoofing attack, the adversary would send a false signal reporting the moving targets true position and then gradually walk the target to a false position.

The vulnerability remains unresolved, and a paper presented at a Chicago communications security conference in October laid out parameters for successful spoofing of both civilian and military GPS units to allow a "seamless takeover" of drones or other targets.

To better cope with hostile electronic attacks, the US Air Force in late September awarded two $47 million contracts to develop a "navigation warfare" system to replace GPS on aircraft and missiles, according to the Defense Update website.

Official US data on GPS describes "the ongoing GPS modernization program" for the Air Force, which "will enhance the jam resistance of the military GPS service, making it more robust."

Why the drone's underbelly was damaged
Iran's drone-watching project began in 2007, says the Iranian engineer, and then was stepped up and became public in 2009 the same year that the RQ-170 was first deployed in Afghanistan with what were then state-of-the-art surveillance systems.

In January, Iran said it had shot down two conventional (nonstealth) drones, and in July, Iran showed Russian experts several US drones including one that had been watching over the underground uranium enrichment facility at Fordo, near the holy city of Qom.

In capturing the stealth drone this month at Kashmar, 140 miles inside northeast Iran, the Islamic Republic appears to have learned from two years of close observation.

Iran displayed the drone on state-run TV last week, with a dent in the left wing and the undercarriage and landing gear hidden by anti-American banners.

The Iranian engineer explains why: "If you look at the location where we made it land and the bird's home base, they both have [almost] the same altitude," says the Iranian engineer. "There was a problem [of a few meters] with the exact altitude so the bird's underbelly was damaged in landing; that's why it was covered in the broadcast footage."

Prior to the disappearance of the stealth drone earlier this month, Irans electronic warfare capabilities were largely unknown and often dismissed.

"We all feel drunk [with happiness] now," says the Iranian engineer. "Have you ever had a new laptop? Imagine that excitement multiplied many-fold." When the Revolutionary Guard first recovered the drone, they were aware it might be rigged to self-destruct, but they "were so excited they could not stay away."

* Scott Peterson, the Monitor's Middle East correspondent, wrote this story with an Iranian journalist who publishes under the pen name Payam Faramarzi and cannot be further identified for security reasons.

                                                 P.C.
109  DBMA Martial Arts Forum / Martial Arts Topics / Re: Self Defense with Pistols on: December 16, 2011, 06:55:58 PM
Interesting.  I must add that conservatives are very invested in making sure you stay under the government thumb (police and many "law and order" types tend to identify with the conservative side), as well.

I do see how it probably will be impossible to see how the use of weapons breaks down.  That is too bad, but I will keep reading.

I started thinking about this because it seems to me that a somewhat fit, somewhat trained person can manage almost everything, outside of the home with smarts, awareness and maybe a blade or impact weapon.  However, it seems like home invasions would require firearms, simply because of the intention of the invader, the surprise factor and the isolation factor.  These are only my thoughts and I am not a LEO and am only familiar with certain kinds of violence which may not even cover half of the things that happen to people.  All this to say; I may have some illusions and need to get rid of them.
Woof dreatx,
 Certain members of our society are targeted by criminals because they can't fight back so well, and to use a knife or impact weapon you still need to be able to block blows and get around their blocks to make contact with the weapon. Often there are more than one attacker and while you're tied up with one of them going toe to toe, trying to stick your knife in him, his buddies are stabbing you to death or pull out their guns and shoot you. If you have your wife and family with you, what's happening to them while you are knife fighting, are you going to hold all them bad guys at knife point or worse stick point? One of them is going to grab your kid. There are other reasons why concealed firearms are needed for personal protection out on the street, but one that is often ignored is the deterrent factor. If the bad guys can't tell who's armed then even a little old lady doesn't look so helpless to them.
                                                           P.C.
110  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Drone tricked into landing? on: December 16, 2011, 06:17:34 PM

Exclusive: Iran hijacked US drone, says Iranian engineer

In an exclusive interview, an engineer working to unlock the secrets of the captured RQ-170 Sentinel says they exploited a known vulnerability and tricked the US drone into landing in Iran.
By Scott Peterson, Payam Faramarzi* | Christian Science Monitor 11 hrs agoEmail
 Iran guided the CIA's "lost" stealth drone to an intact landing inside hostile territory by exploiting a navigational weakness long-known to the US military, according to an Iranian engineer now working on the captured drone's systems inside Iran.

Iranian electronic warfare specialists were able to cut off communications links of the American bat-wing RQ-170 Sentinel, says the engineer, who works for one of many Iranian military and civilian teams currently trying to unravel the drones stealth and intelligence secrets, and who could not be named for his safety.

Using knowledge gleaned from previous downed American drones and a technique proudly claimed by Iranian commanders in September, the Iranian specialists then reconfigured the drone's GPS coordinates to make it land in Iran at what the drone thought was its actual home base in Afghanistan.


"The GPS navigation is the weakest point," the Iranian engineer told the Monitor, giving the most detailed description yet published of Iran's "electronic ambush" of the highly classified US drone. "By putting noise [jamming] on the communications, you force the bird into autopilot. This is where the bird loses its brain."

The spoofing technique that the Iranians used which took into account precise landing altitudes, as well as latitudinal and longitudinal data made the drone land on its own where we wanted it to, without having to crack the remote-control signals and communications from the US control center, says the engineer.

The revelations about Iran's apparent electronic prowess come as the US, Israel, and some European nations appear to be engaged in an ever-widening covert war with Iran, which has seen assassinations of Iranian nuclear scientists, explosions at Iran's missile and industrial facilities, and the Stuxnet computer virus that set back Irans nuclear program.

Now this engineers account of how Iran took over one of Americas most sophisticated drones suggests Tehran has found a way to hit back. The techniques were developed from reverse-engineering several less sophisticated American drones captured or shot down in recent years, the engineer says, and by taking advantage of weak, easily manipulated GPS signals, which calculate location and speed from multiple satellites.

Western military experts and a number of published papers on GPS spoofing indicate that the scenario described by the Iranian engineer is plausible.

"Even modern combat-grade GPS [is] very susceptible to manipulation, says former US Navy electronic warfare specialist Robert Densmore, adding that it is certainly possible to recalibrate the GPS on a drone so that it flies on a different course. I wouldn't say it's easy, but the technology is there.

In 2009, Iran-backed Shiite militants in Iraq were found to have downloaded live, unencrypted video streams from American Predator drones with inexpensive, off-the-shelf software. But Irans apparent ability now to actually take control of a drone is far more significant.

Iran asserted its ability to do this in September, as pressure mounted over its nuclear program.

Gen. Moharam Gholizadeh, the deputy for electronic warfare at the air defense headquarters of the Islamic Revolutionary Guard Corps (IRGC), described to Fars News how Iran could alter the path of a GPS-guided missile a tactic more easily applied to a slower-moving drone.

We have a project on hand that is one step ahead of jamming, meaning deception of the aggressive systems, said Gholizadeh, such that we can define our own desired information for it so the path of the missile would change to our desired destination.

Gholizadeh said that all the movements of these [enemy drones] were being watched, and obstructing their work was always on our agenda.

That interview has since been pulled from Fars Persian-language website. And last month, the relatively young Gholizadeh died of a heart attack, which some Iranian news sites called suspicious suggesting the electronic warfare expert may have been a casualty in the covert war against Iran.

Iran's growing electronic capabilities
Iranian lawmakers say the drone capture is a "great epic" and claim to be "in the final steps of breaking into the aircraft's secret code."

Secretary of Defense Leon Panetta told Fox News on Dec. 13 that the US will "absolutely" continue the drone campaign over Iran, looking for evidence of any nuclear weapons work. But the stakes are higher for such surveillance, now that Iran can apparently disrupt the work of US drones.

US officials skeptical of Irans capabilities blame a malfunction, but so far can't explain how Iran acquired the drone intact. One American analyst ridiculed Irans capability, telling Defense News that the loss was like dropping a Ferrari into an ox-cart technology culture.

Yet Irans claims to the contrary resonate more in light of new details about how it brought down the drone and other markers that signal growing electronic expertise.

A former senior Iranian official who asked not to be named said: "There are a lot of human resources in Iran.... Iran is not like Pakistan."

Technologically, our distance from the Americans, the Zionists, and other advanced countries is not so far to make the downing of this plane seem like a dream for us but it could be amazing for others, deputy IRGC commander Gen. Hossein Salami said this week.

According to a European intelligence source, Iran shocked Western intelligence agencies in a previously unreported incident that took place sometime in the past two years, when it managed to blind a CIA spy satellite by aiming a laser burst quite accurately.

More recently, Iran was able to hack Google security certificates, says the engineer. In September, the Google accounts of 300,000 Iranians were made accessible by hackers. The targeted company said "circumstantial evidence" pointed to a "state-driven attack" coming from Iran, meant to snoop on users.

Cracking the protected GPS coordinates on the Sentinel drone was no more difficult, asserts the engineer.

US knew of GPS systems' vulnerability
Use of drones has become more risky as adversaries like Iran hone countermeasures. The US military has reportedly been aware of vulnerabilities with pirating unencrypted drone data streams since the Bosnia campaign in the mid-1990s.

Top US officials said in 2009 that they were working to encrypt all drone data streams in Iraq, Pakistan, and Afghanistan after finding militant laptops loaded with days' worth of data in Iraq and acknowledged that they were "subject to listening and exploitation."

Perhaps as easily exploited are the GPS navigational systems upon which so much of the modern military depends.

"GPS signals are weak and can be easily outpunched [overridden] by poorly controlled signals from television towers, devices such as laptops and MP3 players, or even mobile satellite services," Andrew Dempster, a professor from the University of New South Wales School of Surveying and Spatial Information Systems, told a March conference on GPS vulnerability in Australia.

"This is not only a significant hazard for military, industrial, and civilian transport and communication systems, but criminals have worked out how they can jam GPS," he says.

The US military has sought for years to fortify or find alternatives to the GPS system of satellites, which are used for both military and civilian purposes. In 2003, a Vulnerability Assessment Team at Los Alamos National Laboratory published research explaining how weak GPS signals were easily overwhelmed with a stronger local signal.

A more pernicious attack involves feeding the GPS receiver fake GPS signals so that it believes it is located somewhere in space and time that it is not, reads the Los Alamos report. In a sophisticated spoofing attack, the adversary would send a false signal reporting the moving targets true position and then gradually walk the target to a false position.

The vulnerability remains unresolved, and a paper presented at a Chicago communications security conference in October laid out parameters for successful spoofing of both civilian and military GPS units to allow a "seamless takeover" of drones or other targets.

To better cope with hostile electronic attacks, the US Air Force in late September awarded two $47 million contracts to develop a "navigation warfare" system to replace GPS on aircraft and missiles, according to the Defense Update website.

Official US data on GPS describes "the ongoing GPS modernization program" for the Air Force, which "will enhance the jam resistance of the military GPS service, making it more robust."

Why the drone's underbelly was damaged
Iran's drone-watching project began in 2007, says the Iranian engineer, and then was stepped up and became public in 2009 the same year that the RQ-170 was first deployed in Afghanistan with what were then state-of-the-art surveillance systems.

In January, Iran said it had shot down two conventional (nonstealth) drones, and in July, Iran showed Russian experts several US drones including one that had been watching over the underground uranium enrichment facility at Fordo, near the holy city of Qom.

In capturing the stealth drone this month at Kashmar, 140 miles inside northeast Iran, the Islamic Republic appears to have learned from two years of close observation.

Iran displayed the drone on state-run TV last week, with a dent in the left wing and the undercarriage and landing gear hidden by anti-American banners.

The Iranian engineer explains why: "If you look at the location where we made it land and the bird's home base, they both have [almost] the same altitude," says the Iranian engineer. "There was a problem [of a few meters] with the exact altitude so the bird's underbelly was damaged in landing; that's why it was covered in the broadcast footage."

Prior to the disappearance of the stealth drone earlier this month, Irans electronic warfare capabilities were largely unknown and often dismissed.

"We all feel drunk [with happiness] now," says the Iranian engineer. "Have you ever had a new laptop? Imagine that excitement multiplied many-fold." When the Revolutionary Guard first recovered the drone, they were aware it might be rigged to self-destruct, but they "were so excited they could not stay away."

* Scott Peterson, the Monitor's Middle East correspondent, wrote this story with an Iranian journalist who publishes under the pen name Payam Faramarzi and cannot be further identified for security reasons.

                                            P.C.
111  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: We the Well-armed People (Gun rights stuff ) on: December 16, 2011, 10:20:45 AM
Woof,
 The short answer is because those guns were counted as illegal guns that were traced back to America and those numbers were used to call for more gun control laws and restrictions in the U.S.
                                     P.C.
112  DBMA Martial Arts Forum / Martial Arts Topics / Re: No, no one knows. on: December 16, 2011, 08:05:52 AM
I am curious about something, and this seems to be the place for it:  In my mind, it seems that it is likely that there have been more incidents of defense with a gun in the home, and more instances of defense with some other kind of weapon out in the world.  Anyone know how that breaks down?
Woof dreatx,
 
 You will probably have trouble hashing the statistic's out on that one. Most private and government entities that are interested in such numbers usually only want to use them for political fodder, and since most big cities (where most of the crimes and deaths occur), are ran by Liberals, they are generally only interested in keeping records on gun deaths committed by violent criminals. They are not all that interested in how many people are stabbed or beaten to death and they are definitely not interested in how many people legally and successfully defend themselves against violence, by any method; gun or otherwise.

 You see if they started keeping those kinds of records then that would show how many innocent lives were potentially saved by the use of a weapon in the hands of a law abiding citizen. They are afraid of that number because then they wouldn't be able to justify their calls for more gun control. Why would they want more gun control that restricts law abiding citizens from having guns, when the crooks and murderer's just break those laws, leaving citizens defenseless?

 Well, they want you to need government protection, that way they can hire government employee's (cops, fire fighters, teachers, all unionized of course), that will also be dependant on a government check and benefits, then after they have wasted your tax dollars and need more, they can threaten you with taking the police off the street and let the riots, looting and burning begin. That's only half of it though; you see they need criminals to make this work, so they crowd millions of people into certain areas of these big liberal city's, make sure that all the jobs dry up or get sent overseas, then put a government roof over their head and give them just enough food stamps to keep them alive, make them angry at the world by telling them slavery from 200 hundred years ago put them there, then just set back and wait until the despair, depression, and hopelessness of their situation drives them to self medicate with illegal drugs and alcohol and turn to crime to get the money they need to buy the things they need and want.

 Of course drug users, attract drug dealers, and things get violent when they compete with each other, so they need gangs and the gangs raise the kids, because daddy is in jail and mom is stoned. You keep the borders wide open so the drugs keep coming and as a added benefit you get illegal immigrants and they fill any jobs left and also become depended on government handouts. You don't let prayer or the Ten Commandments in the schools because prayer might give them hope and the Commandments might contradict what they learn in the gangs. You know, all that 'thou shalt not kill' crap. Of course they won't be in school long anyway because most will drop out, which doesn't bother the teachers, so long as they get more pay and benefits and if they don't, they'll strike with the cops and fire fighters.

 Now the government has a nice little round robin, closed system, to manipulate and control, all for their own corrupt reasons and benefit. It's really a brilliant scheme because the elite in the government get all the power and money and then they blame all the problems on guns, or slavery from 200 hundred years ago, or greedy corporations, or global warming or guns (did I say guns twice?). They are really creative when it comes to finding something to blame while they keep accumulating power and control. Well, I got little off your question there but to answer it. No, no one knows how that breaks down. wink
                                            
                                  P.C.
113  DBMA Martial Arts Forum / Martial Arts Topics / Self Defense with pistols on: December 15, 2011, 11:09:01 PM
Woof,
 The answer is next.
            P.C.
114  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: We the Well-armed People (Gun rights stuff ) on: December 15, 2011, 08:24:56 PM
Woof JDN,
 First you claim that Americans aren't concerned about the thousands of murders taking place in Mexico and now you want Americans to ignore one of our government agency's that has help facilitate some of those deaths as well as the death of one of our Border Patrol agents. If it was a mistake, do you want it to happen again? If people do ignore it, that will almost guarantee it will happen again. If it was a legit sting that was botched by some kind of half ass political play and interference from the Administration, don't you think something like that should be ferreted out? Do you think people inside this Administration and the government are going to do that without any pressure from We the People? Of course not. You're an intelligent guy but some of your post's aren't congruent enough for anyone to nail down what your viewpoint is and they leave some of us feeling somewhat schizophrenic in trying to figure out how or even what to respond to. I think you are conflicted on various points of the issue and need to work those out for yourself. I'm not attacking you or telling you what to think but I believe you have some important points to make and once you reslove and more precisely define how you feel about them I think you'll find that you are not as embattled here by the other poster's as it seems right now. I think part of what you are saying is that you don't want this to turn into a political witchhunt if in fact it was just an operation they lost control of, and you also seem to be saying even if there was some failings by higher ups no one really has the moral high ground to beat them over the head with it because stuff like this happens all the time regardless of who's in office and there is little if any evidence of intentional wrong doing so far. On the other hand you accuse and lament that American's don't care about what happens in Mexico but at the same time they should ignore this story and not be concerned about the reasoning or motovations that went into this operation that violated Mexico's sovereignty and adds to the violence of the cartels against eachother and innocent citizens, then you say it's awful and terrible that this happened. So right now what I'm getting from all this is that: It's bad that this happened, American's are heartless, there's no evidence it was politically motivated even though it involved illegal guns being moved across the border, which is a political hot topic of this Administration and an issue they have been using as a reason for more gun control but none of that should be looked at, and no one should be held accountable if it was a mistake and American's shouldn't care if it was a mistake or not. rolleyes
                                        P.C.
115  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: We the Well-armed People (Gun rights stuff ) on: December 15, 2011, 06:26:40 AM

That said, frankly I don't understand why it would even affect gun control in America.  I mean 10's of thousands of Mexicans have already been gunned down
by the Cartels.  What's a few hundred more guns that frankly/obviously given the death count, could have been bought elsewhere?  Surely if it was a "false
flag operation" to promote gun control in America they could have done better.  Frankly, and sadly, no one cares in America about the huge death toll in Mexico. I truly doubt
if it would even affect gun control in America one way or another.


Woof JDN,
 Really??? Come off it man.
                  P.C.
116  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Cyberwar and American Freedom on: December 13, 2011, 08:44:06 AM
Woof GM,
 Ha! Good update. cheesy
                P.C.
117  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Cyberwar and American Freedom on: December 13, 2011, 02:30:55 AM
Iran claims its experts almost done recovering data from captured US drone
Nasser Karimi, The Associated Press  Dec 12, 2011 13:45:00 PM
0

TEHRAN, Iran - Iranian experts are in the final stages of recovering data from the U.S. surveillance drone captured by the country's armed forces, state TV reported Monday.
Tehran has flaunted the capture of the RQ-170 Sentinel, a top-secret aircraft with stealth technology, as a victory for Iran and a defeat for the United States in a complicated intelligence and technological battle.
President Barack Obama said Monday that the U.S. was pressing Iran to return the aircraft, which U.S. officials say malfunctioned and was not brought down by Iran. But a senior commander of Iran's Revolutionary Guard said on Sunday that the country would not send it back, adding that "no one returns the symbol of aggression."
Iranian lawmaker Parviz Sorouri, a member of the parliament's national security and foreign policy committee, said Monday the extracted information will be used to file a lawsuit against the United States for what he called the "invasion" by the unmanned aircraft.
Sorouri also claimed that Iran has the capability to reproduce the drone through reverse engineering, but he did not elaborate.
State TV broadcast images Thursday of Iranian military officials inspecting what it identified as the drone. Iranian state media have said the unmanned spy aircraft was detected and brought down over the country's east, near the border with Afghanistan.
Officers in the Revolutionary Guard, Iran's most powerful military force, have claimed the country's armed forces brought down the surveillance aircraft with an electronic ambush, causing minimum damage to the drone.
American officials have said that U.S. intelligence assessments indicate that Iran neither shot the drone down, nor used electronic or cybertechnology to force it from the sky. They contend the drone malfunctioned. The officials spoke anonymously in order to discuss the classified program.
U.S. officials are concerned others may be able to reverse engineer the chemical composition of the drone's radar-deflecting paint or the aircraft's sophisticated optics technology that allows operators to positively identify terror suspects from tens of thousands of feet in the air.
They are also worried adversaries may be able to hack into the drone's database, although it is not clear whether any data could be recovered. Some surveillance technologies allow video to stream through to operators on the ground but do not store much collected data. If they do, it is encrypted.
Separately, in comments to the semi-official ISNA news agency, Sorouri said Iran would soon hold a navy drill to practice the closure of the strategic Strait of Hormuz at the mouth of the Persian Gulf, which is the passageway for about 40 per cent of the world's oil tanker traffic.
Despite Sorouri's comments and past threats that Iran could seal off the waterway if the U.S. or Israel moved against Iranian nuclear facilities, no such exercise has been officially announced.
"Iran will make the world unsafe" if the world attacks Iran, Sorouri said.
Both the U.S. and Israel have not rule out military option against Iran's controversial nuclear program, which the West suspects is aimed at making atomic weapons. Iran denies the charge, saying its nuclear activities are geared toward peaceful purposes like power generation.
In another sign of the increasing tensions between Iran and the U.S., Tehran said Monday it has asked Interpol to help seek the arrest of two former U.S. officials it accuses of supporting the assassinations of Iranian officials.
Iran's state prosecutor, Gholamhossein Mohseni Ejehei, told reporters that Iran has filed charges against retired U.S. Army Gen. Jack Keane and former CIA agent Reuel Marc Gerecht.
Ejehei said Iran sent a request to Interpol in Paris to help pursue the two Americans through its office in Washington.
Iran says the two men urged the Obama administration to use covert action against Iran and kill some of its top officials, including Brig. Gen. Ghassem Soleimani commander of the Quds Force, the special foreign operations unit of the Revolutionary Guard.
118  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Cyberwar and American Freedom on: December 13, 2011, 02:27:48 AM
Woof,
 This, along with a Sentinel stealth done losing it's satellite tether and gliding to a landing in Iran, might be of concern.

By Jason Ryan
@JasonRyanABC
Follow on Twitter
Nov 16, 2011 8:11pm
US Satellites Compromised by Malicious Cyber Activity
 
On at least two occasions, hackers have taken over U.S. satellites and targeted their command-and-control systems, a report by the U.S.-China Economic and Security Review Commission revealed today.
The incidents involved two Earth observation satellites. While it may be difficult to trace who hacked the satellites, U.S. officials acknowledged the incidents had to come from a nation power.
U.S. officials cannot clearly trace the incidents to China, but the report released by the by congressionally mandated commission noted that Chinese military writings made reference to attacks on ground-based space communications facilities.
Chinese military writings advocate attacks on space-to ground communications links and ground-based satellite control facilities in the event of a conflict. Such facilities may be vulnerable, the report noted, In recent years, two U.S. government satellites have experienced interference apparently consistent with the cyber exploitation of their control facility.
The report noted that some of the malicious cyber activity targeting the satellites involved NASAs Terra EOS satellite being targeted in June 2008 and again in October 2008. The June incident resulted in the satellite being interfered with for two minutes and the October incident lasted at least nine minutes.
The report noted that in both instances, The responsible party achieved all steps required to command the satellite but did not issue commands.
NASA confirmed in a separate statement: NASA experienced two suspicious events with the Terra spacecraft in the summer and fall of 2008. We can confirm that there was no manipulation of data, no commands were successfully sent to the satellite, and no data was captured. NASA notified the Department of Defense, which is responsible for investigating any attempted interference with satellite operations.
The report noted that the Landsat-7 satellite operated by the U.S. Geological Survey experienced similar interference and events in 2007 and 2008 but added that the entity behind that incident did not achieve the ability to control the satellite.

Artist's rendering of the Terra Satellite (source: NASA)

The report mentions the serious implications the intrusions could have on the satellite systems, particularly if they were directed against more sensitive systems such as military or communications satellites.
If executed successfully, such interference has the potential to pose numerous threats, particularly if achieved against satellites with more sensitive functions. For example, access to a satellites controls could allow an attacker to damage or destroy the satellite, the report read.
The attacker could also deny or degrade as well as forge or otherwise manipulate the satellites transmission, the report added. A high level of access could reveal the satellites capabilities or information, such as imagery, gained through its sensors. Opportunities may also exist to reconnoiter or compromise other terrestrial or space based networks used by the satellite.
119  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Cyberwar and American Freedom on: December 13, 2011, 02:12:49 AM
JEFF ST. JOHN: NOVEMBER 21, 2011
Reports Claim First-Ever Cyber Attack on US Utility
The first cyber attack on utility infrastructure may have finally arrived via a hacked SCADA system and a broken-down water pump in rural Illinois.


Weve been reporting for years how linking the internet to grid communications and control technology could open the countrys utilities to cyber attack. On Friday came reports of what may be the first such hack to cause physical damage to the countrys electric, water or gas infrastructure -- a burned-out water pump at a small utility in Illinois.

Thats not such a big deal in terms of damage caused. But if the report is true, it indicates that nefarious actors may have strung together several key stages of security vulnerabilities to infiltrate, then take control of, a piece of automated utility infrastructure -- and that could be a very big deal indeed.

Heres the story. Earlier this month, workers at a small utility in central Illinois found a problem with the SCADA industrial controls that manage their water system, including a damaged water pump. An investigation by an IT services company found that the SCADA system had been hacked into by a computer in Russia, according to Joe Weiss, managing partner of cybersecurity firm Applied Control Solutions in Cupertino, Calif.

Weiss, who cited a report he said came from the Illinois Statewide Terrorism and Intelligence Center (ISTIC), said that unknown hackers had taken over control of the SCADA system and turned the pump on and off until it burned out. The hackers had apparently stolen entry credentials from a company that makes software to access the SCADA system -- and Weiss said the same hackers could be planning future attacks using the same means and methods.

The U.S. Department of Homeland Security has told multiple news agencies reporting on this matter that it has no evidence that indicates there is a risk to utilities or public safety. Still, DHS and the FBI are investigating the matter.

Breaking Down the Risks

We need to wait for more facts to emerge on this murky matter. But theres no getting around the fact that security is a major challenge for utilities that are seeking to secure legacy control systems that are being hooked up to the internet for the first time. Lets break down the alleged SCADA hack in Illinois, and see how it could have happened, taking as examples some of the cybersecurity problems that have been identified for utilities over the past few years.

First, where could potential attackers have found the credentials they needed to access a utility SCADA system? One significant possibility is that the hackers took advantage of poor human management of security by fooling employees into turning over critical passwords or other credential information that they could exploit. That kind of social engineering is still a key concern for utility security, and requires employee training as much as software expertise to prevent.

Human failures can also open newly networked utility systems to remote attacks. Tom Parker, vice president at computer security firm FusionX, showed at a Black Hat conference in August how he could use simple code and Google searches to theoretically take control of a water treatment facilitys remote terminal units (RTUs), particularly when the RTUs are protected by the password 1234 -- the easiest password to guess besides the word password itself.

Even if SCADA system operators arent using idiotic passwords and are taking proper measures to protect their security credentials, there are harder-to-prevent ways to pull access and security data out of them. One scary possibility is that the hackers had accessed the utilitys SCADA system for months beforehand, and are currently worming their way into others, using more sophisticated cyber-intrusion tools.

Worming Into SCADA Systems?

Take Duqu and Stuxnet -- two words that are probably meaningless to most people, but which strike fear into SCADA system operators around the world. First came Stuxnet, a virus that is believed to have been targeting Irans nuclear materials program by infecting Windows computers and thence infiltrating SCADA systems built by Siemens, all with the goal of causing malfunctions in uranium enrichment centrifuge equipment.

It was just about a year ago that cybersecurity experts first discovered Stuxnet, but its believed that the virus may have been introduced years beforehand -- meaning that SCADA systems around the world may be carrying a version of it right now. While the hope is that the virus was targeting only Iranian centrifuges, the idea that similar viruses could use the same techniques to do more damage remains high on the list of concerns for smart grid cybersecurity experts.

More recently, those concerns have refocused on a computer virus known as Duqu. Whether or not its related to Stuxnet remains a point of contention, but it appears to operate in a similar way, by exploiting a vulnerability in Windows to lodge itself inside servers and collect data passing through them, which could allow for espionage or gathering security data for further exploitation.

The Duqu virus has been shifting around the world, from India to Europe, Africa and Indonesia (and reportedly back to Iran), as security experts seek to track it down and eliminate it. While no exploitation has been found in the utility industry as of yet, its ability to infect Windows machines should give it access to almost any industry out there.

Using Controls to Wreak Havoc

Unfortunately, once hackers have gotten access to a SCADA system, there are plenty of actions they can take to damage the system theyve hijacked. Back in 2007, reports emerged of a DHS experiment that showed how the control system of gas-fired generator at the Department of Energys Idaho National Lab could be hacked in a way that destroyed the generator, using a mock-up of a typical power plants control system.

The U.S. utility industry has had four years since that demonstration to try to fix any similar vulnerabilities in their power plant controls systems, but its unclear if theyve made much progress. The North American Electricity Reliability Council (NERC), an industry group in charge of setting critical infrastructure protection (CIP) guidelines for U.S. and Canadian utilities, has just this year begun auditing utilities on the compliance theyve been self-reporting over the past few years.

NERC recently held a grid security exercise for utilities seeking to comply with its critical infrastructure protection program, which might provide some examples of the security precautions that are being tackled.

While outside attacks are the subject of much of our recent worries, it was an inside job that gave the world a sense of just how much havoc a SCADA system takeover could wreak. In 2000, a disgruntled former employee of a Queensland, Australia water treatment plant decided to remotely access the system and release millions of gallons of sewage into nearby streams and parks. Though he served two years in jail for the act, that didnt stop it from happening.

To guard against these kinds of attacks, experts recommend multiple layers of security to detect and prevent such unusual and knowingly self-destructive commands. Preventing intrusion is the first line of defense, but stopping an attack in progress will be equally important. After all, the IT industrys experience with hackers has shown that its almost impossible to anticipate all the clever ways hackers are working on their next exploits.

Theres little doubt that U.S. national security officials are worried about the potential threats that could come from connecting SCADA systems to the internet. Will utilities decide to cope with the threat by unplugging those systems, thus essentially turning back the clock on the smart grid? Or will they be able to manage the new security challenges that come along with the benefits of networking and integrating the grid? Looks like well be talking a lot more about these subjects, thanks to a broken-down water pump in Illinois.
120  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Immigration issues on: December 13, 2011, 02:07:40 AM
Woof,
 Let's see if the State's are at the mercy of the distant, inept, and corrupt Federal government (exactly why the Revolutionary war was fought). The headline comes at the end: Kagan recluses herself!!!!


High court to review tough Arizona immigration law
By MARK SHERMAN | AP 8 hrs ago

WASHINGTON (AP) The Supreme Court stepped into the fight Monday over a tough Arizona law that requires local police to help enforce federal immigration laws pushing the court deeper into hot, partisan issues of the 2012 election campaign.
The court's election-year docket now contains three politically charged disputes, including President Barack Obama's health care overhaul and Texas redistricting.
The debate over immigration already is shaping presidential politics, and now the court is undertaking a review of an Arizona law that has spawned a host of copycat state laws targeting illegal immigrants.
The court will review a federal appeals court ruling that blocked several provisions in the Arizona law. One of those requires that police, while enforcing other laws, question a person's immigration status if officers suspect he is in the country illegally.
The case is the court's biggest foray into immigration law in decades, said Temple University law professor Peter Spiro, an expert in that area.
The Obama administration challenged the Arizona law by arguing that regulating immigration is the job of the federal government, not states. Similar laws in Alabama, South Carolina and Utah also are facing administration lawsuits. Private groups are suing over immigration measures adopted in Georgia and Indiana.
"This case is not just about Arizona. It's about every state grappling with the costs of illegal immigration," Arizona Gov. Jan Brewer, a Republican, said following the court's announcement Monday.
Fifty-nine Republicans in Congress, including presidential candidate Michele Bachmann, filed a brief with the court backing the Arizona law.
The immigration case, like the challenge to Obama's health care overhaul, pits Republican-led states against the Democratic administration in an argument about the reach of federal power. The redistricting case has a similarly partisan tinge to it, with Republicans who control the state government in Texas facing off against Democrats and minority groups that tend vote Democratic.
In the immigration arena, the states say that the federal government isn't doing enough to address a major problem and that border states are suffering disproportionately.
The issue has been widely discussed by the Republican candidates for president. They have mostly embraced a hard line to avoid accusations that they support any kind of "amnesty" for the some 12 million illegal immigrants estimated to be living in the U.S.
Newt Gingrich was most recently criticized by his opponents for saying he would grant legal status to some with longstanding family and community ties, and Gingrich has since endorsed the South Carolina law that allows police to demand a person's immigration status. That law is among the four state laws that have been challenged by the administration.
Brewer signed the Arizona immigration measure into law in April 2010. The administration sued three months later to block it from taking effect.
In April, a three-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco upheld a federal judge's ruling halting enforcement of several provisions of the law. Among the blocked provisions: requiring all immigrants to obtain or carry immigration registration papers; making it a state criminal offense for an illegal immigrant to seek work or hold a job and allowing police to arrest suspected illegal immigrants without warrants.
In October, the federal appeals court in Atlanta blocked parts of the Alabama law that forced public schools to check the immigration status of students and allowed police to file criminal charges against people who were unable to prove their citizenship.
Lawsuits in South Carolina and Utah are not as far along.
The administration argued that the justices should have waited to see how other courts ruled on the challenges to other laws before getting involved. Still, following the court's announcement Monday, White House spokesman Jay Carney said, "We look forward to arguing our point of view in that case when the time comes."
Spiro, the Temple University immigration expert, said the court easily could have passed on the Arizona case for now. "They could have waited for the more extreme case to come from Alabama, which really outflanked the Arizona law," Spiro said.
He predicted the court would uphold the police check of immigration status but perhaps not the measure making it a crime to be without immigration documents.
Arguments probably will take place in late April, which would give the court roughly two months to decide the case
Justice Elena Kagan will not take part case, presumably because of her work on the issue when she served in the Justice Department in the Obama administration.
The case is Arizona v. U.S., 11-182.
121  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 07:25:34 PM
Woof,
 It certainly shows how our News Media and Press have completely failed us. I guess they think this kind of information is just more than we can understand. I'm just an ol' country boy from Kentucky and even I can grasp the highlights of this accounting. We the People had better wake up to what's going on here, GM is absolutely correct. This is Rome at the end of the Republic.
                                                 P.C.
122  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Original pdf file/Sold Out on: December 11, 2011, 04:57:46 PM
Woof,
 This url leads to the PDF file of all the information of the previous post's, and is easy to read. I'm leaving the other post's in, even though the formatting is poor, because the visual effect of scrolling down the list of the millions, even billions of dollars paid out by these failed companies to our politicans is just stunning and if the original is taken down for some reason, we'll still have the info here.

  www.wallstreetwatch.org/reports/sold_out.pdf
                                                  P.C.

  
123  Politics, Religion, Science, Culture and Humanities / Politics & Religion / For The Record/End on: December 11, 2011, 03:19:27 AM
Woof, 13th Post;

2008
Appendix
218
Accounting Firms: KPMG LLP
Decade-long campaign contribution total (1998-2008): $8,486,392
Decade-long lobbying expenditure total (1998-2008): $19,103,000
KPMG Campaign Contributions:277
2008 Top Recipients278
TOTAL: $1,746,293
1. Barack Obama (D) $67,500
2. Hillary Clinton (D) $40,900
3. John McCain (R) $22,490
4. Chris Dodd (D) $21,000
5. Elizabeth Dole (R) $12,300
6. Steve Chabot (R) $10,300
7. Jim Ryun (R) $10,300
8.
Michele Marie
Bachmann (R) $10,000
9. Melissa Bean (D) $10,000
9. Allen Boyd (D) $10,000
9. John Campbell (R) $10,000
9. Michael Castle (R) $10,000
9. James Clyburn (D) $10,000
9. Norm Coleman (R) $10,000
9. Susan Collins (R) $10,000
9. Mike Conaway (R) $10,000
9. John Cornyn (R) $10,000
9. Joseph Crowley (D) $10,000
9. Artur Davis (D) $10,000
277 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
278 Based on highest 1,000 contributions and
PAC money.
9. Lincoln Davis (D) $10,000
9. Barney Frank (D) $10,000
9. Jim Gerlach (R) $10,000
9. Jeb Hensarling (R) $10,000
9. Michael Johanns (R) $10,000
9. Paul Kanjorski (D) $10,000
9. Ron Kind (D) $10,000
9. Ron Klein (D) $10,000
9. Tim Mahoney (D) $10,000
9. Carolyn Maloney (D) $10,000
9. Jim Marshall (D) $10,000
9. Jim Matheson (D) $10,000
9. Dennis Moore (D) $10,000
9. Chris Murphy (D) $10,000
9. Steve Pearce (R) $10,000
9. Edwin Perlmutter (D) $10,000
9. Charles Rangel (D) $10,000
9. Harry Reid (D) $10,000
9. Peter Roskam (R) $10,000
9. Ed Royce (R) $10,000
9. Paul Ryan (R) $10,000
9. David Scott (D) $10,000
9.
Christopher Shays
(R) $10,000
9. Lamar Smith (R) $10,000
9. John Tanner (D) $10,000
9. Mike Thompson (D) $10,000
Appendix 219
9. Melvin Watt (D) $10,000
2006 Top Recipients279
TOTAL: $1,320,683
1. Heather Wilson (R) $15,000
2. Max Baucus (D) $13,233
3. Chris Dodd (D) $13,000
3. James Talent (R) $13,000
5. Rick Santorum (R) $11,200
6. Patrick McHenry (R) $10,704
7. Spencer Bachus (R) $10,000
7. Roy Blunt (R) $10,000
7. Conrad Burns (R) $10,000
7. Eric Cantor (R) $10,000
7. Hillary Clinton (D) $10,000
7. Bob Corker (R) $10,000
7.
Michael Fitzpatrick
(R) $10,000
7. Barney Frank (D) $10,000
7. Jeb Hensarling (R) $10,000
7. Jon Kyl (R) $10,000
7. Jim Matheson (D) $10,000
7. Raymond Meier (R) $10,000
7. Dennis Moore (D) $10,000
7.
Marilyn Musgrave
(R) $10,000
7. Rick O'Donnell (R) $10,000
7. Rick Renzi (R) $10,000
7. Tom Reynolds (R) $10,000
7. David Scott (D) $10,000
7. E Clay Shaw Jr (R) $10,000
7. Gordon Smith (R) $10,000
7. Patrick Tiberi (R) $10,000
279 Based on highest 1,000 contributions and
PAC money.
2004 Top Recipients
TOTAL: $1,459,303
1. Charles Schumer (D) $32,000
2. Richard Shelby (R) $25,000
3. John Kerry (D) $22,750
4. Chris Dodd (D) $19,000
5. Peter Coors (R) $18,000
6. Mike Conaway (R) $16,000
7. James DeMint (R) $15,201
8. Richard Baker (R) $15,000
8. Jeb Hensarling (R) $15,000
10.
Christopher S 'Kit'
Bond (R) $12,000
10. George W Bush (R) $12,000
12. Gresham Barrett (R) $11,500
13. Mel Martinez (R) $11,000
14. Spencer Bachus (R) $10,000
14. Bob Beauprez (R) $10,000
14. Roy Blunt (R) $10,000
14. Eric Cantor (R) $10,000
14.
Shelley Moore Capito
(R) $10,000
14. Vito Fossella (R) $10,000
14. Katherine Harris (R) $10,000
14. Bill Jones (R) $10,000
14. Sue Kelly (R) $10,000
14. Michael Oxley (R) $10,000
14. Jim Ryun (R) $10,000
2002 Top Recipients
TOTAL: $1,740,139
1. Saxby Chambliss (R) $16,050
2. Mike Ferguson (R) $14,500
3. Norm Coleman (R) $12,500
3. Felix J Grucci Jr (R) $12,500
Appendix
220
5. Jim McCrery (R) $11,750
6. Phil Gramm (R) $11,000
7. Connie Morella (R) $10,450
8. Lamar Alexander (R) $10,250
8.
Charles "Chip"
Pickering Jr (R) $10,250
10. Roy Blunt (R) $10,000
10.
Shelley Moore Capito
(R) $10,000
10. Vito Fossella (R) $10,000
10. Robin Hayes (R) $10,000
10. Tim Hutchinson (R) $10,000
10. Chris John (D) $10,000
10. Sue Kelly (R) $10,000
10. Mark Kennedy (R) $10,000
10. Candice Miller (R) $10,000
10. Dennis Moore (D) $10,000
10. Michael Oxley (R) $10,000
10. Mike Rogers (R) $10,000
10. John Shadegg (R) $10,000
10. Rob Simmons (R) $10,000
10. John Sununu (R) $10,000
10. John Thune (R) $10,000
2000 Top Recipients
TOTAL: $1,371,159
1. George W Bush (R) $89,567
2. Charles Schumer (D) $42,948
3. Spencer Abraham (R) $14,999
4. Rick Lazio (R) $14,550
5. Chris Dodd (D) $14,000
6. George Allen (R) $10,943
7. William Roth Jr (R) $10,500
8. John Ashcroft (R) $10,000
8. Slade Gorton (R) $10,000
8. Rod Grams (R) $10,000
11. Rick Santorum (R) $9,000
12. Rudy Giuliani (R) $8,999
13. Conrad Burns (R) $8,500
14. David Phelps (D) $8,000
15. John Ensign (R) $7,775
16. James Rogan (R) $7,725
17. Dick Armey (R) $7,500
18. Jane Harman (D) $7,400
19. Al Gore (D) $7,300
20. Heather Wilson (R) $7,225
1998 Top Recipients
TOTAL: $848,815
1. Thomas Bliley Jr (R) $10,000
1. Billy Tauzin (R) $10,000
3. Barbara Mikulski (D) $8,219
4. Lauch Faircloth (R) $8,000
5. Ron Wyden (D) $7,795
6. Paul Coverdell (R) $7,500
7. Rick White (R) $6,225
8. Robert Bennett (R) $6,000
8. John Boehner (R) $6,000
8. Molly Bordonaro (R) $6,000
8. Heather Wilson (R) $6,000
12. Matt Fong (R) $5,750
13. Don Nickles (R) $5,500
14. Alfonse D'Amato (R) $5,300
15. Dick Armey (R) $5,000
15. Brian Bilbray (R) $5,000
15. Jim Bunning (R) $5,000
15. Christopher Cox (R) $5,000
15. Tom DeLay (R) $5,000
15. Peter Fitzgerald (R) $5,000
Appendix 221
15. Newt Gingrich (R) $5,000
15. Trent Lott (R) $5,000
15. Bill Redmond (R) $5,000
Appendix
222
KPMG Lobbying Expenses:280
2008
TOTAL: $2,985,000
KPMG LLP $2,525,000
KPMG LLP > $10,000*
Velasquez Group $200,000
Public Strategies $130,000
Clark & Weinstock $80,000
Clark & Assoc $50,000
Mayer, Brown et al > $10,000*
2007
TOTAL: $2,590,000
KPMG LLP $2,130,000
KPMG LLP > $10,000*
Velasquez Group $180,000
Public Strategies $120,000
Clark & Weinstock $80,000
Clark & Assoc $40,000
Mayer, Brown et al $40,000
2006
TOTAL: $2,190,000
KPMG LLP $1,650,000
KPMG LLP $40,000
Velasquez Group $180,000
Public Strategies $120,000
Mayer, Brown et al $80,000
Clark & Weinstock $80,000
Clark & Assoc $40,000
280 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
2005
TOTAL: $1,210,000
KPMG LLP $890,000
KPMG LLP $40,000
Public Strategies $120,000
Clark & Weinstock $80,000
Clark & Assoc $40,000
Velasquez Group $40,000
2004
TOTAL: $1,838,000
KPMG LPP $1,368,000
KPMG LPP $60,000
KPMG LPP > $10,000*
Clark & Weinstock $200,000
Velasquez Group $140,000
Public Strategies $50,000
Clark & Assoc $20,000
2003
TOTAL: $1,575,000
KPMG LLP $925,000
KPMG LLP > $10,000*
KPMG LLP $180,000
Clark & Weinstock $180,000
Velasquez Group $160,000
Public Strategies $90,000
McGovern & Smith $40,000
Clark & Assoc > $10,000*
* Not included in totals
Appendix 223
2002
TOTAL: $1,850,000
KPMG LLP $1,430,000
KPMG LLP $40,000
KPMG LLP $60,000
KPMG LLP $10,000
Public Strategies $160,000
Clark & Weinstock $100,000
McGovern & Smith $20,000
Capitol Tax Partners $20,000
Thelen, Reid et al $10,000
Clark & Assoc > $10,000*
2001
TOTAL: $1,455,000
KPMG LLP $1,175,000
KPMG LLP > $10,000*
KPMG LLP $80,000
Public Strategies $120,000
Palmetto Group $80,000
2000
TOTAL: $1,580,000
KPMG LLP $1,340,000
KPMG LLP $80,000
Palmetto Group $100,000
Mayer, Brown et al $60,000
1999
TOTAL: $1,190,000
KPMG LLP $850,000
Palmetto Group $280,000
Mayer, Brown et al $40,000
* Not included in totals
Spectrum Group $20,000
1998
TOTAL: $640,000
KPMG LLP $600,000
Mayer, Brown et al $40,000
Spectrum Group > $10,000*
* Not included in totals
Appendix
224
KPMG Covered Official Lobbyists:281
Firm / Name of Lobbyist Covered Official Position Year(s)
Clark & Assoc.
Sam Geduldig Dir of Coalitions, House Fin. Serv Comm. 2007-2008
Sr Advisor, Majority Whip Roy Blunt
Clark & Weinstock
Ed Kutler Asst, Office of Speaker, House of Reps 2007-2008
Asst, House Republican Whip
Johathan Schwantes Gen Counsel, Senate Judiciary Comm 2007-2008
Sandra Stuart Asst Sec for Legislative Affairs, DoD 2008
Chief of Staff, Rep. Vic Fazio
Vin Weber Member of Congress (MN) 2007-2008
Margaret McGlinch Chief of Staff, Rep. Tim Walz 2008
Legislative Dir, Rep. Richard Neal
Legislative Counsel, Sen. Harry Reid
Kent Bonham Policy Dir, Sen Chuck Hagel 2002-2003
Juleanna Glover Weiss Press Secretary, Vice President 2002-2003
Brian Bieron Policy Director, House Rulse Comm. 2002
Timothy Morrison Assoc Dir, Presidential Personnel 2002
Anne Urban Legislative Dir, Sen. Robert Kerrey 2002
Capital Tax Partners
William Fant Deputy Asst Sc for Leg Affairs, Treasury 2002-2003
Joseph Mikrut Tax Legislative Counsel, Treasury 2002-2003
Jonathan Talisman Asst Treasury Secretary for Tax Policy 2002-2003
Public Strategies, Inc
Wallace Henderson Counsel, Rep. Tauzin 2001-2002
Mayer, Brown & Platt
Jeffrey Lewis Legislative Asst, Sen. Breaux 1999-2000
281Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix 225
Accounting Firms: Pricewaterhouse
Decade-long campaign contribution total (1998-2008): $10,800,772
Decade-long lobbying expenditure total (1998-2008): $44,291,084
Pricewaterhouse Campaign
Contributions:282
2008 Top Recipients
TOTAL: $2,652,971
1. Barack Obama (D) $205,318
2. Hillary Clinton (D) $190,200
3. John McCain (R) $166,970
4. Mitt Romney (R) $90,150
5. Chris Dodd (D) $64,800
6. Rudy Giuliani (R) $16,250
7. Susan M Collins (R) $16,100
8. Norm Coleman (R) $13,050
9. Elizabeth Dole (R) $12,000
10. Steny H Hoyer (D) $11,000
11. Dean F Andal (R) $10,500
11. Mike Conaway (R) $10,500
13. Keith S Fimian (R) $10,200
14. John Edwards (D) $10,100
15.
Michele Marie
Bachmann (R) $10,000
15. Spencer Bachus (R) $10,000
15. Max Baucus (D) $10,000
15. Melissa Bean (D) $10,000
15. Judy Biggert (R) $10,000
282 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
15. John Boehner (R) $10,000
2006 Top Recipients
TOTAL: $1,388,604
1. Tom Davis (R) $71,208
2. Mark Kennedy (R) $35,600
3. Rick Santorum (R) $23,546
4. Richard Baker (R) $23,488
5. Tom Carper (D) $20,499
6. Spencer Bachus (R) $20,000
7. Joe Lieberman (I) $17,000
8. Deborah Pryce (R) $14,750
9. Mike Ferguson (R) $14,150
10. George Allen (R) $13,850
11. James M Talent (R) $13,000
12. Mike DeWine (R) $11,600
13.
Michael Fitzpatrick
(R) $11,000
13. Jon Kyl (R) $11,000
15. Tom DeLay (R) $10,500
16. Barney Frank (D) $10,250
16. Nancy L Johnson (R) $10,250
16. Tom Reynolds (R) $10,250
16.
Christopher Shays
(R) $10,250
20. E Clay Shaw Jr (R) $10,204
Appendix
226
2004 Top Recipients
TOTAL: $1,882,353
1. George W. Bush (R) $513,750
2. John Kerry (D) $73,000
3. Richard C Shelby (R) $61,250
4. Michael G Oxley (R) $50,550
5. Charles Schumer (D) $27,476
6. Mike Conaway (R) $17,000
7. James W DeMint (R) $12,500
8. Arlen Specter (R) $12,350
9. Chuck Grassley (R) $12,000
9. Scott Paterno (R) $12,000
9. John Thune (R) $12,000
12. Johnny Isakson (R) $11,000
13. Mark Kennedy (R) $10,500
14. Spencer Bachus (R) $10,000
14. Richard Baker (R) $10,000
14. Roy Blunt (R) $10,000
14. Max Burns (R) $10,000
18. Rick Renzi (R) $10,000
19. Richard Burr (R) $9,750
20. Eric Cantor (R) $9,500
2002 Top Recipients
TOTAL: $1,357,480
1. Norm Coleman (R) $13,500
2. Roy Blunt (R) $11,000
3. Connie Morella (R) $10,750
4. John E Sununu (R) $10,500
5. Dennis Hastert (R) $10,000
5. Mark Kennedy (R) $10,000
5. Michael G Oxley (R) $10,000
8. James M Talent (R) $9,950
9. Elizabeth Dole (R) $9,500
9. John Thune (R) $9,500
11. Max Baucus (D) $9,000
12. Phil Crane (R) $8,566
13. Tim Hutchinson (R) $8,000
14. Ken Lucas (D) $7,950
15. Susan M Collins (R) $7,750
16. Wayne Allard (R) $7,500
16. Jim Mcrery (R) $7,500
16. Dennis Moore (D) $7,500
19. Robin Hayes (R) $7,000
19. William Jefferson (D) $7,000
2000 Top Recipients
TOTAL: $1,868,674
1. George W Bush (R) $131,798
2. Rick A Lazio (R) $53,086
3. Bill Bradley (D) $51,550
4. Rudy Giuliani (R) $41,150
5. Charles Schumer (D) $33,974
6. Spencer Abraham (R) $29,550
7. Al Gore (D) $23,630
8. John McCain (R) $19,080
9. John Ashcroft(R) $12,500
10. Edward Kennedy (D) $12,250
11. James E Rogan (R) $11,950
11. William Roth Jr (R) $11,950
13. Chris Dodd (D) $11,750
14. Ernie Fletcher (R) $11,000
15.
Steven Kuykendall
(R) $10,750
16. E Clay Shaw Jr (R) $10,270
17. Rod Grams (R) $10,000
17. Dennis Hastert (R) $10,000
17. Billy Tauzin (R) $10,000
20. Sherrod Brown (D) $9,999
Appendix 227
1998 Top Recipients
TOTAL: $1,650,690
1. Alfonse D'Amato (R) $25,970
2. Chris Dodd (D) $17,800
3.
George Voinovich
(R) $15,500
3. Billy Tauzin (R) $15,000
5. Lauch Faircloth (R) $14,000
5. Martin Frost (D) $14,000
7. Sherrod Brown (D) $13,948
8. Rick White (R) $13,825
9. Newt Gingrich (R) $13,800
10. Paul Coverdell (R) $13,500
10. Anna Eshoo(D) $13,500
10. Ron Wyden (D) $13,500
13. Robert F Bennett (R) $13,000
13. Matt Fong (R) $13,000
15. Thomas Bliley Jr. (R) $12,500
16. Michael Coles (D) $11,750
17.
Christopher S 'Kit'
Bond (R) $11,500
18. Don Nickles (R) $11,000
19. Harry Reid (D) $10,000
20. Christopher Cox (R) $9,111
Appendix
228
Pricewaterhouse Lobbying
Expenditures:283
2008
TOTAL: $3,165,000
PriceWaterhouseCoopers $2,340,000
Quinn, Gillespie & Assoc $370,000
Rich Feuer Group $160,000
American Capitol Group $125,000
Clark & Weinstock $80,000
Clark & Assoc $50,000
Commonwealth Group > $10,000*
Covington & Burling > $10,000*
Donna McLean Assoc > $10,000*
Mayer, Brown et al > $10,000*
Patton Boggs LLP > $10,000*
Cypress Advocacy $40,000
2007
TOTAL: $3,630,584
PriceWaterhouseCoopers $2,650,584
Quinn, Gillespie & Assoc $600,000
Rich Feuer Group $80,000
Clark & Weinstock $80,000
American Capitol Group $60,000
Clark & Assoc $40,000
Donna McLean Assoc $40,000
Mayer, Brown et al $40,000
Patton Boggs LLP $40,000
283 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
2006
TOTAL: $4,413,500
PriceWaterHouseCoopers $3,333,500
Quinn, Gillespie & Assoc $600,000
Patton Boggs LLP $240,000
Clark & Weinstock $80,000
Mayer, Brown et al $80,000
Clark & Assoc $40,000
Donna McLean Assoc $40,000
2005
TOTAL: $13,600,000
PriceWaterhouseCoopers $12,580,000
Quinn, Gillespie & Assoc $600,000
Patton Boggs LLP $200,000
Clark & Weinstock $80,000
Thelen, Redi & Priest $60,000
Donna McLean Assoc $40,000
Clark & Assoc $40,000
2004
TOTAL: $2,505,000
PriceWaterhouseCoopers $1,660,000
PriceWaterhouseCoopers > $10,000*
Quinn, Gillespie & Assoc $580,000
Thelen, Reid & Priest $105,000
Clark & Weinstock $80,000
Public Strategies $40,000
Donna McLean Assoc $20,000
Clark & Assoc $20,000
* Not included in totals
Appendix 229
2003
TOTAL: $2,390,000
PriceWaterhouseCoopers $1,680,000
PriceWaterhouseCoopers > $10,000*
Quinn, Gillespie & Assoc $560,000
Clark & Weinstock $80,000
Thelen, Reid & Priest $70,000
Clark & Assoc > $10,000*
2002
TOTAL: $4,445,000
PriceWaterhouseCoopers $3,160,000
PriceWaterhouseCoopers $155,000
PriceWaterhouseCoopers $260,000
PriceWaterhouseCoopers > $10,000*
Alcalde & Fay $200,000
Quinn, Gillespie & Assoc $540,000
Clark & Weinstock $100,000
Arnold & Porter $20,000
Thelen, Reid et al $10,000
Clark & Assoc > $10,000*
2001
TOTAL: $4,560,000
PriceWaterhouseCoopers $1,240,000
PriceWaterhouseCoopers $560,000
PriceWaterhouseCoopers $700,000
PriceWaterhouseCoopers $840,000
PriceWaterhouseCoopers $120,000
PriceWaterhouseCoopers $360,000
Alcalde & Fay $220,000
Quinn, Gillespie & Assoc $460,000
Cathy Abernathy Consult. $60,000
* Not included in totals
2000
TOTAL: $2,186,000
PriceWaterhouseCoopers $580,000
PriceWaterhouseCoopers $800,000
PriceWaterhouseCoopers $360,000
Quinn, Gillespie & Assoc $350,000
Mayer, Brown et al $60,000
Fleishman-Hillard Inc $36,000
Downey-McGrath Group > $10,000*
Alcalde & Fay > $10,000*
1999
TOTAL: $2,316,000
PriceWaterhouseCoopers $1,220,000
PriceWaterhouseCoopers $1,000,000
Mayer, Brown et al. $40,000
Fleishman-Hillard Inc $36,000
McDonald, Jack H $20,000
Dierman, Wortley et al > $10,000*
Downey McGrath Group > $10,000*
1998
TOTAL: $1,080,000
PriceWaterhouseCoopers $620,000
PriceWaterhouseCoopers $60,000
Coopers & Lybrand $340,000
Mayer, Brown et al $40,000
Downey Chandler Inc $20,000
* Not included in totals
Appendix
230
Pricewaterhouse Covered Official Lobbyists:284
Firm / Name of Lobbyist Covered Official Position Year(s)
PWC Leasing Corp.
Barabara M. Angus
Business Tax Counsel, Joint Committee on
Taxation 1999
Kenneth J. Kies Chief of Staff, Joint Committee on Taxation 1999
Mayer, Brown, & Platt
Jeffery Lewis Legislative Assitant to Senator Breaux 1999-2000
Quinn Gillespie Associates
LLC
John M. Quinn White House Counsel, Chief of Staff to VP 2000
Bruce Andrews Legislative Director, Rep. Tim Holden 2000
Section 170 Coalition
Tim Hanford
Tax Counsel, Committee on Ways and
Means 2001
PwC Structured Finance
Coalition
Tim Hanford
Tax Counsel, Committee on Ways and
Means 2001
John Meager
Special Counsel, Committee on Ways and
Means 2001
PwC Leasing Coalition
Tim Hanford
Tax Counsel, Committee on Ways and
Means 2001
Dierman, Wortley et al
Norman D'Amours Chairman National Credit Union Admin 2002
Clark & Weinstock
Brian Bieron Policy Director, House Rules Committee 2002
284 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix 231
Kent Bonham Policy Director for Sen. Chuck Hagel 2002-2003
Juleanna Glover Weiss Press Secretary to the Vice President 2002-2003
Jonathan Schwantes
General Counsel, Senate Judiciary Committee
2007
Pricewaterhouse Coopers
Beverly Bell Administrative Assistant, Rep. Don Johnson 2003
Amy Best Deputy Director of Public Affairs 2005-2006
Laura Cox Managing Executive External Affairs 2005-2006
Michael O'Brien Legislative Affairs Specialist 2005-2006
Donna Mclean Assoc.
Donna Mclean
US Dept. of Transportation, Asst Sec for
Budeget & Programs & CFO 2004-2006
Quinn Gillespie Associates
LLC
Mike Hacker Communications Dir. (Rep. John Dingell) 2004-2005
Amy Cunniffe Special Asst. to the Pres for Leg. Affairs 2005-2006
Elizabeth Hogan Speical Asst, Dept of Commerce 2005-2006
Kevin Kayes Chief Counsel Senator Reid 2006-2007
Allison Giles
Chief of Staff, House Ways and Means
Committee 2007
Christopher Mccannell Chief of Staff, Congressman Joe Crowley 2007
Patton Boggs LLP
Stephen Mchale Deputy Administrator, TSA 2005
Clark, Lytle, & Geduldig
Sam Geduldig Dir of Coalitions, House Fin Serv Com 2007-2008
Sr Advisor, Majority Whip Roy Blunt 2007-2008Gr

 I just wanted to get all this in the record.
                              P.C.
124  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 03:16:05 AM
Woof, 12th Post;

190
Hedge Funds: Farallon Capital Management
Decade-long campaign contribution total (1998-2008): $1,058,953
Decade-long lobbying expenditure total (1998-2008): $1,005,000
Farallon Campaign Contributions:261
2008 All Recipients
TOTAL: $372,863
1. Hillary Clinton (D) $94,600
2. Barack Obama (D) $15,550
3. David Obey (D) $13,800
3. Chris Dodd (D) $13,800
4. Rahm Emanuel (D) $10,200
5. John McCain (R) $8,900
6. Howard Berman (D) $8,600
7. John Thune (R) $7,100
8. Tim Johnson (D) $4,600
8. Gary Trauner (D) $4,600
9. Mark Warner (D) $3,300
10. Donna Edwards (D) $2,000
11. Charles Rangel (D) $1,000
12. Allyson Schwartz (D) $500
13. Mitt Romney (R) $250
2006 All Recipients
TOTAL: $328,890
1. Hillary Clinton (D) $33,190
2. Kent Conrad (D) $8,400
261 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
3. Rahm Emanuel (D) $8,000
4. Evan Bayh (D) $6,300
5. John Thune (R) $4,400
6. Judy Aydelott (D) $4,200
6. John Hall (D) $4,200
8. Joe Sestak (D) $2,100
8. Ken Lucas (D) $2,100
8. Chris Carney (D) $2,100
8. Michael Arcuri (D) $2,100
8. Edwin Perlmutter (D) $2,100
8. Charles Brown (D) $2,100
8. Chris Murphy (D) $2,100
15. Dianne Feinstein (D) $1,000
15. Howard Berman (D) $1,000
16. Patrick Murphy (D) $500
2004 All Recipients
TOTAL: $233,950
1. John Kerry (D) $14,000
2. Tom Daschle (D) $9,250
3. Russell Feingold (D) $4,000
3. Chris John (D) $4,000
3. Tony Knowles (D) $4,000
3. Brad Carson (D) $4,000
7. Lisa Quigley (D) $2,500
8. Erskine Bowles (D) $2,000
8. Howard Dean (D) $2,000
Appendix 191
8. Ken Salazar (D) $2,000
8. Inez Tenenbaum (D) $2,000
8. Joe Lieberman (D) $2,000
8. Harold Ford, Jr (D) $2,000
8. Betty Castor (D) $2,000
15. Rob Bishop (R) $1,200
16. Robert Bennett (R) $1,000
17. Jamie Metzl (D) $500
2002 All Recipients
TOTAL: $97,250
1. John Kerry (D) $17,000
2. Tom Daschle (D) $7,500
3. John P Murtha (D) $4,000
4. Howard Berman (D) $2,500
5. Robert Bennett (R) $1,000
5. Rahm Emanuel (D) $1,000
5. Howard Berman (D) $1,000
5. John Thune (R) $1,000
9.
Steven Peter Andreasen
(D) $750
2000 All Recipients
TOTAL: $18,500
1. Norm Dicks (D) $9,000
2. Bill Bradley (D) $5,000
3. John McCain (R) $1,000
3. Ed Bernstein (D) $1,000
3. Nancy Pelosi (D) $1,000
1998 All Recipients
TOTAL: $7,500
1. John McCain (R) $1,000
1. Matt Fong (R) $1,000
3. Dick Lane (D) $750
4. Matt Fong (R) $250
Appendix
192
Farallon Lobbying Expenses:262
2004-2008
N/A
2003
TOTAL: $310,000
Timmons & Co. $310,000
2002
TOTAL: $335,000
Timmons & Co. $335,000
2001
TOTAL: $360,000
Fleischman & Walsh $40,000
Timmons & Co. $320,000
1998-2000
N/A
262 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
Appendix 193
Farallon Covered Official Lobbyists:263
Firm / Name of Lobbyist Covered Position Year(s)
Fleischman & Walsh
Louis Dupart
Senate Judiciary Subcommittee on Antitrust,
Business Rights & Competition
2001,
2003-2005
Timmons & Co.
Richard Tarplin Asst Secretary for Legislation, Dept of HHS 2001-2004
263 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix
194
Hedge Funds: Och-Ziff Capital Management
Decade-long campaign contribution total (1998-2008): $338,552
Decade-long lobbying expenditure total (1998-2008): $200,000
Och-Ziff Campaign Contributions:264
2008 All Recipients
TOTAL: $106,300
1. Mark Pryor (D) $11,500
2. Barack Obama (D) $7,900
3. Hillary Clinton (D) $6,800
4. John Thune (R) $4,600
5. Mitt Romney (R) $2,300
5. Eric Cantor (R) $2,300
7. Rahm Emanuel (D) $1,000
7. Norm Coleman (R) $1,000
7. Joe Biden (D) $1,000
2006 All Recipients
TOTAL: $82,650
1.
Sheldon Whitehouse
(D) $3,000
2. Olympia Snowe (R) $2,000
2. James Talent (R) $2,000
2. George Allen (R) $2,000
5. Mitch McConnell (R) $1,000
5. Eric Cantor (R) $1,000
5. Rahm Emanuel (D) $1,000
5. Robert Menendez (D) $1,000
264 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
5. Jon Kyl (R) $1,000
5. Bill Nelson (D) $1,000
11. Chris Shays (R) $250
2004 All Recipients
TOTAL: $95,002
1. John Kerry (D) $14,802
2. Tom Daschle (D) $3,000
2. Charles Schumer (D) $3,000
4. Evan Bayh (D) $2,000
4. Steny Hoyer (D) $2,000
4. Charles Rangel (D) $2,000
4. Rahm Emanuel (D) $2,000
4. Barack Obama (D) $2,000
4. Joe Lieberman (D) $2,000
10. Patty Murray (D) $1,000
10. Barbara Boxer (D) $1,000
10. James DeMint (R) $1,000
10. John McCain (R) $1,000
10. Jamie Metzl (D) $1,000
10. Peter Deutsch (D) $1,000
10. Daniel Inouye (D) $1,000
10. Denise Majette (D) $1,000
Appendix 195
2002 All Recipients
TOTAL: $26,600
1. Charles Schumer (D) $3,000
2. Denise Majette (D) $2,000
3. Tom Harkin (D) $1,000
3. Arlen Specter (R) $1,000
2000 All Recipients
TOTAL: $26,000
1. Charles Schumer (D) $8,000
2. Hillary Clinton (D) $2,000
3. Conrad Burns (R) $1,000
1998 All Recipients
TOTAL: $2,000
1. Charles Schumer (D) $1,000
1. Russell Feingold $1,000
Appendix
196
Och-Ziff Lobbying Expenses:265
2007-2008
N/A
2006
TOTAL: $40,000
Navigant Consulting $40,000
2005
TOTAL: $80,000
Navigant Consulting $80,000
2004
TOTAL: $60,000
Navigant Consulting $60,000
2003
TOTAL: $20,000
Navigant Consulting $20,000
1998-2002
N/A
Och-Ziff Covered Official Lobbyists:
N/A
265 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
Appendix 197
Hedge Funds: Renaissance Technologies
Decade-long campaign contribution total (1998-2008): $1,560,895
Decade-long lobbying expenditure total (1998-2008): $740,000
Renaissance Campaign Contributions:266
2008 Top Recipients
TOTAL: $721,250
1. Hillary Clinton (D) $59,600
2. Barack Obama (D) $39,250
3. Chris Dodd (D) $16,450
4. Timothy Bishop (D) $12,000
5. Tom McClintock (R) $6,900
6. Jeff Merkley (D) $6,100
7. John McCain (R) $5,100
8. Rudy Giuliani (R) $4,850
9. Nancy Pelosi (D) $4,600
9. Charles Rangel (D) $4,600
9. Sean Parnell (R) $4,600
9. Steve Pearce (R) $4,600
9. Steve Israel (D) $4,600
9. Gary Ackerman (D) $4,600
15. Scott Kleeb (D) $2,300
15. Jeanne Shaheen (D) $2,300
15. Gabrielle Giffords (D) $2,300
15. Harry Mitchell (D) $2,300
15. Bob Lord (D) $2,300
15. Ann Kirkpatrick (D) $2,300
266 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
15. Dina Titus (D) $2,300
15. Bart Gordon (D) $2,300
15. Dan Maffei (D) $2,300
15. Jerry McNerney (D) $2,300
15. Rahm Emanuel (D) $2,300
15. Steve Buehrer (R) $2,300
15. Andy Harris (R) $2,300
15. Paul Broun Jr (R) $2,300
15. Bob Schaffer (R) $2,300
15. Charlie Ross (R) $2,300
15. Woody Jenkins (R) $2,300
15.
Christopher L Hackett
(R) $2,300
15. Kirsten Gillibrand (D) $2,300
2006 All Recipients
TOTAL: $364,700
1. Hillary Clinton (D) $21,125
2. Timothy Bishop (D) $4,200
2. Chris Dodd (D) $4,200
2. Michael McGavick (R) $4,200
2. Ben Cardin (D) $4,200
6. Steve Israel (D) $4,100
7. John Yarmuth (D) $2,100
7. Michael Steele (R) $2,100
7. John Gard (R) $2,100
Appendix
198
7. Michael Bouchard (R) $2,100
7. Sharron Angle (R) $2,100
7. Adrian Smith (R) $2,100
7. Rick O'Donnell (R) $2,100
7. William Sali (R) $2,100
7. Chris Chocola (R) $2,100
16. John Sununu (R) $2,000
17. Francine Busby (D) $1,000
17. Claire McCaskill (D) $1,000
17. Debbie Stabenow (D) $1,000
20. Kirsten Gillibrand (D) $500
20. Scott Kleeb (D) $500
20. Tammy Duckworth (D) $500
2004 All Recipients
TOTAL: $239,950
1. John Kerry (D) $8,200
2. Timothy Bishop (D) $7,500
2. Hillary Clinton (D) $7,500
4. George Bush (R) $4,000
5. Betty Castor (D) $2,000
5. Joe Lieberman (D) $2,000
5. Michael Oxley (R) $2,000
5. Steve Israel (D) $2,000
9. Stephanie Herseth (D) $1,000
9. Patricia Lamarch (3) $1,000
11. Howard Dean (D) $550
12. Inez Tenenbaum (D) $500
12. Daniel Montiardo (D) $500
12. Allyson Schwartz (D) $500
12. Tom Daschle (D) $500
2002 All Recipients
TOTAL: $92,445
1. Charles Schumer (D) $15,000
2.
Vivian Viloria-Fisher
(D) $4,000
3. Steve Israel (D) $2,000
3. Denise Majette (D) $2,000
5. Hillary Clinton (D) $1,000
5. Frank Lautenberg (D) $1,000
7.
Jill Long Thompson
(D) $300
8.
Martha Fuller Clark
(D) $250
8. Carol Roberts (D) $250
8. Stephanie Herseth (D) $250
8. Jim Maloney (D) $250
8. Rick Larsen (D) $250
8. Rush Holt (D) $250
8. Jay Inslee (D) $250
2000 All Recipients
TOTAL: $49,550
1. Hillary Clinton (D) $14,700
2. John McCain (R) $1,000
2. Bill Bradley (D) $1,000
1998 All Recipients
TOTAL: $93,000
1. Charles Schumer (D) $4,000
Appendix 199
Renaissance Lobbying Expenditures:267
2008
TOTAL: >$10,000*
E-Copernicus > $10,000*
2005-2006
N/A
2004
TOTAL: $200,000
Liz Robbins Assoc. $200,000
2003
TOTAL: $220,000
Liz Robbins Assoc. $220,000
2002
TOTAL: $220,000
Liz Robbins Assoc. $220,000
2001
TOTAL: $100,000
Liz Robbins Assoc. $100,000
1998-2000
N/A
Renaissance Official Covered Lobbyists:
N/A
267 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
Appendix
200
Accounting Firms: Arthur Andersen
Decade-long campaign contribution total (1998-2008): $3,324,175
Decade-long lobbying expenditure total (1998-2008): $1,900,000
Arthur Andersen
Campaign Contributions:268
2006-2008
N/A
2004 Top Recipients
TOTAL: $86,586
1. George W Bush (R) $12,950
2. John Edwards (D) $7,000
3. John Kerry (D) $6,750
4. George Allen (R) $1,000
4. Orrin G Hatch (R) $1,000
4. Paul Kanjorski (D) $1,000
4. Jim Moran (D) $1,000
4. David Vitter (R) $1,000
9. Bob Graham (D) $500
9. Nancy Johnson (R) $500
9. Pete Sessions (R) $500
12. Barack Obama (D) $300
13. Mike Ferguson (R) $250
13. Barbara Mikulski (D) $250
13.
George Nethercutt Jr
(R) $250
13. Earl Pomeroy (D) $250
13. David Scott (D) $250
268 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009.
2002 Top Recipients
TOTAL: $705,263
1. Rahm Emanuel (D) $11,250
2. Billy Tauzin (R) $10,000
3. Tom Harkin (D) $9,000
4. Wayne Allard (R) $7,500
5. Ron Wyden (D) $7,050
6. Mike Ferguson (R) $6,950
7. Max Baucus (D) $6,500
7. Walter B Jones Jr (R) $6,500
9. Ken Bentsen (D) $6,250
10. Jim McCrery (R) $6,000
10.
Charles "Chip"
Pickering Jr (R) $6,000
12. Christopher Cox (R) $5,500
13. Dick Armey (R) $5,335
14. John Shadegg (R) $5,250
15. Martin Frost (D) $5,000
15. Dennis Hastert (R) $5,000
15. Jim Moran (D) $5,000
15. Harry Reid (D) $5,000
19. Dennis Moore (D) $4,750
20. Vito Fosella (R) $4,500
Appendix 201
2000 Top Recipients
TOTAL: $1,564,270
1. George W Bush (R) $150,900
2. Rick A Lazio (R) $44,550
3. Charles Schumer (D) $34,334
4. Bill Bradley (D) $30,600
5. Jon Kyl (R) $20,101
6. Al Gore (D) $19,350
7. Spencer Abraham (R) $17,650
8. John Ensign (R) $17,000
9. John McCain (R) $14,750
10. John Ashcroft (R) $11,500
11. Chris Dodd (D) $10,500
12. Mel Carnahan (D) $9,000
12. Billy Tauzin (R) $9,000
14. E Clay Shaw Jr (R) $8,500
15. Rudy Giuliani (R) $8,250
16. Rod Grams (R) $8,199
17. Lamar Alexander (R) $8,000
17. Cal Dooley (D) $8,000
19. Peter Fitzgerald (R) $7,565
20. George Allen (R) $7,500
1998 Top Recipients
TOTAL: $968,056
1. Alfonse D'Amato (R) $27,000
2. Evan Bayh (D) $13,750
3. Matt Fong (R) $13,536
4. Paul Coverdell (R) $10,700
5. Ron Wyden (D) $10,650
6.
Carol Moseley Braun
(D) $9,750
7. Peter Fitzgerald (R) $9,350
8. John Ensign (R) $8,350
9.
George Voinovich
(R) $8,250
10. Sherrod Brown (D) $8,187
11. Lauch Faircloth (R) $8,000
11. Billy Tauzin (R) $8,000
13. Robert F Bennett (R) $7,805
14. Joe Barton (R) $7,500
15. Fritz Holings (D) $7,460
16.
Leslie Ann Touma
(R) $7,250
17. Rick White (R) $7,200
18. Barbara Mikulski (D) $7,000
19. Jim Bunning (R) $6,874
20.
Christopher S 'Kit'
Bond (R) $6,250
Appendix
202
Arthur Andersen Lobbying
Expenditures:269
1999-2008
N/A
1998
TOTAL: $1,900,000
Arthur Andersen & Co $1,600,000
Johnson, Madigan et al $120,000
Mayer, Brown et al $40,000
OB-C Group $140,000
269 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
Appendix 203
Arthur Andersen Covered Official Lobbyists:270
Firm / Name of Lobbyist Covered Official Position Year (s)
Mayer, Brown et al
Rothfeld, Charles A
House Sub Comm on Select US Role/Iranian
Arms Transfers to Croatia & Bosnia 1998
OB-C Group
Mellody, Charles J Aide, House Ways & Means Comm. 1998
270 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix
204
Accounting Firms: Deloitte & Touche
Decade-long campaign contribution total (1998-2008): $12,120,340
Decade-long lobbying expenditure total (1998-2008): $19,606,455
Deloitte Campaign Contributions:271
2008 Top Recipients
TOTAL: $2,420,112
1. Barack Obama (D) $177,598
2. John McCain (R) $90,850
3. Hillary Clinton (D) $68,300
4. Mitt Romney (R) $58,550
5. Chris Dodd (D) $51,250
6. Norm Coleman (R) $26,750
7. Rudy Giuliani (R) $24,800
8. Christopher Shays (R) $21,800
9. Saxby Chambliss (R) $12,300
10. Max Baucus (D) $11,000
10. Barney Frank (D) $11,000
10. Michael McCaul (R) $11,000
13. Mike Conaway (R) $10,500
13. Vito Fossella (R) $10,500
15. Spencer Bachus (R) $10,000
15. Roy Blunt (R) $10,000
15. John Boehner (R) $10,000
15. Allen Boyd (D) $10,000
15. John Campbell (R) $10,000
15. Chris Cannon (R) $10,000
271 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
2006 Top Recipients
TOTAL: $2,180,294
1. Mark Kennedy (R) $42,100
2. Spencer Bachus (R) $32,500
3. Chris Dodd (D) $29,000
4.
Christopher Shays
(R) $22,900
5. Richard Baker (R) $20,921
6. Tom Price (R) $20,000
7. Sherrod Brown (D) $19,160
8. Vito Fossella (R) $18,400
9. Henry Bonilla (R) $18,000
10. Hillary Clinton (D) $17,970
11. Rick Santorum (R) $16,950
12. John Campbell (R) $16,500
13. Jon Kyl (R) $14,600
14. George Allen (R) $14,000
15. Joe Lieberman ( I) $13,500
16. Daniel K Akaka (D) $13,000
17. Deborah Pryce (R) $12,498
18. Eric Cantor (R) $12,000
18. David Dreier (R) $12,000
18. Ben Nelson (D) $12,000
Appendix 205
2004 Top Recipients
TOTAL: $2,233,483
1. George W Bush (R) $290,450
2. John Kerry (D) $73,152
3. Charles Schumer (D) $39,999
4. Richard C Shelby (R) $28,500
5. Chris Dodd (D) $27,750
6. Vito Fossella (R) $23,300
7. Mark Kennedy (R) $19,700
8. John Thune (R) $15,450
9.
Robert "Bob"
Conaway (D) $15,000
10. James W DeMint (R) $13,850
11. Daniel K Inouye (D) $13,500
12. Eric Cantor (R) $13,000
13. Patty Murray (D) $12,050
14. Tom Latham (R) $12,000
15. Joseph Crowley (D) $11,000
15. David Vitter (R) $11,000
17. Richard Burr (R) $10,798
18. Tom Davis (R) $10,500
19. Erskine Bowles (D) $10,250
20. Spencer Bachus (R) $10,000
2002 Top Recipients
TOTAL: $1,873,011
1. Mike Enzi (R) $44,249
2. Vito Fossella (R) $16,500
3. Connie Morella (R) $15,172
4. Mark Kennedy (R) $14,000
5. Eric Cantor (R) $12,999
6. Norm Coleman (R) $12,884
7. Elizabeth Dole (R) $12,750
8. Billy Tauzin (R) $12,000
9. John Thune (R) $11,800
10. Felix Grucci Jr (R) $11,200
11. James Talent (R) $11,000
12. Anne Northup (R) $10,500
13. Max Baucus (D) $10,000
13. Thad Cochran (R) $10,000
13. Susan Collins (R) $10,000
13. J D Hayworth (R) $10,000
13. Tim Hutchinson (R) $10,000
13. Dennis Moore (D) $10,000
13.
Charles Chip
Pickering Jr (R) $10,000
20. Sue Kelly (R) $9,999
2000 Top Recipients
TOTAL: $1,982,826
1. George W Bush (R) $83,850
2. Charles Schumer (D) $48,500
3. Rick A Lazio (R) $48,250
4. Hillary Clinton (D) $40,750
5. Rudy Giuliani (R) $38,700
6. Spencer Abraham (R) $30,000
7. Bill Bradley (D) $25,000
8. John McCain (R) $18,200
9. Charles Rangel (D) $14,750
10. Chris Dodd (D) $14,500
11. Mike DeWine (R) $13,650
12. Vito Fossella (R) $12,750
13. Edolphus Towns (D) $11,000
14. E Clay Shaw, Jr (R) $10,800
15. James E Rogan (R) $10,724
16. Jim Maloney (D) $10,500
16. Brad Sherman (D) $10,500
18. John Ashcroft (R) $10,450
19. James M Jeffords (R) $10,000
19. Steven Kuykendall (R) $10,000
Appendix
206
1998 Top Recipients
TOTAL: $1,430,614
1. Chris Dodd (D) $66,145
2. Alfonse D'Amato (R) $45,000
3. Charles Schumer (D) $28,450
4. Ron Wyden (D) $22,850
5. Vito Fossella (R) $20,050
6. Matt Fong (R) $13,050
7. Lauch Faircloth (R) $12,875
8.
George Voinovich
(R) $12,000
9. Chuck Grassley (R) $11,500
10. Anna Eshoo (D) $10,000
10. Rick White (R) $10,000
12. Don Nickles (R) $9,500
13.
Christopher S 'Kit'
Bond (R) $9,000
13. Collin C Peterson (D) $9,000
13. Heather Wilson (R) $9,000
16.
Carol Moseley Braun
(D) $8,800
17. Robert F Bennett (R) $8,000
17.
Ben Nighthorse
Campbell (R) $8,000
17. Trent Lott (R) $8,000
20. Paul Coverdell (R) $7,500
Appendix 207
Deloitte Lobbing Expenditures:272
2008
TOTAL: $1,140,000
Deloitte & Touche $650,000
Clark & Assoc $50,000
Clark & Weinstock $80,000
Johnson, Madigan et al $240,000
Mayer, Brown et al > $10,000*
BGR Holding $120,000
2007
TOTAL: $2,220,000
Deloitte & Touche $440,000
Clark & Assoc $40,000
Clark & Weinstock $80,000
Deloitte LLP $1,060,000
Johnson, Madigan et al $240,000
Mayer, Brown et al $40,000
BGR Holding $120,000
Tew Cardenas $200,000
2006
TOTAL: $1,960,000
Deloitte & Touche $360,000
Clark & Assoc $40,000
Clark & Weinstock $80,000
Deloitte LLP $840,000
Johnson, Madigan et al $240,000
Mayer, Brown et al $80,000
MWW Group > $10,000*
Barbour, Griffith & Rogers $120,000
272 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
Tew Cardenas LLP $200,000
2005
TOTAL: $1,440,000
Clark & Assoc $20,000
Clark & Weinstock $80,000
Deloitte Tax $860,000
Johnson, Madigan et al $240,000
Barbour, Griffith & Rogers $120,000
Tew Cardenas LLP $120,000
2004
TOTAL: $1,520,000
Deloitte Tax $20,000
Barbour, Griffith & Rogers $120,000
Holland & Knight $100,000
Tew Cardenas LLP $60,000
Clark & Assoc $20,000
Clark & Weinstock $80,000
Deloitte Tax $840,000
Johnson, Madigan et al $240,000
Public Strategies $40,000
2003
TOTAL: $1,125,000
Deloitte Tax $660,000
Holland & Knight $145,000
Clark & Assoc $20,000
Clark & Weinstock $60,000
Johnson, Madigan et al $240,000
Appendix
208
2002
TOTAL: $1,677,455
Deloitte & Touche $1,107,455
Clark & Assoc $60,000
Clark & Weinstock $100,000
Thelen, Reid et al $10,000
Velasquez Group $240,000
Johnson, Madigan et al $160,000
2001
TOTAL: $2,625,000
Deloitte & Touche $300,000
Deloitte & Touche $160,000
Dewey Ballantine LLP $1,600,000
Ickes & Enright Group $25,000
Johnson, Madigan et al $320,000
Velasquez Group $220,000
2000
TOTAL: $4,609,000
Deloitte & Touche $2,524,000
Deloitte & Touche $240,000
Dewey Ballantne LLP $1,180,000
Greenberg Traurig LLP $60,000
Ickes & Enright Group $65,000
Johnson, Madigan et al $280,000
Clark & Weinstock $80,000
Mayer, Brown et al $60,000
Velasquez Group $120,000
1999
TOTAL: $870,000
Deloitte & Touche $440,000
Greenberg Traurig LLP $130,000
Ickes & Enright Group $20,000
Deloitte LLP $240,000
Mayer, Brown et al $40,000
1998
TOTAL: $420,000
Deloitte & Touche $360,000
Deloitte & Touche > $10,000*
Latham & Watkins $20,000
Mayer, Brown et al $40,000
* Not included in totals
Appendix 209
Deloitte Covered Official Lobbyists:273
Firm / Name of Lobbyist Covered Official Position Year(s)
Clark & Assoc.
Sam Geduldig Dir of Coalitions, House Fin. Serv. Comm 2008
Sr. Advisor, Majority Whip Roy Blunt
Clark & Weinstock
Ed Kutler Asst, Office of the Speaker, House of Reps 2006-2008
Asst, House Republic Whip
Vin Weber Member of Congress (MN) 2006-2008
Jon Schwantes Gen. Counsel, Sen. Judiciary Comm. 2007-2008
Margaret McGlinch Chief of Staff, Rep. Tim Walz 2007-2008
Leg. Director, Rep. Richard Neal
Leg. Counsel, Sen. Harry Reid
Leg. Aide, Sen. Daniel Moynihan
Sandra Stuart Asst Sec for Leg Affairs, Dept. of Defense 2006-2008
Chief of Staff, Rep. Vic Fazio
Brian Bieron Policy Director, House Rules Comm. 2002
Kent Bonham Policy Director, Sen. Chuck Hagel 2002
Juleanna Glover Weiss Press Secretary to the Vice President 2003
Timothy Morrison Assoc. Dir, Presidential Personnel 2003
Clark Lytle & Geduldig
Sam Geduldig Dir. Of Coalitions, House Fin. Serv Comm 2007
Sr Advisor, Majority Whip Roy Blunt
Deloitte & Touche LLP
Janet Hale Undersecretary for Mgt, DHS 2007
William Ezzell Partner 2007
Cindy Stevens Director 2007
Charles Heeter Principal 2007
273 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix
210
Holland & Knight
Leigh A. Bradley Gen Counsel, Dept of Veterans Affairs 2003
Tillie Fowler Former U.S. Representative 2003
Chris DeLacy Leg. Aide, Sen. John Warner 2003
David Gilliland Chief of Staff, Rep. Tillie Fowelr 2003
Mayer, Brown et al
Jeffrey Lewis Legislative Asst, Sen Breaux 2001-2000
Appendix 211
Accounting Firms: Ernst & Young
Decade-long campaign contribution total (1998-2008): $12,482,407
Decade-long lobbying expenditure total (1998-2008): $25,108,536
Ernst & Young
Campaign Contributions:274
2008 Top Recipients
TOTAL: $2,170,392
1. Rudy Giuliani (R) $292,350
2. Hillary Clinton (D) $165,692
3. Barack Obama (D) $150,207
4. John McCain (R) $105,606
5. Chris Dodd (D) $70,750
6. Mitt Romney (R) $37,800
7. John Cornyn (R) $19,550
8. Max Baucus (D) $18,850
9. John Boehner (R) $13,500
9. Norm Coleman (R) $13,500
11. Susan M Collins (R) $13,300
12. Charles B Rangel (D) $13,287
13. Eric Cantor (R) $12,100
14. Chris Van Hollen (D) $11,000
15. Barney Frank (D) $10,900
16. Spencer Bachus (R) $10,000
16. Elizabeth Dole (R) $10,000
16. Steny H Hoyer (D) $10,000
16. Jay Rockefeller (D) $10,000
274 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
16. David Scott (D) $10,000
2006 Top Recipients
TOTAL: $1,592,550
1. Hillary Clinton (D) $81,500
2. Rudy Giuliani (R) $46,200
3. Ben Cardin (D) $23,003
4. Richard Baker (R) $20,250
5. Mike DeWine (R) $20,100
6. John Boehner (R) $19,300
7. Rick Santorum (R) $16,700
8. George Allen (R) $15,650
9. Mark Kennedy (R) $15,250
10. Deborah Pryce (R) $14,650
11. Joe Lieberman (I) $14,200
12. Jon Kyl (R) $13,500
13. Tom DeLay (R) $12,100
14. James M Talent (R) $11,999
15. Barney Frank (D) $11,750
16. Jim McCrery (R) $11,500
17. Eric Cantor (R) $11,200
18. John Campbell (R) $11,000
18. Anne Northrup (R) $11,000
20.
Michael Fitzpatrick
(R) $10,500
Appendix
212
2004 Top Recipients
TOTAL: $2,140,864
1. George W. Bush (R) $305,140
2. John Kerry (D) $101,425
3.
George Voinovich
(R) $43,600
4. Charles Schumer (D) $38,250
5. Richard C Shelby (R) $33,700
6. Richard Burr (R) $24,061
7. Pete Sessions (R) $20,097
8. Michael G. Oxley (R) $19,800
9. Chris John (D) $17,978
10. Hillary Clinton (D) $16,500
11. Mel Martinez (R) $16,261
12. John Thune (R) $15,000
13. Tom Daschle (D) $14,000
14. Arlen Specter (R) $13,750
15.
Christopher S 'Kit'
Bond (R) $13,000
15. Lisa Murkowski (R) $13,000
17. Steny H Hoyer (D) $11,000
18. Evan Bayh (D) $10,500
18. James DeMint (R) $10,500
18. John Tanner (D) $10,500
2002 Top Recipients
TOTAL: $2,012,978
1. Charles Schumer (D) $63,550
2. John Cornyn (R) $16,700
3. Max Baucus (D) $16,261
4. Jay Rockefeller (D) $12,550
5. Saxby Chambliss (R) $12,500
5. Norm Coleman (R) $12,500
7. Mary L Landrieu (D) $12,250
8. James M Talent (R) $12,000
9. John Thune (R) $11,300
10. Connie Morella (R) $10,999
11. Anna Eshoo (D) $10,500
11. Rob Portman (R) $10,500
13. Dennis Moore (D) $10,200
14. Susan M Collins (R) $10,169
15. Roy Blunt (R) $10,000
15. Mark Kennedy (R) $10,000
15. Michael G Oxley (R) $10,000
18. Jennifer Dunn (R) $9,916
19. E Clay Shaw, Jr (R) $9,750
20. Robert Torricelli (D) $9,250
2000 Top Recipients
TOTAL: $2,845,336
1. George W. Bush (R) $181,949
2. Al Gore (D) $136,675
3. Bill Bradley (D) $67,750
4. Rick A Lazio (R) $30,850
5. Hillary Clinton (D) $30,450
6. Dianne Feinstein (D) $17,150
7. Mike DeWine (R) $15,750
8. John McCain (R) $14,525
9. George Allen (R) $14,450
10. Sherrod Brown (D) $14,000
10. Robert Torricelli (D) $14,000
12. John Ashcroft (R) $13,999
13. Spencer Abraham (R) $13,000
14. Bill Frist (R) $12,500
15. Charles S. Robb (D) $12,450
16. Chris Dodd (D) $12,250
17. Richard Gephardt (D) $12,000
17. Orrin G Hatch (R) $12,000
19. John R Kasich (R) $11,500
Appendix 213
20. E Clay Shaw, Jr. (R) $11,250
1998 Top Recipients
TOTAL: $1,720,281
1. Charles Schumer (D) $26,700
2. Alfonse D'Amato (R) $13,750
3. Newt Gingrich (R) $12,000
4.
Christopher S 'Kit'
Bond (R) $11,750
4. John Linder (R) $11,750
6.
George Voinovich
(R) $11,450
6. Rick White (R) $11,450
8. Barbara Boxer (D) $11,000
9. Peter Fitzgerald (R) $10,500
10. John Breaux (D) $10,249
11. Evan Bayh (D) $10,000
11. Thomas Bliley Jr (R) $10,000
11. Paul Coverdell (R) $10,000
11. Tom DeLay (R) $10,000
11. Jennifer Dunn (R) $10,000
11. John Ensign (R) $10,000
11. Martin Frost (D) $10,000
11. Chuck Grassley (R) $10,000
11. Fritz Hollings (D) $10,000
20. Anna Eshoo (D) $9,999
Appendix
214
Ernst & Young
Lobbying Expenditures:275
2008
TOTAL: $3,173,056
Ernst & Young $2,103,056
RR&G $240,000
Elmendrof Strategies $200,000
Glover Park Group $160,000
American Continental
Group $120,000
Clark & Weinstock $80,000
Clark & Assoc $60,000
Mayer, Brown et al >$10,000*
Jolly/Rissler $210,000
2007
TOTAL: $3,560,480
Ernst & Young $2,440,480
RR&G $240,000
Glover Park Group $200,000
Elmendorf Strategies $200,000
American Continental
Group $120,000
Clark & Weinstock $80,000
Clark & Assoc $40,000
Mayer, Brown et al $40,000
Jolly/Rissler Inc $200,000
2006
TOTAL: $1,741,500
Ernst & Young $861,500
RR&G $160,000
275 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
Glover Park Group $140,000
Alpine Group $140,000
American Continental
Group $120,000
Mayer, Brown et al $80,000
Clark & Weinstock $80,000
Clark & Assoc $40,000
Jolly/Rissler Inc $120,000
2005
TOTAL: $2,549,640
Ernst & Young $1,749,640
Alpine Group $200,000
Glover Park Group $160,000
American Continental
Group $120,000
Clark & Weinstock $80,000
Bryan Cave Strategies $40,000
Clark & Assoc $40,000
Thelen, Reid & Priest $20,000
Jolly/Rissler Inc $140,000
2004
TOTAL: $2,650,000
Ernst & Young $1,790,000
Alpine Group $220,000
Harbour Group $140,000
Clark & Weinstock $140,000
American Continental
Group $120,000
Clark & Assoc $60,000
Public Strategies $40,000
Jolly/Rissler Inc $140,000
Appendix 215
2003
TOTAL: $2,880,000
Ernst & Young $1,980,000
Public Strategies $180,000
Clark & Weinstock $180,000
Alpine Group $160,000
American Continental
Group $120,000
Clark & Assoc $80,000
Jolly/Rissler Inc $80,000
Harbour Group $60,000
Barrett, Michael F. Jr $40,000
2002
TOTAL: $2,573,860
Ernst & Young $2,343,860
American Continental
Group $120,000
Clark & Weinstock $100,000
Thelen, Reid et al $10,000
Clark & Assoc > $10,000*
2001
TOTAL: $1,600,000
Ernst & Young $1,320,000
American Continental
Group $80,000
Mayer, Brown et al $60,000
2000
TOTAL: $1,340,000
Ernst & Young $1,200,000
American Continental
Group $80,000
Mayer, Brown et al $60,000
* Not included in totals
1999
TOTAL: $1,400,000
Ernst & Young $1,200,000
Fleishman-Hillard $100,000
Mayer, Brown et al $100,000
1998
TOTAL: $1,640,000
Ernst & Young $1,420,000
Fleishman-Hillard $180,000
Mayer, Brown et al $40,000
Appendix
216
Ernst & Young Covered Official Lobbyists:276
Firm / Name of Lobbyist Covered Official Position Year(s)
Mayer, Brown, & Platt
Jeffery Lewis Legislative Assitant to Senator Breaux 1999-2001
Clark and Weinstock
Brian Bieron Policy Director, House Rules Committee 2002
Kent Bonham Policy Director for Sen. Chuck Hagel 2002-2003
Juleanna Glover Weiss Press Secretary to the Vice President 2002-2003
Jonathan Schwantes
General Counsel, Senate Judiciary Committee
2007
Ed Kutler
Assistant Office of the Speaker House of
Reps 2008
Assistant, House Republic Whip
Sandra Stuart Asst. Sec. for Leg Affairs, DoD 2008
Chief of Staff, Rep. Vic Fazio
Vin Weber Member of Congress (MN) 2008
Margaret McGlinch Chief of Staff, Rep. Tim Walz, 2008
Leg. Director, Rep. Richard Neal
Legislative Aide, Sen Daniel Moynihan
Leg. Counsel, Sen Harry Reid
Jolly/Rissler Inc.
Thomas R. Jolly Chairman 2003-2004
Glover Park Group
Joyce Brayboy Chief of Staff, Rep. Mel Watt 2007
Joel Johnson Chief of Staff, Sen. Howard Metzenbaum, 2008
Exec. Director, House Democratic Study
Group
Assistant Secretary of the Minority US
Senate
Staff Director, Democratic Leadership
Committee, Special Assistant to the Presi-
276 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix 217
dent for Policy, Communications
Susan Brophy Chief of Staff, Rep. Byron Dorgan 2008
Chief of Staff Senator Tim Wirth
Deputy Assistant to the President for Legislative
Affairs
Clark, Lytle, & Geduldig
Sam Geduldig
Dir of Coalitions, House Fin Serv Com, Sr
Advisor, Majority Whip Roy Blunt
125  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 03:13:00 AM
Woof, 11th Post;

Appendix 165
Commercial Banks: JP Morgan Chase & Co.
Decade-long campaign contribution total (1998-2008): $15,714,953
Decade-long lobbying expenditure total (1998-2008): $49,372,915
JP Morgan Campaign
Contributions:243
2008 Top Recipients
TOTAL: $4,247,991
1. Barack Obama (D) $559,210
2. Hillary Clinton (D) $272,694
3. John McCain (R) $205,657
4. Rudy Giuliani (R) $94,300
5. Mitt Romney (R) $78,250
6. Chris Dodd (D) $68,950
7. Harry Reid (D) $53,300
8. John Cornyn (R) $48,598
9. Charles B. Rangel (D) $47,900
10. Rahm Emanuel (D) $44,700
11. Mary L. Landrieu (D) $41,399
12. Steny H. Hoyer (D) $34,300
13. Spencer Bachus (R) $33,000
14. Richard C. Shelby (R) $31,500
15. Dave Camp (R) $30,500
16. Fred Thompson (R) $29,450
17. Jack Reed (D) $27,850
18. Norm Coleman (R) $26,900
19. Tim Johnson (D) $26,495
20. Eric Cantor (R) $24,000
243 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
2006 Top Recipients
TOTAL: $2,163,356
1. Hillary Clinton (D) $113,965
2. Richard Baker (R) $45,100
3. Tom Carper (D) $38,268
4. Michael G. Oxley (R) $35,100
5. Chris Dodd (D) $31,300
6. Mitch McConnell (R) $31,000
7. Mel Martinez (R) $30,600
8. Tim Johnson (D) $29,600
9. Steny H. Hoyer (D) $29,500
10. Harold E. Ford Jr. (D) $27,100
11. Max Baucus (D) $27,000
12. Kent Conrad (D) $25,000
13. Joe Lieberman (I) $23,901
14. Mike DeWine (R) $23,500
15. John E. Sununu (R) $22,500
16. Orrin G. Hatch (R) $21,000
17. Christopher Shays (R) $19,366
18. Melissa Bean (D) $18,542
19.
David McSweeney
(R) $17,950
20. Debbie Stabenow (D) $15,650
Appendix
166
2004 Top Recipients
TOTAL: $3,042,399
1. John Kerry (D) $200,565
2. George W. Bush (R) $187,150
3. Erskine B. Bowles (D) $59,750
4. Jay Helvey (R) $54,750
5. Charles Schumer (D) $47,550
6. Barack Obama (D) $47,300
7. Michael G. Oxley (R) $36,250
8. Richard C. Shelby (R) $35,000
9. Chris Dodd (D) $30,500
10. Tom Daschle (D) $28,450
11. Spencer Bachus (R) $20,000
12. John Edwards (D) $19,750
13. Jeb Hensarling (R) $19,500
14. Tom Carper (D) $19,411
15. Blanche Lincoln (D) $18,357
16. Martin Frost (D) $17,250
17. Michael N. Castle (R) $17,000
18. Pete Sessions (R) $16,800
19. Richard Baker (R) $16,500
20. Howard Dean (D) $16,161
2002 Top Recipients
TOTAL: $2,277,188
1. Charles Schumer (D) $160,000
2. Ron Kirk (D) $85,400
3. Max Baucus (D) $41,604
4. Erskine B. Bowles (D) $38,556
5. John Kerry (D) $37,000
6. Richard Baker (R) $24,000
7. Amo Houghton (R) $21,000
8. Wayne Allard (R) $20,000
8. Spencer Bachus (R) $20,000
10. Jim Maloney (D) $17,000
11. Mike Enzi (R) $16,000
11. Carolyn Maloney (D) $16,000
13. Ken Bentsen (D) $15,000
13. Phil English (R) $15,000
13. Bart Gordon (D) $15,000
13. Pat Toomey (R) $15,000
17. John Edwards (D) $14,500
18. Michael G. Oxley (R) $14,000
18. Rob Portman (R) $14,000
20. Tom Strickland (D) $13,146
2000 Top Recipients
TOTAL: $2,502,414
1. Bill Bradley (D) $133,255
2. Rick A. Lazio (R) $122,361
3. George W. Bush (R) $101,205
4. Charles Schumer (D) $89,250
5. Hillary Clinton (D) $53,750
6. Phil Gramm (R) $36,250
7. Al Gore (D) $36,050
8. Rudy Giuliani (R) $24,850
9. John McCain (R) $24,703
10. Richard G. Lugar (R) $24,550
11.
Peter Staub Wareing
(R) $21,500
12. Spencer Abraham (R) $21,250
13.
Kay Bailey Hutchison
(R) $21,000
14. John J. LaFalce (D) $19,750
15. Richard Baker (R) $17,000
16. Tom Campbell (R) $14,250
17. Pat Toomey (R) $13,500
18. Martin Frost (D) $13,000
18. Marge Roukema (R) $13,000
Appendix 167
20. Bill McCollum (R) $12,500
1998 Top Reciepients
TOTAL: $1,481,605
1. Alfonse D'Amato (R) $32,850
2. Charles Schumer (D) $27,650
3. Lauch Faircloth (R) $24,500
4. Rick A. Lazio (R) $19,350
5. Chris Dodd (D) $19,023
6.
Kay Bailey Hutchison
(R) $16,500
6. John J. LaFalce (D) $16,500
8.
Christopher S. 'Kit'
Bond (R) $13,000
8. Chuck Hagel (R) $13,000
10. Robert F. Bennett (R) $12,500
10. Tom Daschle (D) $12,500
12. Bill McCollum (R) $12,000
13. Martin Frost (D) $11,250
13. Pete King (R) $11,250
15. Richard Baker (R) $11,000
15. Bart Gordon (D) $11,000
17. Michael N. Castle (R) $10,550
17. Dick Armey (R) $10,500
19. Paul E. Gillmor (R) $10,000
19. Sue Kelly (R) $10,000
Appendix
168
JP Morgan Lobbying Expenses:244
2008
TOTAL: $6,336,000
JP Morgan Chase & Co $5,390,000
OB-C Group $240,000
Equale & Assoc $147,500
BKSH & Assoc $120,000
Richard F Hohlt $130,000
Triangle Assoc $88,000
Mayer, Brown et al $80,000
Walter Group $80,500
Fennel Consulting $50,000
David L Horne LLC $10,000
B&D Consulting > $10,000*
2007
TOTAL: $6,452,500
JP Morgan Chase & Co $5,440,000
OB-C Group $240,000
BKSH & Assoc $140,000
Richard F Hohit $95,500
Triangle Assoc $80,000
Mayer, Brown et al $80,000
David L Horne LLC $60,000
Equale & Assoc $60,000
Fennel Consulting $52,000
American Continental
Group $40,000
Walter Group $40,000
Wilmer, Cutler &
Pickering $40,000
B&D Consulting $20,000
244 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
Bryan Cave LLP $20,000
Thaxton, Richard R $45,000
2006
TOTAL: $7,204,040
JP Morgan Chase & Co $6,120,000
American Continental
Group $200,000
Tongour Simpson Group $140,000
BKSH & Assoc $120,000
Mayer, Brown et al $100,000
Triangle Assoc $80,000
Zeliff Enterprises $80,000
Richard F Hohlt $74,800
Private/Public Solutions $62,500
Angus & Nickerson $40,000
B&D Consulting $36,740
David L Horne LLC $20,000
Fennel Consulting $20,000
OB-C Group $20,000
Thaxton, Richard R $90,000
2005
TOTAL: $4,448,500
JP Morgan Chase & Co $3,540,000
Mayer, Brown et al $140,000
B&D Sagamore $120,000
BKSH & Assoc $120,000
Tongour Simpson Group $100,000
Richard F Hohit $83,500
Zeliff Enterprises $80,000
Triangle Assoc $70,000
Patton Boggs LLP $60,000
Angus & Nickerson $20,000
Appendix 169
Clark & Weinstock $20,000
Kerrigan & Assoc > $10,000*
Thaxton, Richard R $95,000
2004
TOTAL: $5,072,500
JP Morgan Chase & Co $3,580,000
Bank One Corp $415,000
Clark & Weinstock $310,000
B&D Sagamore $140,000
Mayer, Brown et al $140,000
BKSH & Assoc $120,000
Zeliff Enterprises $80,000
Richard F Hohit $67,500
Patton Boggs LLP $60,000
Triangle Assoc $40,000
Kerrigan & Assoc $40,000
Covington & Burling > $10,000*
Thaxton, Richard R $60,000
Brownstein, Hyatt et al $20,000
2003
TOTAL: $8,246,575
JP Morgan Chase & Co $6,706,575
BankOne Corp $720,000
Patton Boggs LLP $220,000
Williams & Jensen 140,000
BKSH & Assoc $120,000
B&D Sagamore $100,000
Richard F Hohit $80,000
Kerrigan & Assoc $40,000
Triangle Assoc > $10,000*
Covington & Burling $40,000
* Not included in totals
Thaxton, Richard R $60,000
Carmen Group $20,000
2002
TOTAL: $5,062,800
JP Morgan Chase & Co $4,700,000
B&D Sagamore $120,000
BKSH & Assoc $96,000
Williams & Jensen $80,000
Richard F Hohit $66,800
Triangle Assoc > $10,000*
Kerrigan & Assoc > $10,000*
2001
TOTAL: $6,550,000
JP Morgan Chase & Co $6,300,000
BKSH & Assoc $88,000
Richard F Hohit $62,000
B&D Sagamore $60,000
Williams & Jensen $40,000
1998-2000
N/A
* Not included in totals
Appendix
170
JP Morgan Covered Official Lobbyists:245
Firm / Name of Lobbyist Covered Official Position Year(s)
Carmen Group, Inc
Hoitsma, Gary Press Secretary, Senator Inhofe 2003
Wassmer, Victoria
Program Examiner, Transport Branch,
OMB 2003
Clark & Wienstock
Godes, Niles Chief of Staff to Sen. Byron Dorgan 2003
Lehman, Dirksen
Spec. Asst. for Legal Affairs for the President
2003
Angus & Nickerson
Angus, Barbara
Tax Counsel, Committee on Ways and
Means 2005-2006
Nickerson, Gregory
International Tax Counsel, Dept. of Treasury
2005-2006
Zeliff Enterprises
Zeliff, William H.
Former member of Congress: NH 1991-
1997 2005-2006
OB-C Group LLC
Stevenson, Robert Sen. Bill Frist Communications Director 2006
Private Public Solutions
Moffett, Anthony J. Former Member of Congress 2006
BKSH & Associates
Turner, Pam
Asst. Sec for LA Homeland Security,
2003-2006 2008
Dep Asst to Pres for LA 82-89
245 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix 171
Fennel Consulting
Fennel, Melody Assistant Secretary, HUD 2005-2008
Appendix
172
Commercial Banks: Wachovia Corp.
Decade-long campaign contribution total (1998-2008): $3,946,727
Decade-long lobbying expenditure total (1998-2008): $11,996,752
Wachovia Campaign
Contributions:246
2008 Top Recipients247
TOTAL: $934,381
1. Barack Obama (D) $178,382
2. John McCain (R) $155,658
3. Hillary Clinton (D) $77,000
4. Rudy Giuliani (R) $49,400
5. Mitt Romney (R) $36,550
6. Robin Hayes (R) $18,929
7. Eric Cantor (R) $17,750
8. Elizabeth Dole (R) $16,700
9. Mark Warner (D) $15,550
10. Lindsey Graham (R) $15,400
11. Patrick McHenry (R) $15,350
11. Sue Myrick (R) $15,350
13. James Clyburn (D) $13,500
14. Chris Dodd (D) $12,750
15. Melvin Watt (D) $12,500
16. Artur Davis (D) $10,250
16. Tim Johnson (D) $10,250
18. Spencer Bachus (R) $10,000
246 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
247 Based on highest 1,000 contributions plus
PAC contributions.
18. David Scott (D) $10,000
18. John Boehner (R) $10,000
2006 Top Recipients
TOTAL: $742,384
1. George Allen (R) $30,650
2. Rick Santorum (R) $26,600
3. Robin Hayes (R) $21,470
4. Sue Myrick (R) $17,700
5. Eric Cantor (R) $16,700
6. Patrick McHenry (R) $15,250
7. Richard Burr (R) $13,250
8. Michael Fitzpatrick (R) $11,050
9. Michael Steele (R) $10,450
10. Vernon Buchanan (R) $10,100
11. Robert Menendez (D) $10,000
11. Deborah Pryce (R) $10,000
11. Jim McCrery (R) $10,000
11. David Dreier (R) $10,000
11. John Boehner (R) $10,000
11. Richard Baker (R) $10,000
11. Spencer Bachus (R) $10,000
18. Jon Kyl (R) $9,000
18. Mitch McConnell (R) $9,000
20. John Spratt Jr (D) $8,800
Appendix 173
2004 Top Recipients248
TOTAL: $1,237,468
1. George W Bush (R) $223,960
2. Erskine Bowles (D) $95,750
3. Richard Burr (R) $76,000
4. John Kerry (D) $33,850
5. Eric Cantor (R) $23,000
6. Robin Hayes (R) $18,750
7. Sue Myrick (R) $16,500
8. Melvin Watt (D) $15,550
9. Arlen Specter (R) $14,300
10. Elizabeth Dole (R) $13,250
10. Jay Helvey (R) $13,250
12. Charlie Condon (R) $12,200
13. Johnny Isakson (R) $10,070
14. Chris Dodd (D) $10,000
14. Tom Carper (D) $10,000
16. John Thune (R) $9,500
17. Mel Martinez (R) $8,700
18. Pete Sessions (R) $8,250
19. Howard Dean (D) $7,460
20. Jim McCrery (R) $7,250
2002 Top Recipients
TOTAL: $790,969
1. Erskine Bowles (D) $77,200
2. Elizabeth Dole (R) $31,325
3. Robin Hayes (R) $19,470
4. Melvin Watt (D) $12,500
5. Richard Burr (R) $11,800
6. Saxby Chambliss (R) $10,500
7. Lindsey Graham (R) $10,250
8. Michael Oxley (R) $10,000
248 Based on highest 1,000 contributions plus
PAC contributions.
8. Richard Baker (R) $10,000
8. Spencer Bachus (R) $10,000
11. Walter Jones Jr (R) $9,500
12. Ed Royce (R) $6,000
12. Eric Cantor (R) $6,000
12. Max Baucus (D) $6,000
15. Calder Clay (R) $5,900
16. Cass Ballenger (R) $5,000
16. Gregory Meeks (D) $5,000
16. Jim Maloney (D) $5,000
16. Sue Myrick (R) $5,000
16. Wayne Allard (R) $5,000
16. Pete King (R) $5,000
2000 Top Recipients
TOTAL: $130,175
1. Elizabeth Dole (R) $9,450
2. Richard Burr (R) $8,450
3. Robin Hayes (R) $8,000
4. Walter Jones Jr (R) $6,500
5. John Edwards (D) $5,250
6. Zell Miller (D) $4,000
6. Sue Myrick (R) $4,000
8. Al Gore (D) $3,250
8. Bill McCullum (R) $3,250
10. Johnny Isakson (R) $3,000
10. Melvin Watt (D) $3,000
12. Lindsey Graham (R) $2,825
13. Bob Barr (R) $2,500
13. George W Bush (R) $2,500
13. Roger Kahn (D) $2,500
13. Trent Lott (R) $2,500
13. Floyd Spence (R) $2,500
18. Charles Norwood (R) $2,250
Appendix
174
19. Bill Bradley (D) $2,000
19. George Allen (R) $2,000
19. Jack Kingston (R) $2,000
19. John Linder (R) $2,000
19. Lamar Alexander (R) $2,000
19. Mack Mattingly (R) $2,000
19. Richard Baker (R) $2,000
19. Saxby Chambliss (R) $2,000
19. William Roth Jr (R) $2,000
19. Doug Haynes (R) $2,000
19. Mike McIntyre (D) $2,000
19. Charles Taylor (R) $2,000
1998 Top Recipients
TOTAL: $102,350
1. Lauch Faircloth (R) $15,100
2. Richard Burr (R) $13,000
3. Max Cleland (D) $7,500
4. Paul Coverdell (R) $5,750
5. Frank Lautenberg (R) $5,000
6. Fritz Hollings (D) $4,600
7. Walter Jones Jr (R) $4,500
8. Michael Coles (D) $4,000
9. Robin Hayes (R) $3,500
9. Mike McIntyre (D) $3,500
11. Melvin Watt (D) $3,250
12. Bob Ethridge (D) $3,000
13. John Linder (R) $2,500
13. Sue Myrick (R) $2,500
15. Charles Taylor (R) $2,250
15. Johnny Isakson (R) $2,250
17. James Clyburn (D) $1,500
18. Bob Graham (D) $1,000
18. Ernest Hollings (D) $1,000
18. John Kasich (R) $1,000
18. Bob Barr (R) $1,000
18. David Price (D) $1,000
18. Dan Page (R) $1,000
18. Howard Coble (R) $1,000
18. Cass Ballenger (R) $1,000
18. Jesse Helms (R) $1,000
18. Michael Fair (R) $1,000
18. John Spratt Jr (D) $1,000
Appendix 175
Wachovia Lobbying Expenditures:249
2008
TOTAL: $2,561,000
Wachovia Corp $1,781,000
C2 Group $200,000
Angus & Nickerson $120,000
Porterfield & Lowenthal $120,000
Public Strategies $80,000
Dixon, Dan $60,000
Jenkins Hill Group $80,000
Capitol Hill Strategies $80,000
Cypress Advocacy $20,000
Barnett, Sivon & Natter $20,000
Sullivan & Cromwell > $10,000*
2007
TOTAL: $2,295,752
Wachovia Corp $1,360,000
Kilpatrick Stockton $365,752
C2 Group $240,000
Capitol Hill Strategies $120,000
Jenkins Hill Group $100,000
Dixon, Dan $40,000
Public Strategies $30,000
Angus & Nickerson $20,000
Cypress Advocacy $20,000
Sullivan & Cromwell > $10,000*
249 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not counted in total
2006
TOTAL: $1,740,000
Wachovia Corp $900,000
Kilpatrick Stockton $400,000
C2 Group $240,000
Capitol Hill Strategies $100,000
Jenkins Hill Group $80,000
Cypress Advocacy $20,000
2005
TOTAL: $1,220,000
Wachovia Corp $840,000
C2 Group $240,000
Jenkins Hill Group $60,000
Kilpatrick Stockton $60,000
Capitol Hill Strategies $20,000
2004
TOTAL: $1,030,000
Wachovia Corp $720,000
C2 Group $240,000
Jenkins Hill Group $70,000
2003
TOTAL: $320,000
Wachovia Corp $220,000
C2 Group $100,000
Appendix
176
2002
TOTAL: $420,000
Wachovia Corp $120,000
Williams & Jensen $300,000
Sullivan & Cromwell > $10,000*
2001
TOTAL: $730,000
Wachovia Corp $10,000
Williams & Jensen $620,000
2000
TOTAL: $480,000
Wachovia Corp > $10,000*
Williams & Jensen $460,000
Groom Law Group $20,000
1999
TOTAL: $600,000
Wachovia Corp $20,000
Williams & Jensen $440,000
Groom Law Group $140,000
Sullivan & Cromwell > $10,000*
Bradley, Arant et al > $10,000*
1998
TOTAL: $600,000
Groom Law Group $20,000
Sullivan & Cromwell > $10,000*
Williams & Jensen $580,000
* Not included in total
Appendix 177
Wachovia Covered Official Lobbyists:250
Firm / Name of Lobbyist Covered Official Position Year(s)
William & Jensen, PC
Bechtel, Phillip
General Counsel - Senate Banking Committee
1999-2002
Landers, David M. Legislative Counsel for Lauch Faircloth 1999-2002
McCarlle, Christine C. Special Assistant to Trent Lott 1999-2002
C2 Group, LLC
Hanson, Michael Chief of Staff to Congressman Sam Johnson 2003-2008
Murray, Jefferies Chief of Staff to Congressman Bud Cramer 2003-2008
Litterst, Nelson Special Asst. to the President for Leg Affairs 2004-2008
Knight, Shahira
Senior Advisor to Chair of Ways & Means
Committee 2006-2008
Elliott, Lesley Deputy Chief of Staff, Secretary of the Senate 2007-2008
Golden West Financial Corp
LaFalce, John Member of Congress 2005
Kilpatrick Stockton LLP
Dekeyser, Armand C/S Sen. Jeff Sessions 2005-2007
Cypress Advocacy
Cave, J. Patrick
Deputy Asst. Sec./ Acting Asst. Sec., Treasury
2005-2008
250 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix
178
Commercial Banks: Wells Fargo
Decade-long campaign contribution total (1998-2008): $5,330,022
Decade-long lobbying expenditure total (1998-2008): $16,637,740
Wells Fargo Campaign Contributions:251
2008 Top Recipients252
TOTAL: $1,448,197
1. Barack Obama (D) $160,089
2. Hillary Clinton (D) $103,322
3. John McCain (R) $42,436
4. Norm Coleman (R) $36,500
5. Mitt Romney (R) $33,200
6. Rudy Giuliani (R) $19,450
7. John Edwards (D) $16,950
8. Max Baucus (D) $14,700
9. Erik Paulsen (R) $12,700
10. Ed Royce (R) $12,300
10. Paul Kanjorski (D) $12,300
12. John Cornyn (R) $11,500
13. John Sununu (R) $11,000
13. Tom Latham (R) $11,000
15. Pete Sessions (R) $10,000
15. Collin Peterson (D) $10,000
15. Nancy Pelosi (D) $10,000
15. George Miller (D) $10,000
15. Steny Hoyer (D) $10,000
251 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
252 Based on highest 1,000 contributions plus
PAC contributions.
15. James Clyburn (D) $10,000
15. James Clyburn (D) $10,000
15. Spencer Bachus (R) $10,000
15. John Barrasso (R) $10,000
2006 Top Recipients
TOTAL: $1,054,492
1. Dianne Feinstein (D) $21,750
2. Amy Klobuchar (D) $18,585
3. Rick Santorum (R) $14,750
4. Michael McGavick (R) $14,250
5. Orrin Hatch (R) $13,900
6. Richard Baker (R) $13,500
7. Ed Royce (R) $13,000
8. Jon Kyl (R) $11,250
9. Christopher Shays (R) $11,000
10. Jeffery Lamberti (R) $10,350
11. Deborah Pryce (R) $10,000
11. Nancy Pelosi (D) $10,000
11. Jim McCrery (R) $10,000
11. Robert Byrd (D) $10,000
11. Conrad Burns (R) $10,000
16. Tom Latham (R) $9,750
17. Joe Lieberman (I) $9,200
18. Earl Pomeroy (D) $9,000
18. Spencer Bachus (R) $9,000
Appendix 179
20. Ben Nelson (D) $8,650
2004 Top Recipients253
TOTAL: $1,190,226
1. John Kerry (D) $67,700
2. George W Bush (R) $63,735
3. Chuck Grassley (R) $21,250
4. Tom Daschle (D) $19,250
5. Nancy Pelosi (D) $16,000
6. Howard Dean (D) $13,750
7. Jim Bunning (R) $13,000
7. Randy Neugebauer (R) $13,000
7. Richard Baker (R) $13,000
10. Barney Frank (D) $11,800
11. Bob Beuprez (R) $11,000
12. Lisa Murkowski (R) $10,250
13. Robert Bennett (R) $10,000
13. Michael Oxley (R) $10,000
13. Spencer Bachus (R) $10,000
13. Pete Domenici (R) $10,000
17. Richard Shelby (R) $9,750
18. John Thune (R) $9,400
19. Jeb Hensarling (R) $9,000
20. Mark Kennedy (R) $8,250
2002 Top Recipients
TOTAL: $613,262
1. Wayne Allard (R) $23,550
2. Norm Coleman (R) $18,500
3. John Thune (R) $16,500
4. Richard Baker (R) $12,000
5. Tim Johnson (D) $11,750
253 Based on highest 1,000 contributions plus
PAC contributions.
6. Max Baucus (D) $9,000
7. John Cornyn (R) $8,950
8. Chuck Hagel (R) $8,000
9. Jim Ramstad (R) $6,750
10. Gordon Smith (R) $6,500
11. Larry Craig (R) $6,000
11. Mike Enzi (R) $6,000
11. Jack Reed (D) $6,000
14. Earl Pomeroy (D) $5,750
15. Dick Armey (R) $5,000
15. Chuck Grassley (R) $5,000
17. Mark Kennedy (R) $4,900
18. Nancy Pelosi (D) $4,750
19. Ron Kirk (D) $4,500
19. Silvestre Reyes (D) $4,500
19. Ted Stevens (R) $4,500
19. Michael Oxley (R) $4,500
19. Charlie Gonzalez (D) $4,500
2000 Top Recipients
TOTAL: $676,676
1. Dianne Feinstein (D) $24,000
2. Jim Ramstad (R) $11,400
3. Bill Bradley (D) $10,500
3. Kent Conrad (D) $10,500
5. Jon Kyl (R) $10,250
6. George W Bush (R) $10,000
7. Rod Grams (R) $9,500
8. Bob Kerrey (D) $8,500
8. Bruce Vento (D) $8,500
8. Kay Bailey Hutchison (R) $8,250
11. Al Gore (D) $7,550
12. Conrad Burns (R) $7,250
12. John Ensign (R) $7,250
Appendix
180
14. Slade Gorton (R) $6,900
15. Jeff Bingaman (D) $6,750
15. Paul Sarbanes (D) $6,750
17. Hillary Clinton (D) $6,460
18. Charlie Gonzalez (D) $5,500
18. Max Baucus (D) $5,500
18. Rick Lazio (R) $5,500
18. Tom Carper (D) $5,500
1998 Top Recipients
TOTAL: $347,169
1. Robert Bennet (R) $10,550
2. Chuck Grassley (R) $10,000
3. Chris Dodd (D) $8,000
4. Byron Dorgan (D) $7,500
5. Rod Grams (R) $6,500
6. Jeff Sessions (R) $6,000
7. Matt Fong (R) $5,500
8. Bill Clinton (D) $5,000
8. Bob Kerrey (D) $5,000
10. Bruce Vento (D) $4,750
12. Pete Sessions (R) $4,500
12. Steven Kuykendall (R) $4,000
12. Richard Baker (R) $4,000
12. Tom Daschle (D) $4,000
15. Buck McKeon (R) $3,500
15. Blanche Lincoln (D) $3,500
17. Robert Greenlee (R) $3,300
18. John McCain (R) $3,000
18. David Dreier (R) $3,000
18. Earl Pomeroy (D) $3,000
18. Scott McInnis (R) $3,000
18. Rick Lazio (R) $3,000
18. Ray LaHood (R) $3,000
18. Jerry Kleczka (D) $3,000
18. Armando Falcon (D) $3,000
18. Mark Baker (R) $3,000
18. Chuck Hagel (R) $3,000
Appendix 181
Wells Fargo Lobbying
Expenditures:254
2008
TOTAL: $1,674,740
Wells Fargo $1,200,740
Doremus, Theodore A Jr $444,000
Chesapeake Enterprises $30,000
2007
TOTAL: $2,347,000
Wells Fargo $1,919,000
Doremus, Theodore A Jr $428,000
2006
TOTAL: $2,565,000
Wells Fargo $1,765,000
Doremus, Theodore A Jr $400,000
Kilpatrick Stockton $400,000
2005
TOTAL: $2,050,000
Wells Fargo $1,590,000
Doremus, Theodore A Jr $400,000
Kilpatrick Stockton $60,000
2004
TOTAL: $1,680,000
Wells Fargo $1,280,000
Doremus, Theodore A Jr $400,000
254 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
2003
TOTAL: $1,560,000
Wells Fargo $960,000
Doremus, Theodore A Jr $400,000
Davis, Polk & Wardwell $200,000
2002
TOTAL: $820,000
Wells Fargo $620,000
Doremus, Theodore A Jr $200,000
2001
TOTAL: $870,000
Wells Fargo $650,000
HD Vest Financial Services
$20,000
Davis, Pol & Wardwell $100,000
Doremus, Theodore A Jr $100,000
Kirkpatrick & Lockhart > $10,000*
2000
TOTAL: $800,000
Wells Fargo $720,000
Davis, Pol & Wardwell $80,000
1999
TOTAL: $671,000
Wells Fargo $471,000
Davis, Polk & Wardwell $200,000
* Not included in the total amount
Appendix
182
1998
TOTAL: $1,600,000
Norwest Corp $1,180,000
Canfield & Assoc $20,000
Hogan & Hartson > $10,000*
Davis, Polk & Wardwell $200,000
Miller & Chevalier $20,000
Vickers, Linda $180,000
* Not included in the total amount
Appendix 183
Wells Fargo Covered Official Lobbyists:255
Firm / Name of Lobbyist Covered Official Position Year(s)
Kilpatrick Stockton LLP
Dekeyser, Armand C/S Sen. Jeff Sessions 2005-2006
255 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix
184
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: $239,400
1. John McCain (R) $69,050
2. Barack Obama (D) $13,700
3.
David John Cappiello
(R) $4,600
4. Rudolph Giuliani (R) $3,300
5. Mitt Romney (R) $2,300
5. Paul Hodes (D) $2,300
7. Christopher Shays (R) $2,000
8. Patrick Murphy $200
2006 All Recipients
TOTAL: $8,750
1. Christopher Shays (D) $2,250
2. Ned Lamont (D) $1,250
3. Paul Hodes (D) $1,000
4. Jon Tester (D) $750
5. Diane Goss Farrell (D) $250
5. James Webb (D) $250
256 Source: Center for Responsive Politics. Campaign
contribution totals accessed February
2009. Individual recipient numbers do not include
the 4th Quarter of 2008.
2004 All Recipients
TOTAL: $25,500
1. George W Bush (R) $250
1. Wesley Clark (D) $250
2002
N/A
2000 All Recipients
TOTAL: $1,000
1. Stephanie Hunter Sanchez (D) $1,000
1998-1999
N/A
Appendix 185
Bridgewater Lobbying Expenses:257
2008
TOTAL: $135,000
Rich Feuer Group $135,000
2007
TOTAL: $220,000
Quinn, Gillespie & Assoc. $60,000
Rich Feuer Group $160,000
2006
TOTAL: $440,000
Quinn, Gillespie & Assoc. $340,000
Rich Feuer Group $100,000
2005
TOTAL: $60,000
Rich Feuer Group $60,000
1998-2004
N/A
Bridgewater Covered Official Lobbyists:
N/A
257 Source: Center for Responsive Politics. Lobbying amounts accessed January 2009 and may not include
4th Quarter amounts.
Appendix
186
Hedge Funds: DE Shaw Group
Decade-long campaign contribution total (1998-2008): $3,100,255
Decade-long lobbying expenditure total (1998-2008): $680,000
DE Shaw Campaign Contributions:258
2008 All Recipients
TOTAL: $841,541
1. Hillary Clinton (D) $18,650
2. Barack Obama (D) $13,320
3. Max Baucus (D) $3,250
4. Jeff Merkley (D) $2,700
5. Darcy Burner (D) $2,300
5. Kay Hagan (D) $2,300
5. Chellie Pingree (D) $2,300
5. Jerry McNerney (D) $2,300
5. Jeanne Shaheen (D) $2,300
5. Andrew Rice (D) $2,300
5. Jim Himes (D) $2,300
5. Mary Landrieu (D) $2,300
13. Bob Inglis (R) $2,000
13. Susan Collins (R) $2,000
14. Mitch McConnell (R) $2,000
15. Ron Klein (D) $1,500
16. Ron Paul (R) $1,100
17. Heather Wilson (R) $1,000
17. Steny Hoyer (D) $1,000
17. Roger Wicker (R) $1,000
17. James Risch (R) $1,000
17. Micahel Johanns (R) $1,000
258 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
17. Norm Coleman (R) $1,000
2006 All Recipients
TOTAL: $485,200
1. Bob Casey (D) $4,100
2. Maria Cantwell (D) $4,000
3. Robert Menendez (D) $3,600
4. Healther Wilson (R) $3,000
5. Tim Mahoney (D) $2,100
5. Ben Nelson (D) $2,100
5. Evan Bayh (D) $2,100
8. Jo Bonner (R) $2,000
8. Chet Edwards (D) $2,000
8. Joe Lieberman (I) $2,000
8. Mike Ferguson (R) $2,000
8. Clay Shaw (R) $2,000
8. Mark Pryor (D) $2,000
8. Baron Hill (D) $2,000
8. Darcy Burner (D) $2,000
8. Patricia Madrid (D) $2,000
17. Edwin Perlmutter (D) $1,000
17. Olympia Snowe (R) $1,000
17. Max Baucus (D) $1,000
17. Nancy Johnson (R) $1,000
Appendix 187
2004 All Recipients
TOTAL: $256,250
1. John Kerry (D) $6,250
2. Blanche Lincoln (D) $4,000
2. Patty Murray (D) $4,000
4. Hillary Clinton (D) $2,000
5. Erskine Bowles (D) $1,000
5. Joseph Hoeffel (D) $1,000
5. Charles Rangel (D) $1,000
8. Joe Lieberman (D) $500
2002 All Recipients
TOTAL: $769,296
1. Erskine Bowles (D) $1,000
1. Jeanne Shaheen $1,000
2000
TOTAL: $503,968
1. Richard Gephardt (D) $1,000
2. John McCain (R) $750
1998
TOTAL: $244,000
No contributions to individual candidates
Appendix
188
DE Shaw Lobbying Expenses:259
2008
TOTAL: $20,000
Mehlman Vogel Castagnetti
Inc $20,000
2007
N/A
2006
TOTAL: $70,000
Mehlman Vogel Castagnetti
Inc $30,000
Navigant Consulting $40,000
2005
TOTAL: $110,000
Mehlman Vogel Castagnetti
Inc $30,000
Navigant Consulting $80,000
2004
TOTAL: $80,000
Mehlman Vogel Castagnetti
Inc $20,000
Navigant Consulting $60,000
2003
TOTAL: $20,000
Navigant Consulting $20,000
2002
N/A
259 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
2001
TOTAL: $20,000
Commonwealth Group $20,000
2000
TOTAL: $160,000
DE Shaw & Co $120,000
Commonwealth Group $40,000
1999
TOTAL: $80,000
DE Shaw & Co $40,000
Commonwealth Group $40,000
1998
TOTAL: $120,000
DE Shaw & Co $80,000
Commonwealth Group $40,000
Appendix 189
DE Shaw Covered Official Lobbyists:260
Firm / Name of Lobbyist Covered Position Year(s)
Mehlman Vogel Castagnetti Inc
Kelly Bingel Chief of Staff, Sen. Blanche Lincoln 2005-2006
Elise Finley Pickering
Chief of Staff, Rep. Shaddegg; Exec Director,
RPC 2006
Dean Rosen
Health Policy Director, Senate Majority
Leader 2005-2006
David Thomas Chief of Staff, Rep. Zoe Lofgren 2006
C. Stewart Verdery Jr Asst Sec for Homeland Security 2005
Alex Vogel Chief Council, Senate Majority Leader 2005
260 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 200a
126  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 03:10:17 AM
Woof, 10th Post;

Appendix
143
Investment Banks: Morgan Stanley
Decade-long campaign contribution total (1998-2008): $14,367,857
Decade-long lobbying expenditure total (1998-2008): $20,835,000
Morgan Stanley Campaign
Contributions:234
2008 Top Recipients
TOTAL: $3,573,627
1. Barack Obama (D) $425,502
2. Hillary Clinton (D) $376,980
3. John McCain (R) $258,677
4. Mitt Romney (R) $165,750
5. Rudy Giuliani (R) $133,750
6. Chris Dodd (D) $69,400
7. Fred Thompson (R) $42,800
8. Max Baucus (D) $30,500
9. Mark Kirk (R) $23,850
10. Jack Reed (D) $21,350
11. Mark Warner (D) $19,450
12. Michael N Castle (R) $17,850
13. Niki Tsongas (D) $17,100
14. Rahm Emanuel (D) $16,200
15. Susan M Collins (R) $15,933
16. Bill Richardson (D) $14,900
17. John Boehner (R) $14,300
17. Al Franken (D) $14,300
19. Jim Himes (D) $13,200
19. Scott Kleeb (D) $13,200
234 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
2006 Top Recipients
TOTAL: $1,943,033
1. Hillary Clinton (D) $116,060
2. Harold Ford Jr (D) $43,650
3. Chris Dodd (D) $42,200
4. Joe Lieberman (I) $24,700
5. Rick Santorum (R) $19,250
6. Orrin G Hatch (R) $19,000
7. Jon Kyl (R) $17,100
8. Michael N Castle (R) $16,100
9. Mike DeWine (R) $15,600
10. Dennis Hastert (R) $14,100
11.
Kathleen Troia
McFarland (R) $14,000
12. Mark Kirk (R) $13,900
13. Thomas Kean Jr (R) $12,550
14.
Christopher Shays
(R) $12,350
15. Bob Corker (R) $12,200
16. Robert Menendez (D) $12,150
17. Tom Carper (D) $11,880
18. Ned Lamont (D) $11,850
19. Conrad Burns (R) $11,100
20. Scott Kleeb (D) $11,050
Appendix
144
2004 Top Recipients
TOTAL: $3,286,484
1. George W Bush (R) $600,480
2. John Kerry (D) $180,979
3. Charles Schumer (D) $57,000
4. Chris Dodd (D) $46,000
5. Robert Bennett (R) $38,000
6. Dennis Hastert (R) $34,750
7. John Edwards (D) $33,050
8. Erskine Bowles (D) $32,750
9. Howard Dean (D) $29,350
10. Arlen Specter (R) $27,750
11. James DeMint (R) $20,750
12. Barack Obama (D) $20,250
13. Wesley Clark (D) $19,550
14. Tom Daschle (D) $18,000
15. Michael N Castle (R) $17,000
15.
Andrew McKenna
(R) $17,000
17. Richard Burr (R) $16,549
18.
Christopher S 'Kit'
Bond (R) $15,400
19. Evan Bayh (D) $15,000
19. Mel Martinez (R) $15,000
2002 Top Recipients
TOTAL: $1,899,242
1. Charles Schumer (D) $52,500
2. Erskine Bowles (D) $27,000
3. Elizabeth Dole (R) $23,750
4. Rob Portman (R) $19,000
5. Frank Lautenberg (D) $18,150
6. Saxby Chambliss (R) $16,000
7. Max Baucus (D) $15,500
8. Norm Coleman (R) $15,450
9. Michael N Castle (R) $14,800
10. Evan Bayh (D) $14,450
11. Richard Baker (R) $14,000
11. Lindsey Graham (R) $14,000
13. James M Talent (R) $13,000
14. Mike Ferguson (R) $12,250
15. Billy Tauzin (R) $12,000
16. Roy Blunt (R) $11,000
17. Arlen Specter (R) $10,250
18. Mark Foley (R) $10,200
19. Wayne Allard (R) $10,000
19. Spencer Bachus (R) $10,000
2000 Top Recipients
TOTAL: $2,656,627
1. George W Bush (R) $148,050
2. Rick A Lazio (R) $139,450
3. Charles Schumer (D) $126,000
4. Bill Bradley (D) $97,850
5. Al Gore (D) $52,300
6. Phil Gramm (R) $41,500
7. John McCain (R) $38,050
8. Hillary Clinton (D) $30,400
9. Tom Campbell (R) $24,500
10. Charles S Robb (D) $23,000
11. Bill McCollum (R) $18,700
12. Spencer Abraham (R) $16,050
13. Rudy Giuliani (R) $15,800
14. William Roth Jr (R) $14,700
15. John J LaFalce (D) $14,000
16. Kent Conrad (D) $13,000
17. Mark Kirk (R) $12,150
17. Carolyn Maloney (D) $12,000
19. Jon S Corzine (D) $11,500
Appendix
145
20. Bob Franks (R) $11,250
1998 Top Recipients
TOTAL: $1,008,844
1. Lauch Faircloth (R) $48,100
2. Evan Bayh (D) $31,750
3. Charles Schumer (D) $31,500
4. Alfonse D'Amato (R) $30,500
5. Barbara Mikulski (D) $7,500
6. Robert Bennett (R) $7,000
7. Tom Daschle (D) $6,500
8. Jon D Fox (R) $6,250
8. Arlen Specter (R) $6,250
10. Michael N Castle (R) $5,750
11. Chris Dodd (D) $5,225
12. Phil Crane (R) $5,000
12. Edward Kennedy (D) $5,000
12. Rick A Lazio (R) $5,000
12. Trent Lott (R) $5,000
12. Michael G Oxley (R) $5,000
12. Larry Schneider (D) $5,000
12. Billy Tauzin (R) $5,000
19. Rick White (R) $4,800
20. John J LaFalce (D) $4,750
Appendix
146
Morgan Stanley Lobbying Expenditures235:
2008
TOTAL: $3,005,000
Morgan Stanley $2,500,000
Capitol Tax Partners $240,000
Eris Group $120,000
American Capitol Group $45,000
Baptista Group $60,000
Kate Moss Co $40,000
DCI Group > $10,000*
2007
TOTAL: $3,040,000
Morgan Stanley $2,360,000
Capitol Tax Partners $240,000
Eris Group $120,000
American Capitol Group $80,000
Baptista Group $80,000
James E Boland Jr $80,000
Kate Moss Co $40,000
Alston & Bird $40,000
DCI Group > $10,000*
2006
TOTAL: $3,360,000
Morgan Stanley $2,720,000
Capitol Tax Partners $240,000
James E Boland Jr $120,000
Bartlett & Bendall $60,000
Alston & Bird $60,000
Eris Group $60,000
235 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
Kate Moss Co $40,000
American Capitol Group $40,000
Baptista Group $20,000
DCI Group > $10,000*
2005
TOTAL: $2,840,000
Morgan Stanley $2,280,000
Capitol Tax Partners $240,000
Bartlett & Bendall $120,000
James E Boland Jr $120,000
Kate Moss Co $40,000
Alston & Bird $40,000
2004
TOTAL: $2,750,000
Morgan Stanley $2,180,000
Capitol Tax Partners $240,000
Bartlett & Bendall $120,000
James E Boland Jr $120,000
Kate Moss Co $50,000
Alston & Bird $40,000
2003
TOTAL: $2,580,000
Morgan Stanley $2,000,000
Capitol Tax Partners $200,000
Bartlett & Bendall $120,000
James E Boland Jr $100,000
Alston & Bird $100,000
Kate Moss Co $60,000
* Not included in totals
Appendix
147
2002
TOTAL: $1,960,000
Morgan Stanley $1,540,000
Capitol Tax Partners $200,000
Alston & Bird $80,000
James E Boland Jr $80,000
Kate Moss Co $60,000
2001
TOTAL: $1,300,000
Morgan Stanley $920,000
James E Boland Jr $80,000
Capitol Tax Partners $80,000
Kate Moss Co $80,000
Alston & Bird $70,000
Palmetto Group $40,000
George C Tagg $30,000
1998-2000
N/A
Appendix
148
Morgan Stanley Covered Official Lobbyists:236
Firm / Name of Lobbyist Covered Official Position Year (s)
Capitol Tax Partners
Fant, William
Deputy Asst Sec. (treasury) for legislative
affairs 2001-2004
Mikrut, Joseph Tax Legislative Counsel - US Treasury 2001-2008
Talisman, Jonathan Assistant Treasury Secretary for Tax Policy 2001-2008
Wilcox, Lawrence
Staff Director, Senate Republican Policy
Committee 2006-2008
McKenny, William Chief of Staff, Rep. Amo Hougton 2004-2008
Grafmeyer, Richard Deputy Chief of Staff - JCT 2003-2008
Dennis, James
Tax Counsel, Sen. Robb - Counsel, Sen.
Bingaman 2008
Javens, Christopher
Tax Counsel, Sen. Grassley, Sen. Finance
Committee 2008
Bartlett & Bendall
Amy D. Smith Deputy Assistant Secretary, US Treasury 2003
Gill, Shane Legislative Director, Rep. Spencer Bachus
2004-2005
2007
Alston & Bird
Martino, Paul G Tax Counsel, Senate Finance Committee 2006
Eris Group
Kadesh, Mark Chief of Staff, Sen. Feinstein 2006-2007
236 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix 149
Commercial Banks: Bank of America
Decade-long campaign contribution total (1998-2008): $11,292,260
Decade-long lobbying expenditure total (1998-2008): $28,635,440
BOA Campaign Contributions:237
2008 Top Recipients
TOTAL: $2,212,369
1. Barack Obama (D) $230,552
2. John McCain (R) $126,175
3. Hillary Clinton (D) $106,071
4. Rudy Giuliani (R) $69,050
5. Chris Dodd (D) $63,100
6. Mitt Romney (R) $52,550
7. Joseph R. Biden Jr. (D) $44,000
8. Michael N. Castle (R) $25,250
9.
Dutch Ruppersberger
(D) $17,200
10. Melissa Bean (D) $16,000
10. Rahm Emanuel (D) $16,000
12. Dick Durbin (D) $13,600
13. Melvin L. Watt (D) $13,500
14. Mark Warner (D) $12,800
15. Barney Frank (D) $12,750
16. Kay R. Hagen (D) $12,600
17. Peter Roskam (R) $11,500
18. Jack Reed (D) $11,321
19. James E. Clyburn (D) $11,000
20. John E. Sununu (R) $10,950
237 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
2006 Top Recipients
TOTAL: $2,098,533
1. John M. Spratt Jr. (D) $64,500
2. Hillary Clinton (D) $53,085
3. David McSweeney (R) $33,800
4. Harold E. Ford Jr. (D) $32,400
5. Michael N. Castle (R) $31,250
6. Rick Santorum (R) $21,250
7. Tom Carper (D) $20,130
8. Spencer Bachus (R) $18,500
9. Jack Reed (D) $17,828
10. Pete Sessions (R) $17,700
11. Patrick McHenry (R) $16,999
12.
Dutch Ruppersberger
(D) $16,450
13. Robert Menendez (D) $16,000
14. Melissa Bean (D) $15,130
15.
Michael Fitzpatrick
(R) $15,000
16. Sue Myrick (R) $14,900
17. John E. Sununu (R) $14,607
18. Olympia J. Snowe (R) $14,600
19. Joe Lieberman (I) $14,549
20. James M. Talent (R) $14,500
Appendix
150
2004 Top Recipients
TOTAL: $2,360,786
1. George W. Bush (R) $195,761
2. John Kerry (D) $126,202
3. John M. Spratt Jr. (D) $50,700
4. Richard Burr (R) $44,100
5. Erskine B. Bowles (D) $43,800
6. Barack Obama (D) $28,500
7. Elizabeth Dole (R) $20,750
8. John Edwards (D) $18,050
9. Melvin L. Watt (D) $17,500
10. Richard Gephardt (D) $17,450
11. Sue Myrick (R) $16,500
12. Harold E. Ford Jr. (D) $16,000
13. Jay Helvey (R) $15,250
14. Michael G. Oxley (R) $15,000
15. Dennis Hastert (D) $14,500
16. Mike Ferguson (R) $13,000
17. David Vitter (R) $12,800
18. Pete Sessions (R) $11,065
19. Tim J. Michels (R) $10,950
20. Johnny Isakson (R) $10,700
2002 Top Recipients
TOTAL: $1,193,660
1. Charles Schumer (D) $57,500
2. Erskine B. Bowles (D) $37,600
3. Elizabeth Dole (R) $22,150
4. John M. Spratt Jr. (D) $20,750
5. Max Baucus (D) $18,450
6. John Cornyn (R) $11,000
7. Spencer Bachus (R) $10,000
7. Martin Frost (D) $10,000
9. Sue Myrick (R) $9,250
10. David Dreier (R) $9,000
11. Michael G. Oxley (R) $8,500
12. Charlie Gonzalez (D) $8,000
12. Tim Johnson (D) $8,000
14. Lindsey Graham (R) $7,750
14. Richard Baker (R) $7,500
16. Richard Gephardt (D) $7,000
16. Robin Hayes (R) $7,000
16. John Linder (R) $7,000
19. Jerry Weller (R) $6,888
20. Ken Bentsen (D) $6,500
2000 Top Recipients
TOTAL: $1,649,522
1. George W. Bush (R) $113,500
2. Bill Bradley (D) $56,450
3. John M. Spratt Jr. (D) $26,500
4. Phil Gramm (R) $25,500
5. Dianne Feinstein (D) $18,139
6. Sue Myrick (R) $16,850
7. Al Gore (D) $16,750
8. Martin Frost (D) $15,000
9. Rick A. Lazio (R) $13,550
10. Bill Nelson (D) $13,000
11. John McCain (R) $12,450
12. Bill McCollum (R) $11,500
13. Zell Miller (D) $11,000
14. David Dreier (R) $10,000
14. Richard Gephardt (D) $10,000
16. John Edwards (D) $9,750
17. Mel Carnahan (D) $8,150
18. Elizabeth Dole (R) $7,750
18. Charles S. Robb (D) $7,750
18. Ellen Tauscher (D) $7,750
Appendix 151
1998 Top Recipients
TOTAL: $2,114,390
1. Lauch Faircloth (R) $56,000
2.
Christopher S. 'Kit'
Bond $21,900
3. Bill McCollum (R) $18,500
4. Bob Graham (D) $17,950
5. John McCain (R) $17,550
6. John M. Spratt Jr. (D) $17,500
7. Richard Baker (R) $17,000
8.
Carol Moseley Braun
(D) $16,050
9. Robert F. Bennett (R) $16,000
9. Tom Daschle (D) $16,000
11. John Linder (R) $15,000
12. Evan Bayh (D) $14,000
12. Martin Frost (D) $14,000
14. Matt Fong (R) $13,000
15. Paul Coverdell (R) $12,500
15. Alfonse D'Amato (R) $12,500
15. Richard Gephardt (D) $12,500
15. Rick A. Lazio (R) $12,500
19. Ellen Tauscher (D) $12,300
20. Dick Armey (R) $12,000
Appendix
152
BOA Lobbying Expenditures:238
2008
TOTAL: $5,755,000
Bank of America $4,090,000
King & Spalding $480,000
Quinn, Gillespie & Assoc $360,000
Smith-Free Group $250,000
Bryan Cave Strategies $160,000
Public Strategies $165,000
Clark Consulting Federal
Policy group $100,000
Quadripoint Strategies $90,000
American Capitol Group $60,000
Covington & Burling > $10,000*
2007
TOTAL: $4,946,400
Bank of America $3,220,000
Quinn, Gillespie & Assoc $360,000
Kilpatrick Stockton $300,000
Clark Consulting Federal
Policy group $300,000
Smith-Free Group $280,000
King & Spalding $180,000
Covington & Burling $100,000
Bryan Cave Strategies $100,000
Quadripoint Strategies $76,400
Public Strategies $30,000
238 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
2006
TOTAL: $3,486,014
Bank of America $1,986,014
Kilpatrick Stockton $400,000
Quinn, Gillespie & Assoc $360,000
Clark Consulting Federal
Policy group $300,000
Smith-Free Group $240,000
Covington & Burling $120,000
Angus & Nickerson $40,000
Cypress Advocacy $20,000
Kate Moss Co $20,000
2005
TOTAL: $1,900,000
Bank of America $1,000,000
Clark Consulting Federal
Policy group $300,000
Quinn, Gillespie & Assoc $240,000
Smith & Assoc $240,000
Kilpatrick Stockton $60,000
Angus & Nickerson $20,000
Covington & Burling $20,000
Kate Moss Co $20,000
Winston & Strawn > $10,000*
* Not included in totals
Appendix 153
2004
TOTAL: $1,020,000
Bank of America $660,000
Clark Consulting Federal
Policy group $300,000
Kate Moss Co $40,000
Perkins, Smith & Cohen $20,000
Reed Smith LLP > $10,000*
Covington & Burling > $10,000*
2003
TOTAL: $1,196,141
Bank of America $656,141
Clark Consulting Federal
Policy group $300,000
Perkins, Smith & Cohen $160,000
Covington & Burling $40,000
Kate Moss Co $40,000
Reed Smith LLP > $10,000*
2002
TOTAL: $1,179,350
Bank of America $679,350
Clark Consulting Federal
Policy group $200,000
PriceWaterhouseCoopers $140,000
O'Connor & Hannan $120,000
Kate Moss Co $40,000
2001
TOTAL: $1,932,204
Bank of America $1,552,204
PriceWaterhouseCoopers $240,000
O'Connor & Hannan $100,000
Kate Moss Co $40,000
Holmes, Weddle & Barcott > $10,000*
2000
TOTAL: $1,947,331
Bank of America $1,567,331
PriceWaterhouseCoopers $240,000
Beck, Edward A III $40,000
Kate Moss Co $40,000
O'Connor & Hannan $40,000
Hyjek & Fix $20,000
Winston & Strawn > $10,000*
1999
TOTAL: $340,000
Beck, Edward A III $20,000
Covington & Burling > $10,000*
Hyjek & Fix $20,000
Kate Moss Co $40,000
PriceWaterhouseCoopers $260,000
Winston & Strawn > $10,000*
1998
TOTAL: $4,933,000
Bank of America $3,960,000
NationsBank $620,000
Bergner, Bockorny et al $140,000
Kate Moss Co $73,000
PriceWaterhouseCoopers $60,000
Beck, Edward A III $60,000
Covington & Burling > $10,000*
Covington & Burling $20,000
* Not included in totals
Appendix
154
BOA Covered Official Lobbyists:239
Firm / Name of Lobbyist Covered Official Position Year(s)
American Capitol Group
Nate Gatten Prof. Staff, Senate Banking Comm. 2008
Leg. Asst, Sen. Bennett
Staff, Sen. Budget Comm.
Brian Cave Strategies LLC
Waldo McMillan Intern, Rep. Chaka Fattah 2008
Floor Asst, Counsel for Bus. Affairs, Sen.
Harry Reid
Federal Policy Group (Clark & Wamberg)
Ken Kies Chief of Staff, Joint Comm on Taxation 2008
Matt Dolan Counsel, Sen. David Durenberger 2008
Pat Raffaniello Chief of Staff, Cong. Bill Brewster 2008
King & Spalding
William Clarkson Legislative Asst, Sen. Susan Collins 2007-2008
Archibald Galloway III
Sr. Defense Policy Advisor, Sen. Jeff Sessions
2008
Quinn Gillespie & Associates
Jack Quinn
Counsel, Pres. Clinton; Chief of Staff, VP
Gore 2008
Dave Hoppe
Staff Dir/CoS, Sen Lott; CoS Rep. Kemp and
Coats 2008
Jeff Connaughton Special Asst to chair of Sen. Judiciary Comm 2008
Special Asst to White House Counsel
Allison Giles Chief of Staff, Ways & Means Comm 2007-2008
Legislative Asst, Rep. Thomas
Elizabeth Hogan Special Asst, Dept of Commerce 2005-2008
Assoc. Dir, EOP; Intern, Rep. McCrery
Bonnie Hogue Duffy Staff, Sen. Comm on Aging 2008
239 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix 155
Legislative Asst, Sen. Reed
Harriet James Melvin Prof. Staff, Rep Charles Hatcher 2008
Kevin Kayes Chief Counsel, Sen. Reid 2006-2008
Marc Lampkin Policy Dir, Sen Coverdell 2008
Nick Maduros Cloakroom assistant; Intern, Sen Lehman 2008
Christopher McCannell Chief of Staff, Cong. Crowley 2007-2008
Amy Jensen Cunniffee Special Asst to the Pres for Legal Affairs 2005-2006
Mike Hacker Comm Dir, Rep. Dingell 2005
Covington & Burling
Holly Fechner Policy Dir, Sen. Edward Kennedy 2007
Angus & Nickerson
Barbara Angus Intl Tax Counsel, Dept of Treausry 2006
Gregory Nickerson Tax Counsel, Ways and Means Comm 2006
Cypress Advocacy
Patrick Cave Asst Sec, Dept of Treasury 2006
Kilpatrick Stockton
Armand Dekeyser Chief of Staff, Sen. Jeff Sessions 2005-2006
The Smith-Free Group
Jon Deuser Chief of Staff, Sen. Bunning 2006
PricewaterhouseCoopers
Tim Hanford Tax Counsel, Ways and Means Comm. 2001-2002
Kenneth Kies Chief of Staff, Joint Comm. on Taxation 2000-2001
Barbara Angus
Business Tax Counsel, Joint Comm. on
Taxation 2000-2001
Appendix
156
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: $4,270,678
1. Barack Obama (D) $543,430
2. Hillary Clinton (D) $423,417
3. John McCain (R) $301,301
4. Mitt Romney (R) $168,550
5. Chris Dodd (D) $157,244
6. Rudy Giuliani (R) $151,100
7. Charles B. Rangel (D) $61,450
8. John Edwards (D) $44,600
9. Saxby Chambliss (R) $40,350
10. Dick Durbin (D) $40,250
11. Spencer Bachus (R) $35,450
12. David Landrum (R) $30,450
13. Rahm Emanuel (D) $28,000
14. John E. Sununu (R) $26,850
15.
Shelley Moore Capito
(R) $25,700
16. Richard C. Shelby (R) $25,200
17. Max Baucus (D) $24,500
18. Chuck Hagel (R) $24,100
19. Joe Biden Jr. (D) $23,950
20. Jim Marshall (D) $23,050
240 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
2006 Top Recipients
TOTAL: $2,576,066
1. Hillary Clinton (D) $134,610
2. Christopher J. Dodd (D) $107,800
3. Joe Lieberman (I) $59,450
4. Tom Carper (D) $55,300
5. Kent Conrad (D) $36,000
6. John E. Sununu (R) $35,250
7. Jim McCrery (R) $34,300
8. Mitch McConnell (R) $33,700
9. Jon Kyl (R) $33,400
10. Rick Santorum (R) $29,850
11. Christopher Shays (R) $23,000
12. Mike DeWine (R) $21,850
13. Thomas H. Kean Jr. (R) $21,550
14. Harold E. Ford Jr. (D) $19,800
15. Robert Menendez (D) $19,550
16. Ben Nelson (D) $18,200
17. Doris O. Matsui (D) $18,050
18. Bob Corker (R) $17,250
19. David Yassky (D) $16,050
20. James M. Talent (R) $15,900
Appendix 157
2004 Top Recipients
TOTAL: $3,003,758
1. George W. Bush (R) $315,820
2. John Kerry (D) $280,881
3. Hillary Clinton (D) $91,250
4. Charles Schumer (D) $80,800
5. Richard Shelby (R) $65,000
6. Tom Daschle (D) $56,700
7. Chris Dodd (D) $50,200
8. Michael G. Oxley (R) $40,550
9. Mike Crapo (R) $34,450
10. Harry Reid (D) $32,250
11. Wesley Clark (D) $30,650
12. Rob Portman (R) $30,000
13. Joe Lieberman (D) $29,000
14. Howard Dean (D) $26,886
15. Erskine B. Bowles (D) $25,550
16. Barack Obama (D) $21,350
17. Mel Martinez (R) $20,600
18. Evan Bayh (D) $17,543
19. Arlen Specter (R) $17,500
20. James W. DeMint (R) $17,250
2002 Top Recipients
TOTAL: $3,021,725
1. Tim Johnson (D) $54,560
2. Chris Dodd (D) $41,550
3. Charles B. Rangel (D) $40,500
4. Jean Carnahan (D) $39,750
5. Charles Schumer (D) $30,750
6.
Shelley Moore Capito
(R) $17,448
7. Amo Houghton (R) $17,050
8. Max Baucus (D) $16,250
9. John E. Sununu (R) $15,750
10. Nancy L. Johnson (R) $15,250
10. Ron Kirk (D) $15,250
12. Max Cleland (D) $14,950
13. Rahm Emanuel (D) $14,250
14. Norm Coleman (R) $12,000
14. Elizabeth Dole (R) $12,000
16. Bill Janklow (R) $11,000
16. Jim Maloney (D) $11,000
16. Billy Tauzin (R) $11,000
19. Nita M. Lowey (D) $10,500
19. Carolyn Maloney (D) $10,500
2000
TOTAL: $4,157,926
1. Charles Schumer (D) $135,550
2. Bill Bradley (D) $127,500
3. Rick A. Lazio (R) $127,390
4. George W. Bush (R) $115,700
5. Al Gore (D) $115,500
6. Hillary Clinton (D) $99,650
7. Joe Lieberman (D) $55,296
8. John McCain (R) $42,700
9. Rudy. Giuliani (R) $37,015
10. Spencer Abraham (R) $29,750
11. Bob Franks (R) $28,208
12. Carolyn Maloney (D) $22,000
13. William Roth Jr. (R) $20,650
14. Charles S. Robb (D) $19,250
15. Tim Johnson (D) $18,500
16. Nita M. Lowey (D) $18,000
17. John J. LaFalce (D) $15,250
18. Bill Nelson (D) $14,750
19. Nancy L. Johnson (R) $14,050
20. Phil Gramm (R) $13,500
Appendix
158
1998 Top Recipients
TOTAL: $2,748,229
1. Alfonse D'Amato (R) $105,914
2. Charles Schumer (D) $99,116
3. Chris Dodd (D) $40,250
4. Tom Daschle (D) $39,000
5. Nancy L. Johnson (D) $26,975
6. Geraldine Ferraro (D) $25,724
7. Charles B. Rangel (D) $25,500
8. Paul Coverdell (R) $19,964
9. Bob Graham (D) $19,857
10. Rick A. Lazio (R) $19,500
10. Nita M. Lowey (D) $19,500
12. Richard Gephardt (D) $18,000
13. Bob Kerrey (D) $16,500
14. Newt Gingrich (R) $16,000
15. Lauch Faircloth (R) $15,775
16.
Carol Moseley Braun
(D) $15,450
17.
Daniel Patrick Moynihan
(D) $14,949
18. Richard Baker (R) $14,000
19. Evan Bayh (D) $13,750
20. Tom Delay (R) $12,000
Appendix 159
Citigroup Lobbying Expenditures:241
2008
TOTAL: $7,875,000
Citigroup Management
Corp $5,520,000
Avenue Solutions $100,000
Barnett, Sivon & Natter $260,000
Capitol Hill Strategies $240,000
Capitol Tax Partners $200,000
Cypress Advocacy $200,000
Ernst & Young $320,000
Ogilvy Government Relations
$320,000
Elmendorf Strategies $140,000
BGR Holding $110,000
Roberti Assoc $225,000
Timmons & Co $240,000
2007
TOTAL: $10,640,000
Citigroup Inc $8,180,000
Ernst & Young $320,000
Barnett, Sivon & Natter $320,000
Ogilvy Government Relations
$320,000
Kilpatrick Stockton $300,000
Capitol Hill Strategies $240,000
Avenue Solutions $240,000
Capitol Tax Partners $200,000
Cypress Advocacy $120,000
Dewey Square Group $40,000
Angus & Nickerson $40,000
King & Spalding $20,000
241 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
Timmons & Co $300,000
2006
TOTAL: $9,100,000
Citigroup Inc $6,760,000
Kilpatrick Stockton $400,000
Ernst & Young $340,000
Barnett, Sivon & Natter $340,000
Federalist Group $320,000
Avenue Solutions $170,000
O'Melveny & Myers $160,000
Capitol Hill Strategies $120,000
Cypress Advocacy $120,000
Capitol Tax Partners $110,000
Angus & Nickerson $60,000
Timmons & Co. $200,000
2005
TOTAL: $5,140,000
Citigroup Inc $3,600,000
Barnett, Sivon & Natter $360,000
Ogilvy Government Relations
$240,000
Avenue Solutions $180,000
Ernst & Young $160,000
Cypress Advocacy $120,000
Capitol Hill Strategies $120,000
Capitol Tax Partners $120,000
Angus & Nickerson $80,000
Kilpatrick Stockton $60,000
Cleary, Gottlieb et al $100,000
Appendix
160
2004
TOTAL: $8,520,000
Citigroup Inc $7,200,000
Barnett, Sivon & Natter $360,000
Ernst & Young $280,000
Federalist Group $240,000
Avenue Solutions $180,000
Capitol Hill Strategies $120,000
Capitol Tax Partners $120,000
Walker, Lynda K > $10,000*
Skadden, Arps et al $20,000
2003
TOTAL: $10,400,000
Citigroup Inc $7,800,000
Akin, Gump et al $960,000
Barnett, Sivon & Natter $360,000
Quinn, Gillespie & Assoc $240,000
Ernst & Young $200,000
Van Scoyoc Assoc $180,000
Barbour, Griffith & Rogers $160,000
Federalist Group $120,000
Avenue Solutions $90,000
Tonio Burgos & Assoc $50,000
Campbell-Crane & Assoc $40,000
Franzel, Brent S $40,000
Mayer, Brown et al $40,000
Capitol Tax Partners $120,000
2002
TOTAL: $7,730,000
Citigroup Inc $5,400,000
Akin, Gump et al $620,000
* Not included in totals
Barnett, Sivon & Natter $400,000
Ernst & Young $240,000
Verner, Liipfert et al $220,000
Avenue Solutions $150,000
Barbour, Griffith & Rogers $120,000
Mayer, Brown et al $80,000
Baker & Hostetler $80,000
Campbell-Crane & Assoc $80,000
Franzel, Brent S $80,000
Thaxton, Richard R $70,000
Tonio Burgos & Assoc $50,000
Van Scoyoc Assoc $40,000
Venn Strategies $40,000
Hogan & Hartson $20,000
Heidepriem & Mager > $10,000*
Capitol Tax Partners $40,000
2001
TOTAL: $5,930,000
Citigroup Inc $4,100,000
Barnett, Sivon & Natter $440,000
Verner, Liipfert et al $380,000
Baker & Hostetler $260,000
Ernst & Young $240,000
Mayer, Brown et al $100,000
PodestaMattoon $100,000
Campbell-Crane & Assoc $80,000
Thaxton, Richard R $60,000
Hogan & Hartson $40,000
Franzel, Brent S $40,000
Tonio Burgos & Assoc $30,000
Heidepriem & Mager $20,000
Rhoads Group $40,000
* Not included in totals
Appendix 161
2000
TOTAL: $6,420,000
Citigroup Inc $4,120,000
Associates First Capital $300,000
Verner, Liipfert et al $560,000
Barnett, Sivon & Natter $480,000
Akin, Gump et al $120,000
Ernst & Young $120,000
Baker & Hostetler $120,000
Thaxton, Richard R $90,000
Mayer, Brown et al $80,000
Campbell-Crane & Assoc $80,000
Franzel, Brent S $60,000
Barrett, Michael F Jr $60,000
Walker, Lynda K $50,000
Arter & Hadden $40,000
Heidepriem & Mager > $10,000*
Rhoads Group $120,000
Wilmer, Cutler &
Pickering $20,000
1999
TOTAL: $7,570,000
Citigroup Inc $5,080,000
Associates First Capital $300,000
Barnett, Sivon & Natter $500,000
Verner, Liipfert et al $480,000
Baker & Hostetler $240,000
Walker, Lynda K $180,000
Akin, Gump et al $160,000
Arter & Hadden $140,000
Franzel, Brent S $100,000
Wilmer, Cutler &
Pickering $80,000
* Not included in totals
Campbell-Crane & Assoc $60,000
Silbey, Franklin R $40,000
Thaxton, Richard R $40,000
Barrett, Michael F Jr $30,000
Heidepriem & Mager $20,000
Rhoads Group $120,000
Cleary, Gottlieb et al > $10,000*
1998
TOTAL: $9,135,000
Citigroup Inc $7,290,000
Verner, Liipfert et al $420,000
Barnett, Sivon & Natter $320,000
Arter & Hadden $260,000
Baker & Hostetler $260,000
Akin, Gump et al $180,000
Walker, Lynda K $80,000
Campbell-Crane & Assoc $60,000
Franzel, Brent S $40,000
Callister, Nebeker &
McCullough $40,000
Thaxton, Richard R $35,000
Silbey, Fanklin R $20,000
Ely & Co $20,000
Barrett, Michael F Jr $20,000
Davis & Harman > $10,000*
Heidepriem & Mager > $10,000*
Biklen, Stephen C > $10,000*
Alston & Bird $30,000
Cleary, Gottlieb et al $60,000
* Not included in totals
Appendix
162
Citigroup Covered Official Lobbyists:242
Firm / Name of Lobbyist Covered Official Position Year(s)
Angus & Nickerson
Angus, Barbara
Tax Counsel, Committee on Ways and
Means 2005-2007
Nickerson, Gregory International Tax Counsel, Dept. of Treasury 2005-2007
Avenue Solutions
Tejral, Amy Legislative Director, Senator Ben Nelson 2007
Baker & Hostetler
Kennelly, Barbara
Assoc. Commissioner - Social Securty
Admin. 2001
Barnett, Sivon & Natter
Barnett, Robert E. President (Attorney) 1999
Sivon, James C. VP/ Secretary (Attorney) 1999
Rivas, Jose S. Legislative/Regulatory Specialist 1999
Capitol Tax Partners
Fant, William
Deputy Asst. Secr (Treasury) for Legislative
Afrs 2002-2008
Mikrut, Joseph Tax Legislative Counsel - US Treasury 2002-2008
Talisman, Johnathan Assistant Treasury Secretary for Tax Policy 2002-2008
Grafmeyer, Rick Deputy Chief of Staff - JCT 2002-2008
McKenney, William Chief of Staff - Rep. Amo Houghton 2002-2008
Willcox, Lawrence G.
Staff Director, Senate Republican Policy
Committee 2006-2008
Dennis, James
Tax Counsel, Sen. Robb - Counsel, Sen.
Bingaman 2008
Javens, Christopher
Tax Counsel, Sen. Grassley, Sen. Finance
Committee 2008
Cypress Advocacy
Cave, J. Patrick Deputy Asst. Sec./Acting Asst. Sec, Treasury 2005-2007
242 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix 163
Ernst & Young
Badger, Doug Chief of Staff, Office of Senator Nickles 2000-2002
Conklin, Brian Special Assistant to the President 2004
Federalist Group LLC
Cave, J. Patrick
Deputy Asst. Sec./ Acting Asst. Sec., Treasury
2003-2004
Dammann, Julie Chief of Staff, Senator Christopher S. Bond 2006
Sternhall, Alexander Deputy Staff Director, Sen. Banking Comm. 2008
Hogan & Hartson
Kyle, Robert D. Associate Director, OMB 2001
Kilpatrick Stockton
Dekeyser, Armand C/S Senator Jeff Sessions 2005-2006
King & Spalding LLP
Clarkson, William Legislative Assistant, Sen. Susan Collins 2007-2008
Ogilvy Government Relations
Dammann, Julie Chief of Staff, Senator Christopher S. Bond 2007-2008
PodestaMattoon
Clark, Bill
Executive Office of POTUS - Office of
Personnel 2001
Tornquist, David Office of Management and Budget 2001
PriceWaterhouseCoopers
Angus, Barbara Business Tax Counsel, JCT 1999-2000
Kies, Kenneth J. Chief of Staff, JCT 1999, 2000
Timmons & Co
Shapiro, Daniel Deputy Cos - Office of Sen. Bill Nelson 2007-2008
Paone, Martin Secretary for the Majority, US Senate 2008
Appendix
164
Van Scoyoc Assoc
Porterfield, Lendell Maj. Econ. US Committee on Banking 2002
127  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 03:07:40 AM
Woof, 9th Post;

116
Investment Banks: Bear Stearns
Decade-long campaign contribution total (1998-2008): $6,355,737
Decade-long lobbying expenditure total (1998-2008): $9,550,000
Bear Stearns Campaign Contributions:219
2008 Top Recipients
TOTAL: $1,241,290
1. Rudy Giuliani (R) $130,091
2. Hillary Clinton (D) $127,460
3. John McCain $98,200
4. Barack Obama (D) $60,503
5. Christopher Dodd (D) $48,700
6. Mitt Romney (R) $31,550
7. Nita Lowey (D) $12,200
8. Frank Lautenberg (D) $11,600
9. Paul Kanjorski (D) $7,500
9. Elizabeth Dole (R) $7,500
11. Charles Rangel (D) $7,300
12. John Edwards (D) $6,850
13. Kirsten Gillibrand (D) $6,600
14. Dick Durbin (D) $6,400
15. Steny Hoyer (D) $6,000
16. Bill Richardson (D) $5,250
17. Tim Johnson (D) $5,000
17. Spencer Bachus (R) $5,000
17. Barney Frank (D) $5,000
20.
Christopher Shays
(R) $4,800
219 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
2006 Top Recipients
TOTAL: $938,619
1. Chris Dodd (D) $67,850
2. Joe Lieberman (I) $49,610
3. Martha Rainville (R) $14,800
4. Hillary Clinton (D) $13,575
5. Deborah Pryce (R) $13,000
6. Spencer Bachus (R) $10,000
7. Rick Santorum (R) $8,700
8. Richard Baker (R) $7,500
8. Jim McCrery (R) $7,500
10. Paul Kanjorski (D) $6,500
11. Rudy Giuliani (R) $6,300
12.
Christopher Shays
(R) $6,165
13. Barney Frank (D) $5,500
13. Pete Sessions (R) $5,500
15. Evan Bayh (D) $5,000
15. Mike Crapo (RD) $5,000
15. Michael Oxley (R) $5,000
15. Bill Thomas (R) $5,000
15. Patrick Tiberi (R) $5,000
20. Mike Ferguson (R) $4,600
Appendix 117
2004 Top Recipients220
TOTAL: $1,458,005
1. George W Bush (R) $198,200
2. John Kerry (D) $65,400
3. Wesley Clark (D) $41,000
4. Rick Santorum (R) $20,500
5. Charles Schumer (D) $18,000
6. Richard Gephardt (D) $13,500
7. John Peterson (R) $12,000
8.
Charles Wieder Dent
(R) $11,080
9. Pete Sessions (R) $10,580
10. Lowey, Nita M (D) $10,000
11. Erskine Bowles (D) $8,080
12. Tom Daschle (D) $8,000
12. James DeMint (R) $8,000
12. John Thun, (R) $8,000
12. David Vitter (R) $8,000
16. Rahm Emanuel (D) $7,000
16. Luis Fortuno (3) $7,000
18. John Edwards (D) $6,250
19.
Charles Boustany Jr
(R) $6,080
20. Timothy Bishop (D) $5,500
2002 Top Recipients
TOTAL: $661,838
1. Charles Schumer (D) $94,900
2. Christopher Dodd (D) $92,900
3. Chuck Grassley (R) $16,000
4. Jack reed (R) $13,000
5. Nita Lowey (D) $11,250
6. Jack Conway (D) $7,750
220 Based on highest 1,000 contributions and
PAC money.
7. John Kerry (D) $7,000
8. Ron Kirk (D) $6,990
9. Tim Johnson (D) $6,000
9. Pete Domenici (R) $6,000
9. Michael Oxley (R) $6,000
9. Charles Rangel (D) $6,000
13. Artur Davis (D) $5,400
14. Denise Majette (D) $5,250
15. Paul Kanjorski (D) $5,000
16. Max Baucus (D) $4,500
16. Pat Toomey (R) $4,000
16. Bill Thomas (R) $4,000
19. Deborah Pryce (R) $3,500
20. Joe Biden (D) $3,250
2000 Top Recipients
TOTAL: $1,243,379
1. Rick Lazio (R) $40,000
2. Jon Corzine (D) $23,250
3. Spencer Abraham (R) $18,500
4. Hillary Clinton (D) $15,500
5. Vito Fossella (R) $11,000
6. Al Gore (D) $10,000
7. Charles Schumer (D) $9,500
8. George W Bush $7,000
9. Charles Rangel (D) $5,811
10. Orrin Hatch (R) $5,500
10.
David Lawther Johnson
(D) $5,500
12. Edolphus Towns (D) $5,000
13. Tom Harkin (D) $3,000
13. Marge Roukema (R) $3,000
13. Howard Berman (D) $3,000
13. George Allen (R) $3,000
17. Richard Neal (D) $2,500
Appendix
118
18. Steve Forbes (R) $2,250
18. John McCain (R) $2,250
20. William Roth (R) $2,000
20. Trent Lott (R) $2,000
20. Rod Grams (R) $2,000
20. Robert Torricelli (D) $2,000
20. Richard Lugar (R) $2,000
20. Phil Gramm (R) $2,000
20. Phil Crane (R) $2,000
20. Paul Sarbanes (D) $2,000
20. Kent Conrad (D) $2,000
20. John Kerry (D) $2,000
20. Jim Maloney (D) $2,000
20. E Clay Shaw (R) $2,000
20. Deborah Pryce (R) $2,000
20. Dan Quayle (R) $2,000
20. Christopher Dodd (D) $2,000
20. Bill McCollum (R) $2,000
20. Amo Houghton (R) $2,000
1998 Top Recipients
TOTAL: $812,606
1. Alfonse D'Amato (R) $38,950
2. Charles Rangel (D) $7,050
3.
Blanche Lambert
Lincoln (D) $7,000
3. John Edwards (D) $7,000
5. Tom Daschle (D) $6,250
6. Scotty Baesler (D) $6,000
7. Rick Lazio (R) $5,800
8. Evan Bayh (D) $5,000
9. John Breaux (D) $4,000
10.
Carol Moseley-Braun
(D) $3,000
10. John Kerry (D) $3,000
10. Newt Gingrich (R) $3,000
13. Rick White (R) $2,550
14. Jerry Weller (R) $2,500
15. Billy Tauzin (R) $2,050
15. Thomas Manton (D) $2,050
17. Amo Houghton (R) $2,000
17. Bob Graham (D) $2,000
17. Charles Grassley (R) $2,000
17. Christopher Bond (R) $2,000
17. Fritz Hollings (D) $2,000
17. Jerry Kleczka (D) $2,000
17. John Ensign (R) $2,000
17. John LaFalce (D) $2,000
17. Robert Bennett (R) $2,000
Appendix 119
Bear Stearns Lobbying Expenditures221:
2008
TOTAL: $460,000
Bear Stearns $420,000
Steptoe & Johnson $40,000
Venable LLP > $10,000*
2007
TOTAL: $1,120,000
Bear Stearns $900,000
Steptoe & Johnson $200,000
Venable LLP $20,000
2006
TOTAL: $1,200,000
Bear Stearns $780,000
Venable LLP $220,000
Steptoe & Johnson $160,000
Angus & Nickerson $40,000
2005
TOTAL: $820,000
Bear Stearns $540,000
Steptoe & Johnson $180,000
Venable LLP $60,000
Angus & Nickerson $40,000
221 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
2004
TOTAL: $900,000
Bear Stearns $680,000
Steptoe & Johnson $220,000
Venable LLP > $10,000*
2003
TOTAL: $920,000
Bear Stearns $620,000
Steptoe & Johnson $240,000
Venable LLP $60,000
2002
TOTAL: $800,000
Bear Stearns $520,000
Steptoe & Johnson $200,000
Venable LLP $80,000
2001
TOTAL: $960,000
Bear Stearns $640,000
Steptoe & Johnson $200,000
Venable LLP $80,000
O'Connor & Hannan $40,000
2000
TOTAL: $750,000
Bear Stearns $440,000
Steptoe & Johnson $190,000
O'Connor & Hannan $120,000
Appendix
120
1999
TOTAL: $760,000
Bear Stearns $500,000
Steptoe & Johnson $140,000
O'Connor & Hannan $120,000
1998
TOTAL: $860,000
Bear Stearns $560,000
Steptoe & Johnson $160,000
O'Connor & Hannan $140,000
Appendix 121
Bear Stearns Covered Official Lobbyists:222
Firm / Name of Lobbyist Covered Official Position Year(s)
Bear Stearns
Dombo III, Fred
Counsel, Office of Congressman Michael
Forbes 1999-2000
Venable LLP
Olchyk, Sam Joint Committee on Taxation Staff 2004-2008
Beeman, E. Ray
Legislative Counsel, Joint Committee on
Taxation Staff 2006-2008
222 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix
122
Investment Banks: Goldman Sachs
Decade-long campaign contribution total (1998-2008): $25,445,983
Decade-long lobbying expenditure total (1998-2008): $21,637,530
Goldman Sachs Campaign Contributions223
2008 Top Recipients
TOTAL: $5,635,501
1. Barack Obama (D) $884,907
2. Hillary Clinton (D) $405,475
3. John McCain (R) $229,695
4. Mitt Romney (R) $229,675
5. Jim Himes (D) $140,448
6. Chris Dodd (D) $110,000
7. Rudy Giuliani (R) $109,450
8. John Edwards (D) $66,450
9. Arlen Specter (R) $47,600
10. Rahm Emanuel (D) $35,250
11. John Sununu (R) $31,400
12. Jack Reed (D) $30,100
13. Max Baucus (D) $26,000
14. Tom Harkin (D) $24,580
15. Frank Lautenberg (D) $24,100
16.
Michael Peter Skelly
(D) $23,364
17. Susan M Collins (R) $21,900
18. Mark Warner (D) $21,800
19. Mary L Landrieu (D) $20,700
20. Norm Coleman (R) $19,200
223 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
2006 Top Recipients
TOTAL: $3,502,866
1. Hillary Clinton (D) $138,570
2. Robert Menendez (D) $80,500
3. Harold E Ford Jr (D) $80,497
4. Evan Bayh (D) $52,750
5. Sherrod Brown (D) $42,600
6. Maria Cantwell (D) $39,800
7. Joe Lieberman (I) $33,950
8. Ben Cardin (D) $33,150
9. Kent Conrad (D) $30,600
10. Thomas H Kean Jr (R) $29,500
11. Rick Santorum (R) $27,000
12. Bill Nelson (D) $25,400
13.
Sheldon Whitehouse
(D) $24,600
14. Mike DeWine (R) $23,500
15. Eric Cantor (R) $23,300
16.
Kay Bailey Hutchison
(R) $22,500
17. Richard Baker (R) $22,400
18. Max Baucus (D) $21,900
19. Rahm Emanuel (D) $18,800
20. George Allen (R) $17,800
Appendix 123
2004 Top Recipients
TOTAL: $6,426,438
1. George W Bush (R) $390,600
2. John Kerry (D) $303,250
3. Jack Ryan (R) $218,161
4. Tom Daschle (D) $143,500
5. John Edwards (D) $102,300
6. Evan Bayh (D) $72,000
7. Charles Schumer (D) $58,040
8. Chris Dodd (D) $58,000
8. Barack Obama (D) $58,000
10. Hillary Clinton (D) $55,000
11. Arlen Specter (R) $51,000
12. Erskine Bowles (D) $37,250
13. Tony Knowles (D) $34,050
14. Joe Lieberman (D) $34,000
15. Dylan C Glenn (R) $33,000
16. Wesley Clark (D) $32,500
17. Howard Dean (D) $30,500
18. Robert Menendez (D) $30,000
19. Richard Burr (R) $29,496
20. John McCain (R) $29,000
2002 Top Recipients
TOTAL: $3,510,035
1. Charles Schumer (D) $124,550
2. Jon Corzine (D) $47,970
3. John Edwards (D) $41,000
4. Robert Torricelli (D) $34,750
5. Tom Strickland (D) $34,000
6. Arlen Specter (R) $30,000
7. Tim Johnson (D) $28,980
8. Erskine Bowles (D) $28,000
9. Max Baucus (D) $26,000
10. Tom Harkin (D) $21,355
11. Lamar Alexander (R) $20,500
12. John E Sununu (R) $20,250
13. Robert Menendez (D) $18,500
14. Jean Carnahan (D) $18,355
15. Max Cleland (D) $18,230
16. John Cornyn (R) $18,000
16. John Kerry (D) $18,000
18. Norm Coleman (R) $15,500
19. Saxby Chambliss (R) $15,250
20. Maria Cantwell (D) $14,250
2000 Top Recipients
TOTAL: $4,432,977
1. Jon S Corzine (D) $554,900
2. Bill Bradley (D) $271,200
3. Rick A Lazio (R) $175,300
4. George W Bush (R) $137,499
5. Charles Schumer (D) $99,500
6. Al Gore (D) $95,050
7. Hillary Clinton (D) $88,170
8. John McCain (R) $67,320
9. Dick Zimmer (R) $53,200
10. Rudolph Giuliani (R) $40,000
11. Phil Gramm (R) $29,000
12. Rush Holt (D) $26,000
13. Frank Pallone Jr (D) $19,000
14. Nita M Lowey (D) $18,000
15.
Brian David
Schweitzer (D) $16,250
16. Dylan C Glenn (R) $15,500
17.
Kay Bailey Hutchison
(R) $15,000
17. Bill McCollum (R) $15,000
19. Eliot L Engel (D) $14,000
Appendix
124
19. Edolphus Towns (D) $14,000
1998 Top Recipients
TOTAL: $1,938,166
1. Charles Schumer (D) $107,550
2. Alfonse D'Amato (R) $70,050
3. Evan Bayh (D) $33,500
4. Chris Dodd (D) $21,000
5. Bob Kerrey (D) $17,495
6. Shawn D Terry (R) $15,000
7. Rick A Lazio (R) $14,500
8. John Breaux (D) $14,158
9.
Kay Bailey Hutchison
(R) $14,000
10. Geraldine Ferraro (D) $11,750
11. Amo Houghton (R) $11,500
12. Check Hagel (R) $11,000
13. John McCain (R) $10,400
14.
Daniel Patrick
Moynihan (R) $10,000
15. Jay R Pritzker (D) $9,200
16. Arlen Specter (R) $9,000
17. Nita M Lowey (D) $8,500
18. Paul Coverdell (R) $8,375
19. Lauch Faircloth (R) $8,000
19. Bob Graham (D) $8,000
Appendix 125
Goldman Sachs Lobbying Expenditures224:
2008
TOTAL: $5,210,000
Goldman Sachs $3,280,000
Duberstein Group $400,000
ML Strategies $280,000
Baptista Group $270,000
Capitol Tax Partners $240,000
Williams & Jensen $160,000
Rich Feuer Group $130,000
Angus & Nickerson $120,000
RR&G $80,000
Bingham McCutchen LLP $50,000
Law Offices of John T
ORourke $60,000
Sullivan & Cromwell $30,000
Vinson & Elkins $40,000
Mattox Woolfolk LLC > $10,000*
Gephardt Group $70,000
2007
TOTAL: $4,610,000
Goldman Sachs $2,720,000
Baptista Group $280,000
Duberstein Group $260,000
Vinson & Elkins $160,000
ML Strategies $140,000
DLA Piper $140,000
Angus & Nickerson $120,000
Bigham McCutchen LLP $120,000
Rich Feuer Group $120,000
224 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
* Not included in totals
Sullivan & Cromwell $120,000
RR&G $90,000
Williams & Jensen $80,000
Law Offices of John T
O'Rourke $80,000
Maddox Strategies $60,000
Capitol Tax Partners $60,000
Clark & Weinstock $60,000
2006
TOTAL: $3,651,250
Goldman Sachs $2,620,000
Baptista Group $200,000
DLA Piper $160,000
Rich Feuer Group $120,000
Angus & Nickerson $120,000
RR&G $110,000
Duberstein Group $100,000
Law Offices of John T
O'Rourke $81,250
Vinson & Elkins $80,000
Williams & Jensen $60,000
Clark & Assoc > $10,000*
2005
TOTAL: $1,712,000
Goldman Sachs $600,000
Clark Consulting Federal
Policy Group $140,000
Vinson & Elkins $140,000
Thelen, Reid & Priest $120,000
Law Offices of John T
O'Rourke $102,000
Rich Feuer Group $100,000
* Not included in totals
Appendix
126
DCI Group $100,000
Mattox Woolfolk LLC $90,000
Duberstein Group $80,000
Angus & Nickerson $80,000
Clark & Assoc $80,000
Williams & Jensen $80,000
2004
TOTAL: $1,230,000
Clark & Assoc $60,000
Clark Consulting Federal
Policy Group $260,000
DCI Group $100,000
Duberstein Group $40,000
Law Offices of John T
O'Rourke $200,000
Mattox Woolfolk LLC $90,000
Rich Feuer Group $60,000
Thelen, Reid & Priest $240,000
Vinson & Elkins $160,000
Williams & Jensen $20,000
2003
TOTAL: $1,030,000
Clark & Assoc $100,000
Clark Consulting Federal
Policy Group $240,000
Duberstein Group $80,000
Law Offices of John T
O'Rourke $80,000
Mattox Woolfolk LLC $70,000
Thelen, Reid & Priest $240,000
Vinson & Elkins $100,000
Williams & Jensen $40,000
Wilmer, Culter & Pickering $60,000
Winning Strategies Wash. $20,000
2002
TOTAL: $910,000
Clark & Assoc. > $10,000*
Clark Consulting Federal
Policy Group $200,000
Duberstein Group $220,000
Johnson, Madigan et al $120,000
Law Offices of John T
O'Rourke $110,000
PriceWaterhouseCoopers $40,000
Sullivan & Cromwell > $10,000*
Verner, Liipfert et al $40,000
Vinson & Elkins $120,000
Williams & Jensen $20,000
Winning Strategies Washington
$40,000
2001
TOTAL: $810,000
Duberstein Group $100,000
Johnson, Madigan et al $80,000
Law Offices of John T
O'Rourke $30,000
PriceWaterhouseCoopers $240,000
Verner, Liipfert et al $260,000
Vinson & Elkins $100,000
2000
TOTAL: $500,000
Duberstein Group $80,000
Law Offices of John T
O'Rourke $40,000
Morgan, Lewis & Bockius $20,000
PriceWaterhouseCoopers $240,000
Verner, Liipfert et al $40,000
* Not included in totals
Appendix
127
Vinson & Elkins $80,000
1999
TOTAL: $1,264,000
Duberstein Group $140,000
Law Offices of John T
O'Rourke $32,000
Morgan, Lewis & Bockius > $10,000*
PriceWaterhouseCoopers $240,000
Sullivan & Cromwell > $10,000*
Verner, Liipfert et al $60,000
Vinson & Elkins $160,000
1998
TOTAL: $710,280
Duberstein Group $140,000
Law Offices of John T
O'Rourke $115,000
PriceWaterhouseCoopers > $10,000*
Sullivan & Cromwell > $10,000*
Verner, Liipfert et al $80,000
Vinson & Elkins $120,000
Washington Counsel $40,000
* Not included in totals
Appendix
128
Goldman Sachs Covered Official Lobbyists:225
Firm / Name of Lobbyist Covered Official Position Year(s)
PriceWaterhouseCoopers
Angus, Barbara
Business Tax Counsel, Committee on Taxation
1999- 2000
Kies, Kenneth Chief of Staff, Committee on Taxation 1999- 2000
Hanford, Tim Tax Counsel, Counsel on Ways and Means 2001
Verner, Liipfert et al
Hawley, Noelle M. Legislative Director, Rep. Bill Archer 1999
Jones, Brian C.
Investigator, Perm. Subcommittee on Investigations
2002
Madigan, Johnson et al
English, James
Staff Director, Senate Appropriations, Min
Staff 2001- 2002
Griffin, Patrick J. Director of Legal Affairs, White House 2001- 2002
Winning Strategies Washington
Mullins, Donna Chief of Staff, Rep. Frelinghuysen 2002-2003
Angus & Nickerson
Angus, Barbara
Tax Counsel, Committee on Ways and
Means 2005-2008,
Nickerson, Gregory International Tax Counsel, Dept. of Treasury 2005- 2008
Capitol Tax Partners LLP
Talisman, Johnathan Assistant Treasury Secretary for Tax Policy 2008
Grafmeyer, Richard Deputy Chief of Staff, JCT 2008
Mikrut, Joseph Tax Legislative Counsel - US Treasury 2008
McKenney, William
Staff Director, Ways and Means Over Subcommittee
2008
225 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix
129
Wilcox, Lawrence
Staff Director, Senate Republican Policy
Committee 2008
Dennis, James
Tax Counsel, Sen. Robb - Counsel, Sen
Bingaman 2008
Javens, Christopher
Tax Counsel, Sen. Grassley, Senate Finance
Committee 2008
The Goldman Sachs Group. Inc
Connolly, Ken
S.A. Director of Office of Environmental
Policy; LD, 2008
Sen. Jeffords; LD, CEPW
Shirzad, Faryar
Dept. Natl Security Adv. For Intl Econ.
Affairs 2008
Appendix
130
Investment Banks: Lehman Brothers
Decade-long campaign contribution total (1998-2008): $6,704,574
Decade-long lobbying expenditure total (1998-2008): $8,660,000
Lehman Campaign Contributions:226
2008 Top Recipients227
TOTAL: $2,211,761
1. Barack Obama (D) $288,538
2. Hillary Clinton (D) $227,150
3. Rudy Giuliani (R) $140,000
4. John McCain (R) $116,907
5. Mitt Romney (R) $96,200
6. Chris Dodd (D) $31,400
7. Rahm Emanuel (D) $23,000
8. Jack Reed (D) $21,600
9. Joseph Biden Jr (D) $21,100
10. John Edwards (D) $20,400
11. Bill Richardson (D) $13,800
12. Charles Rangel (D) $11,900
13. Steny Hoyer (D) $9,300
14. Jim Himes (D) $8,100
15. Mark Warner (D) $7,600
16. Lee Terry (R) $7,100
17. Steve Israel (D) $6,600
18. Jerrold Nadler (D) $5,600
19. Norm Coleman (R) $5,300
226 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
227 Based on highest 1,000 contributions plus
PAC money.
19. Arlen Specter (R) $5,300
2006 Top Recipients
TOTAL: $917,414
1. Joe Lieberman (I) $82,900
2. Hillary Clinton (D) $54,190
3. Pete Ricketts (R) $13,600
4. Rick Santorum (R) $10,500
5. Harold Ford Jr (D) $9,600
6. Frank Lautenberg (D) $9,000
7. Robert Menendez (D) $8,900
8. Bill Nelson (D) $7,300
9. Ron Klein (D) $6,800
10. Rudy Giuliani (R) $6,300
11. Mike Crapo (R) $5,300
12. Dianne Feinstein (D) $5,100
13. Michael Oxley (R) $5,000
13. Orrin Hatch (R) $5,000
13. Dennis Hastert (R) $5,000
13. Barney Frank (D) $5,000
13. Vito Fossella (R-NY) $5,000
18. Claire McCaskill (D) $4,500
18. Jon Kyl (R) $4,500
18. Richard Baker (R) $4,500
Appendix
131
2004 Top Recipients
TOTAL: $1,985,718
1. George Bush (R) $237,650
2. John Kerry (D) $92,312
3. Chris Dodd (D) $55,000
4. Joe Lieberman (D) $35,950
5. Charles Schumer (D) $35,250
6. Wesley Clark (D) $28,500
7. Richard Gephardt (D) $19,500
8. John Edwards (D) $18,650
9. Tom Daschle (D) $16,970
10. Erskine Bowles (D) $10,000
10. Nancy Pelosi (D) $10,000
12. Barack Obama (D) $9,062
13. John Spratt Jr (D) $9,000
14. Arlen Specter (R) $8,812
15. Mel Martinez (R) $8,500
16. Alcee Hastings (D) $7,500
17. Richard Baker (R) $7,000
17. James Stork (D) $7,000
19.
Joseph Edward Driscoll
(D) $6,500
20. Judd Gregg (R) $6,000
2002 Top Recipients
TOTAL: $231,970228
1. Charles Schumer (D) $14,500
2. Robert Torricelli (D) $14,250
3. Max Baucus (D) $11,000
4. Michael Castle (R) $10,000
4. Michael Oxley (R) $10,000
6. Tom Strickland (D) $8,000
7. Max Cleland (D) $7,000
8. Dan Wofford (D) $5,550
228 Based only on campaign contributions
9. Richard Baker (R) $5,000
9. Billy Tauzin (R) $5,000
11. Lamar Alexander (R) $4,000
11. Erskine Bowles (D) $4,000
11. Nita Lowey (D) $4,000
14. Timothy Carden (D) $3,250
14. Ron Kirk (D) $3,250
16. Rick Boucher (D) $3,000
16. Chris Dodd (D) $3,000
16. Vito Fossella (R) $3,000
16. Tom Harkin (D) $3,000
16. Dennis Hastert (R) $3,000
16. Amo Houghton (R) $3,000
16. Tim Johnson (D) $3,000
16. Mary Landrieu (D) $3,000
16. Carolyn Maloney (D) $3,000
16. Jay Rockefeller (D) $3,000
16. John Spratt Jr (D) $3,000
2000 Top Recipients
TOTAL: $929,780
1. Bill Bradley (D) $51,800
2.
Brendan Thomas
Byrne Jr (D) $31,300
3. Jon Corzine (D) $20,200
4. Rick Lazio (R) $19,750
5. George W Bush (R) $11,000
6. Hillary Clinton (D) $10,550
7. Dianne Feinstein (D) $10,500
8. Charles Schumer (D) $10,000
9. Michael Oxley (R) $9,250
10. William Roth Jr (R) $9,000
11. Michael Castle (R) $8,000
11. Chris Dodd (D) $8,000
13. Spencer Abraham (R) $6,000
Appendix
132
13. Bob Kerrey (D) $6,000
15. Dennis Hastert (R) $5,500
16. Charles Rangel (D) $4,500
16. Edolphus Towns (D) $4,500
18. Richard Lugar (R) $4,000
19. Rick Boucher (D) $3,500
19. Rod Grams (R) $3,500
19. Joe Lieberman (D) $3,500
1998 Top Recipients
TOTAL: $427,931
1. Charles Schumer (D) $10,200
2. Chris Dodd (D) $9,500
3. Tom Daschle (D) $7,500
4. Alfonse D'Amato (R) $7,400
5. Rick Lazio (R) $6,000
6. Charles Rangel (D) $5,500
7.
Brendan Thomas
Byrne Jr (D) $5,000
8. John Breaux (D) $4,000
9. Bob Kerrey (D) $3,500
10. Christopher Bond (R) $3,000
11. Rick White (R) $2,550
11. Jerry Weller (R) $2,500
13. Thomas Manton (D) $2,050
13. Billy Tauzin (R) $2,050
15. Robert Bennett (R) $2,000
15. John Ensign (R) $2,000
15. Newt Gingrich (R) $2,000
15. Bob Graham (D) $2,000
15. Fritz Hollings (D) $2,000
15. Amo Houghton (R) $2,000
15. Jerry Kleczka (D) $2,000
15. John LaFalce (D) $2,000
Appendix
133
Lehman Lobbying Expenditures:229
2008
TOTAL: $720,000
Lehman Brothers $590,000
O'Neill, Athy & Casey $60,000
DLA Piper $70,000
2007
TOTAL: $840,000
Lehman Brothers $720,000
O'Neill, Athy & Casey $80,000
DLA Piper $40,000
2006
TOTAL: $1,140,000
Lehman Brothers $920,000
American Continental
Group $100,000
O'Neill, Athy & Casey $80,000
DLA Piper $40,000
2005
TOTAL: $1,080,000
Lehman Brothers $820,000
American Continental
Group $140,000
O'Neill, Athy & Casey $80,000
DLA Piper $40,000
229 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
2004
TOTAL: $740,000
Lehman Brothers $620,000
O'Neill, Athy & Casey $80,000
Piper Rudnick LLP $40,000
2003
TOTAL: $660,000
Lehman Brothers $540,000
O'Neill, Athy & Casey $80,000
Piper Rudnick LLP $40,000
2002
TOTAL: $660,000
Lehman Brothers $540,000
O'Neill, Athy & Casey $80,000
Verner, Liipfert et al $40,000
Piper Rudnick LLP > $10,000*
2001
TOTAL: $600,000
Lehman Brothers $320,000
Verner, Liipfert et al $200,000
O'Neill, Athy & Casey $80,000
2000
TOTAL: $560,000
Lehman Brothers $280,000
Verner, Liipfert et al $200,000
O'Neill, Athy & Casey $80,000
* Not included in totals
Appendix
134
1999
TOTAL: $860,000
Lehman Brothers $580,000
Verner, Liipfert et al $200,000
O'Neill, Athy & Casey $80,000
1998
TOTAL: $800,000
Lehman Brothers $560,000
Verner, Liipfert et al $140,000
O'Neill, Athy & Casey $80,000
Palmetto Group $20,000
Appendix
135
Lehman Covered Official Lobbyists:230
Firm / Name of Lobbyist Covered Official Position Year(s)
Verner, Liipfert et al
Hawley, Noelle M. Legislative Director, Rep. Bill Archer 1999-2001
Krasow, Cristina L.
Sr. Cloakroom Asst., Sen. Dem. Cloakroom
1999-2000
230 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix
136
Investment Banks: Merrill Lynch
Decade-long campaign contribution total (1998-2008): $9,977,724
Decade-long lobbying expenditure total (1998-2008): $59,076,760
Merrill Lynch Campaign Contributions:231
2008 Top Recipients
TOTAL: $2,780,347
1. John McCain (R) $360,620
2. Barack Obama (D) $264,720
3. Rudy Giuliani (R) $210,275
4. Hillary Clinton (D) $202,568
5. Mitt Romney (R) $172,025
6. Chris Dodd (D) $67,300
7. Mitch McConnell (R) $31,600
8. Mark Pryor (D) $23,900
9. Debbie Stabenow (D) $23,850
10. Rahm Emanuel (D) $20,800
11. John Edwards (D) $19,075
12. Max Baucus (D) $17,800
13. Joseph Biden (D) $15,900
14.
Christopher Shays
(R) $14,675
15. Jack Reed (D) $10,500
16. Linda Ketner (D) $10,200
17. Chuck Hagel (R) $10,000
18. Gregory Meeks (D) $9,600
19. Tim Ryan (D) $9,200
20. Ron Paul (R) $9,001
231 Source: Center for Responsive Politics.
Campaign contribution totals accessed February
2009. Individual recipient numbers do
not include the 4th Quarter of 2008.
2006 Top Recipients
TOTAL: $1,153,733
1. Chris Dodd (D) $61,650
2. Harold E Ford Jr (D) $50,450
3. Hillary Clinton (D) $49,510
4. Bob Corker (R) $33,900
5. Mike DeWine (R) $30,000
6. Robert Menendez $28,450
7. Ben Nelson (D) $18,200
8. Chuck Hagel (R) $17,300
9. Rick Santorum (R) $16,800
10. George Allen (R) $14,050
11. Mike Ferguson (R) $12,400
12. Jim Matheson (D) $11,500
13. Christopher Shays (R) $10,450
14. Joe Lieberman (/I) $10,400
15. Sheldon Whitehouse (D) $10,200
16. Thomas Kean Jr (R) $10,150
17. Michael McGavick (R) $9,900
18. Ed Royce (R) $9,000
19. Geoff Davis (R) $8,700
20. David Dreier (R) $8,300
Appendix
137
2004 Top Recipients
TOTAL: $2,187,763
1. George W Bush (R) $580,004
2. David M Beasley (R) $118,500
3. John Kerry (D) $111,526
4. Charles Schumer (D) $50,250
5. Scott Paterno (R) $41,000
6. Arlen Specter (R) $29,600
7. Joe Lieberman (D) $27,900
8. Barack Obama (D) $21,000
9. Rick Santorum (R) $17,500
10. Tom Daschle (D) $13,000
11. Wesley Clark (D) $11,750
12. Richard C Shelby (R) $11,000
13. Howard Dean (D) $10,400
14.
Christopher s 'Kit'
Bond (R) $9,000
15.
Christopher Shays
(R) $8,200
16. Jay Helvey (R) $8,150
17. Christopher Cox (R) $7,675
18. Jim Bunning (R) $7,500
19. Lamar Alexander (R) $7,000
20. Michael R Turner (R) $6,750
2002 Top Recipients
TOTAL: $955,306
1. Charles Schumer (D) $76,750
2. Robert Torricelli (D) $13,500
3. Erskine Bowles (D) $12,000
4. Arlen Specter (R) $10,700
5. Lamar Alexander (R) $9,750
6. Elizabeth Dole (R) $9,200
7.
Christopher Shays
(R) $9,000
8. John Kerry (D) $7,250
9. Douglas Forrester (R) $6,750
10. Chellie Pingree (D) $6,250
11. Wayne Allard (R) $6,000
11. Hillary Clinton (D) $6,000
13. Rob Simmons (R) $5,500
14. Suzanne Terrell (R) $5,000
15. James M Talent (R) $4,700
16.
David Howard Fink
(D) $4,500
17. Jim Marshall (D) $4,250
17. Tom Strickland (D) $4,250
19. Max Baucus (D) $4,200
19. Norm Coleman (R) $4,200
2000 Top Recipients
TOTAL: $1,873,044
1. George W Bush (R) $132,425
2. Bill Bradley (D) $87,780
3. John McCain (R) $69,400
4. Rick A Lazio (R) $63,550
5. Al Gore (D) $28,500
6. Jon S Corzine (D) $24,250
7. Hillary Clinton (D) $22,925
8. Charles Schumer (D) $20,000
9. Spencer Abraham (R) $19,000
10. Phil Gramm (R) $17,000
11. Rudy Giuliani (R) $15,350
12. Dick Zimmer (R) $14,000
13. George Allen (R) $10,242
14. Orrin Hatch (R) $8,750
15. William Gormley (R) $8,500
16. Kent Conrad (D) $8,000
17. William Roth Jr (R) $7,250
18. Joe Lieberman (D) $7,000
18. Paul S Sarbanes (D) $7,000
Appendix
138
18. Robert Torricelli (D) $7,000
1998 Top Recipients
TOTAL: $1,027,531
1. Alfonse D'Amato (R) $53,200
2. Charles Schumer (D) $31,150
3.
Carol Moseley Braun
(D) $17,750
4. Bob Kerrey (D) $16,000
5. Chris Dodd (D) $14,250
6. Geraldine Ferraro (D) $10,500
7. Lauch Faircloth (R) $10,400
8. Evan Bayh (D) $10,300
9.
Daniel Patrick
Moynihan (R) $10,000
10. James M Casso (D) $9,000
10. Paul Coverdell (R) $9,000
12. Tom Daschle (D) $7,450
13. Gary A Franks (R) $6,750
13.
Christopher Shays
(R) $6,750
15. Spencer Abraham (R) $6,500
15. Michael Coles (D) $6,500
17.
Ben Nighthorse
Campbell (R) $6,000
18. David Wu (D) $5,750
19. Matt Fong (R) $5,500
19. Ellen Tauscher (D) $5,500
Appendix
139
Merrill Lynch Lobbying Expenditures:232
2008
TOTAL: $6,174,000
Merrill Lynch $4,700,000
Ernst & Young $604,000
Johnson, Madigan et al $240,000
Mayer, Brown et al $150,000
DLA Piper $210,000
Brownstein, Hyatt et al $120,000
Davis & Harman $80,000
Baptista Group $60,000
John Kelly Consulting $10,000
2007
TOTAL: $6,000,000
Merrill Lynch $4,420,000
Ernst & Young $600,000
DLA Piper $340,000
Mayer, Brown et al $160,000
Brownstein, Hyatt et al $120,000
Davis & Harman $120,000
Baptista Group $80,000
James E Boland Jr $80,000
John Kelly Consulting $80,000
2006
TOTAL: $6,397,760
Merrill Lynch $3,952,760
Mayer, Brown et al $1,100,000
Ernst & Young $605,000
DLA Piper $300,000
Davis & Harman $140,000
232 Source: Center for Responsive Politics.
Lobbying amounts accessed February 2009.
Brownstein, Hyatt et al $120,000
James E Boland Jr $80,000
John Kelly Consulting $80,000
Baptista Group $20,000
2005
TOTAL: $5,480,000
Merrill Lynch $4,160,000
Ernst & Young $600,000
DLA Piper $200,000
Brownstein, Hyatt et al $140,000
Davis & Harman $140,000
Deloitte Tax $120,000
James E Boland Jr $80,000
John Kelly Consulting $40,000
Seward & Kissel > $10,000*
2004
TOTAL: $5,770,000
Merrill Lynch $4,210,000
Ernst & Young $600,000
Piper Rudnick LLP $380,000
Deloitte Tax $240,000
Brownstein, Hyatt et al $140,000
Davis & Harman $120,000
James E Boland Jr $80,000
Seward & Kissel > $10,000*
2003
TOTAL: $4,825,000
Merrill Lynch $3,300,000
Ernst & Young $600,000
* Not included in totals
Appendix
140
Piper Rudnick LLP $460,000
Deloitte Tax $240,000
Davis & Harman $140,000
James E Boland Jr $65,000
Brownstein, Hyatt et al $20,000
Seward & Kissel > $10,000*
2002
TOTAL: $4,960,000
Merrill Lynch $3,100,000
Ernst & Young $600,000
Verner, Liipfert et al $580,000
Piper Rudnick LLP $320,000
Davis & Harman $160,000
James E Boland Jr $80,000
Seward & Kissel $60,000
Deloitte & Touche $40,000
Capitol Tax Partners $20,000
2001
TOTAL: $4,160,000
Merrill Lynch $2,940,000
Ernst & Young $620,000
Verner, Liipfert et al $300,000
Davis & Harman $140,000
OB-C Group $80,000
James E Boland Jr $60,000
Seward & Kissel $20,000
2000
TOTAL: $4,400,000
Merrill Lynch $3,660,000
* Not included in totals
Verner, Liipfert et al $240,000
Davis & Harman $200,000
OB-C Group $160,000
Ernst & Young $140,000
Swidler, Berlin et al > $10,000*
Wilmer, Culter & Pickering > $10,000*
1999
TOTAL: $5,400,000
Merrill Lynch $3,580,000
Ernst & Young $600,000
Swidler, Berlin et al $460,000
Verner, Liipfert et al $300,000
Davis & Harman $200,000
Rhoads Group $180,000
Seward & Kissel $40,000
George C Tagg $40,000
OB-C Group > $10,000*
1998
TOTAL: $5,510,000
Merrill Lynch $3,800,000
Washington Counsel $480,000
Swidler, Berlin et al $300,000
Verner, Liipfert et al $260,000
Rhoads Group $200,000
OB-C Group $160,000
Davis & Harman $160,000
Seward & Kissell $100,000
George C Tagg $50,000
* Not included in totals
Appendix
141
Merrill Lynch Covered Official Lobbyists:233
Firm / Name of Lobbyist Covered Official Position Year(s)
Ernst & Young
Badger, Doug Chief of Staff, Senate Majority Whip 12/98 1999-2002
Giordano, Nick
Minority Chief, Tax Counsel, Senate Committee
on Finance
1999-2000
2003-2008
Conklin, Brian Special Assistant to the President 2004
Merrill Lynch & Co, Inc
Thompson Jr, Bruce E.
Vice President, Director of Government
Relations 1999-2008
Kelly, John F. Vice President, Government Relations 1999-2005
Costantino Jr, Louis A. Director, Government Relations 2003-2008
Goldstein, Lon N. Director, Government Relations 2008
Micali, Mark A. Director, Government Relations 2008
Thibau, Janelle C. M. Director, Government Relations 2007-2008
Berry, Steven K. Managing Director, Government Relations 2008
Verner, Liipfert et al
Krasow, Cristina L.
Sr. Cloakroom Assistant, Sen. Dem. Cloakroom
1999
Hyland, James E. Legislative Director, Senator Kay Bailey 2003
Hutchison
OB-C Group
Calio, Nicholas E. Assistant to the President 2000-2005
Capitol Tax Partners, LLP
Fant, William
Dep. Asst. Secretary for Legislative Affairs
- Treasury 2002
Mikrut, Joseph Tax Legislative Counsel - US Treasury 2002
Talisman, Johnathan Asst. Treasury Secretary for Tax Policy 2002
233 Source: Senate Office of Public Records <http://soprweb.senate.gov/>. Accessed January 2009.
Appendix
142
Piper Rudnick, LLP
Hyland, James E. Legislative Director, Senator Hutchison 2002-2004
Brownstein Hyatt & Farber, P.C.
Mottur, Alfred
Sr. Telecommunications Counsel - Commerce
Committee 2003-2008
Chube, Ellen
Sr. Legislative Asst. - Cong. Harold Ford,
Jr.
Whonder, Carmencita
Staff Director - Subcommittee on House
Transport and 2008
Commercial Development; Min Stf Dir -
Subcomm on Econ.
Policy; Legislative Corresp. - Office of
Sen. Charles Schumer
Johnson, Madigan et al
Murphy, Sheila LD, Senator Klobuchar 2008
128  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 03:04:08 AM
Woof, 8th Post

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Part II:
Wall Streets
Washington Investment
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Wall Streets 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.
The entire financial sector (finance, insurance,
real estate) drowned political
candidates in campaign contributions,
spending more than $1.738 billion in federal
elections from 1998-2008. Primarily reflecting
the balance of power over the decade,
about 55 percent went to Republicans and
45 percent to Democrats. Democrats took
just more than half of the financial sectors
2008 election cycle contributions.
The industry spent even more topping
$3.3 billion on officially registered
lobbyists during the same period. This total
certainly underestimates by a considerable
amount what the industry spent to influence
policymaking. U.S. reporting rules require
that lobby firms and individual lobbyists
disclose how much they have been paid for
lobbying activity, but lobbying activity is
defined to include direct contacts with key
government officials, or work in preparation
for meeting with key government officials.
Public relations efforts and various kinds of
indirect lobbying are not covered by the
reporting rules.
During the decade-long period:
Commercial banks spent more than
$154 million on campaign contributions,
while investing $383 million
in officially registered lobbying;
Accounting firms spent $81 million
on campaign contributions and $122
million on lobbying;
Insurance companies donated more
than $220 million and spent more
than $1.1 billion on lobbying; and
Securities firms invested more than
$512 million in campaign contributions,
and an additional nearly $600
million in lobbying. Hedge funds, a
subcategory of the securities industry,
spent $34 million on campaign
contributions (about half in the 2008
election cycle); and $20 million on
lobbying. Private equity firms, a
subcategory of the securities industry,
contributed $58 million to federal
candidates and spent $43 million
on lobbying.
Individual firms spent tens of millions
of dollars each. During the decade-long
period:
Goldman Sachs spent more than $46
million on political influence buying;
Merrill Lynch spent more than $68
million;
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Citigroup spent more than $108 million;
Bank of America devoted more than
$39 million;
JPMorgan Chase invested more than
$65 million; and
Accounting giants Deloitte &
Touche, Ernst & Young, KPMG and
Pricewaterhouse spent, respectively,
$32 million, $37 million, $27 million
and $55 million.
The number of people working to advance
the financial sectors political objectives
is startling. In 2007,211 the financial
sector employed a staggering 2,996 separate
lobbyists to influence federal policy making,
more than five for each Member of Congress.
This figure only counts officially
registered lobbyists. That means it does not
count those who offered strategic advice
or helped mount policy-related PR campaigns
for financial sector companies. The
figure counts those lobbying at the federal
level; it does not take into account lobbyists
at state houses across the country. To be
clear, the 2,996 figure represents the number
of separate individuals employed by the
financial sector as lobbyists in 2007. We do
not double count individuals who lobby for
more than one company; 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.
whopping 6,738.
Within the financial sector, industry
groups deployed legions of lobbyists. In
2007:212
Accounting firms employed 178
lobbyists;
Insurance companies had 1,219 lobbyists
working for them;
Real estate interests hired 1,142
lobbyists;
Finance and credit companies employed
415 lobbyists;
Credit unions maintained 96 lobbyists;
Commercial banks employed 421
lobbyists;
Securities and investment firms
maintained 1,023 lobbyists; and
Miscellaneous other financial companies
employed 134 lobbyists.
A great many of those lobbyists entered
and exited through the revolving door
connecting the lobbying world with government.
Surveying only 20 leading firms in
the financial sector (none from the insurance
industry or real estate), we found that 142
212 These figures do not double count within the
industry group, but total more than the figure
for the entire financial sector because we
did not eliminate overlaps between industry
sectors. Thus, for these totals, if John Smith
works as a lobbyist for two accounting
firms, he counts as only one lobbyist for the
accounting industry. If he works as a lobbyist
for an accounting firm and an insurance
company, he counts as one for the accounting
industry and one for the insurance industry.
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industry lobbyists during the period 1998-
2008 had formerly worked as covered
officials in the government. Covered
officials are top officials in the executive
branch (most political appointees, from
members of the cabinet to directors of
bureaus embedded in agencies), Members of
Congress, and congressional staff.
Nothing evidences the revolving door
or Wall Streets direct influence over policymaking
more than the stream of Goldman
Sachs expatriates who left the Wall
Street goliath, spun through the revolving
door, and emerged to hold top regulatory
positions. Topping the list, of course, are
former Treasury Secretaries Robert Rubin
and Henry Paulson, both of whom had
served as chair of Goldman Sachs before
entering government.
In the charts that follow in this part, we
detail campaign contributions and lobby
expenditures from 1998-2008 for the overall
financial sector and for the industry components
of the sector. We also provide aggregated
information on number of industry
lobbyists and number of industry lobbyists
circling through the revolving door. In the
appendix to this report, we provide extensive
information on the campaign contributions
and lobbyists of 20 leading companies
in the financial sector five each from
commercial banking, securities, accounting
and hedge fund industries. For each profiled
company, we identify the top 20 recipients
of their campaign contributions for each
election cycle over the last decade; the lobby
firms they employed each year, and the
amount paid to those firms; and covered
official lobbyists they employed (i.e., lobbyists
formerly employed as top officials in the
executive branch, or as former Members of
Congress or congressional staff).
  
Methodological Note
Our information on campaign contributions
and lobby expenditures comes from mandated
public filings, and the enormously
helpful data provided by the Center for
Responsive Politics.
Our figures on total and annual sector,
industry and firm campaign contributions
and lobby expenditures are drawn from the
Center for Responsive Politics.
Our campaign contribution data is organized
by biannual Congressional election
cycles. Thus the total for 1998 also includes
contributions made in 1997.
Our data on total number of official
lobbyists is compiled from data prepared by
the Center for Responsive Politics. The
Center for Responsive Politics lobbyist
database lists all individual lobbyists reporting
to the Senate Office of Public Records.
We tallied up totals from that database.
Our data on number of covered official
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lobbyists is drawn from the original disclosure
statements filed with the Senate Office
of Public Records.
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. In four cases where the Center had
not compiled the data, we compiled the
information using the Centers raw data on
individual campaign contributors and information
on the companys political action
committee (PAC) contributions. That is, we
tracked donations from every person with,
for example, Lehman Brothers as an employer,
213 compiled them into a database;
added in the Lehman Brothers PAC contributions;
and then list the top 20 recipients.
We compiled donations for Lehman Brothers,
Wachovia, Wells Fargo and KPMG.
  
213 Our compilation is based only on the top
1,000 largest contributors affiliated with
each company.
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Financial Sector
Campaign Contributions and Lobbying Expenditures
Finance, Insurance, Real Estate
$5,178,835,253
Decade-long campaign contribution total (1998-2008): $1,738,284,032
Decade-long lobbying expenditure total (1998-2008): $3,440,551,221
Campaign Contributions
2008 $442,535,157
2006 $259,023,355
2004 $339,840,847
2002 $233,156,722
2000 $308,638,091
1998 $155,089,860
Lobbying Expenditures
2008 $454,879,133
2007 $417,401,740
2006 $374,698,174
2005 $371,576,173
2004 $338,173,874
2003 $324,865,802
2002 $268,886,799
2001 $235,129,868
2000 $231,218,026
1999 $213,921,725
1998 $209,799,907
Source: Center for Responsive Politics, <www.opensecrets.org>.
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Financial Sector
Official Lobbyists
Finance, Insurance, Real Estate
2007 total official lobbyists for financial sector: 2,996
Covered official lobbyists for 20 profiled firms,
Decade-long total (1998-2008): 142
Source: Center for Responsive Politics, <www.opensecrets.org>.
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Securities Firms
Decade-long campaign contribution industry total (1998-2008):
$512,816,632
Decade-long lobbying expenditure industry total (1998-2008):
$599,955,649
Campaign Contributions for 5 Leading Firms
Bear Stearns $6,355,737
Goldman Sachs $25,445,983
Lehman Brothers $6,704,574
Merrill Lynch $9,977,724
Morgan Stanley $14,367,857
Lobbying Expenditures for 5 Leading Firms
Bear Stearns $9,550,000
Goldman Sachs $21,637,530
Lehman Brothers $8,660,000
Merrill Lynch $59,076,760
Morgan Stanley $20,835,000
Source: Center for Responsive Politics, <www.opensecrets.org>.
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Commercial Banks
Decade-long campaign contribution industry total (1998-2008):
$154,868,392
Decade-long lobbying expenditure industry total (1998-2008):
$382,943,342
Campaign Contributions for 5 Leading Firms
Bank of America $11,629,260
Citigroup $19,778,382
JP Morgan Chase & Co $15,714,953
Wachovia Corp. $3,946,727
Wells Fargo $5,330,022
Lobbying Expenditures for 5 Leading Firms
Bank of America $28,635,440
Citigroup $88,460,000
JP Morgan Chase & Co $49,372,915
Wachovia Corp. $11,996,752
Wells Fargo $16,637,740
Source: Center for Responsive Politics, <www.opensecrets.org>.
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Hedge Funds*
Decade-long campaign contribution industry total (1998-2008):
$33,742,815
Decade-long lobbying expenditure industry total (1998-2008):
$20,252,000
Campaign Contributions for 5 Leading Firms
Bridgewater Associates $274,650
DE Shaw Group $3,100,255
Farallon Capital Management $1,058,953
Och-Ziff Capital Management $338,552
Renaissance Technologies $1,560,895
Lobbying Expenditures for 5 Leading Firms
Bridgewater Associates $855,000
DE Shaw Group $680,000
Farallon Capital Management $1,005,000
Och-Ziff Capital Management $200,000
Renaissance Technologies $740,000
* Hedge fund contributions are included in the overall securities campaign contributions and lobbying
expenditure totals.
Source: Center for Responsive Politics, <www.opensecrets.org>.
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Accounting Firms
Decade-long campaign contribution industry total (1998-2008):
$81,469,000
Decade-long lobbying expenditure industry total (1998-2008):
$121,658,156
Campaign Contributions for 5 Leading Firms
Arthur Andersen $3,324,175
Deloitte & Touche $12,120,340
Ernst & Young $12,482,407
KPMG LLP $8,486,392
Pricewaterhouse $10,800,772
Lobbying Expenditures for 5 Leading Firms
Arthur Andersen $1,900,000
Deloitte & Touche $19,606,455
Ernst & Young $25,108,536
KPMG LLP $19,103,000
Pricewaterhouse $44,291,084
Source: Center for Responsive Politics, <www.opensecrets.org>.
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Conclusion and
Recommendations:
Principles for a New
Financial Regulatory
Architecture
For more than 25 years, regulatory control
over the financial sector has steadily eroded.
This deregulatory trend accelerated in the
last decade: In 1999, Congress, with the
support of the Clinton White House passed
the Gramm-Leach-Bliley Act of 1999,
removing the firewalls between commercial
banking on the one hand and investment
banking and insurance on the other; federal
agencies declined to regulate financial
derivatives and Congress then enshrined this
head-in-the-sand policy as law; federal
regulators rationalized the subprime lending
boom as good housing policy rather than the
ticking time bomb that it self-evidently was;
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.
All of these deregulatory moves created
the conditions for the current financial
implosion.
The dangers inherent in these policies
were evident to any careful observer. Consumer
groups, some investor advocates,
independent economists and analysts, and
some regulators all sounded the alarm as
each of the actions chronicled in this report
were first proposed.
Those warnings were ignored, however.
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.
Now, after the trillions of dollars in
taxpayer money has been spent, there is
widespread agreement that deregulation
went too far, and that new regulatory initiatives
are required. But as with each of the
twelve steps on the road to financial ruin,
the financial industry is resisting meaningful
reforms.
The repeal of Glass-Steagall and the
bank mergers already authorized cannot
easily be undone, but both those issues
require very careful scrutiny. The leading
independent investment banks have all
merged into commercial banks or converted
themselves into bank holding companies;
the very severe risk is that the investment
bank culture will again influence traditional
banking operations, and encourage dangerous
and unsustainable risk-taking. The bank
merger trend is actually escalating as a
consequence of the financial crisis, as fed110
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eral regulators bless shot-gun marriages in
order to avoid committing still more taxpayer
money to making depositors whole.
But much more care should taken in authorizing
additional mergers. Also, as Bert Foer
of the American Antitrust Institute points
out, many of the recently consummated
mergers are almost certain to fail. Policymakers
need to take a comprehensive assessment
of banking concentration; for if the
existing high levels of concentration are to
be permitted, regulatory review must be
much more intensive, and controls on big
bank activity much more extensive.
Beyond undoing the deregulatory maneuvers
documented in this report, an affirmative
regulatory agenda must establish a
new framework for financial sector regulation.
It should aim to reduce the size of the
financial sector, reduce reliance on overly
complicated financial instruments, and
provide robust and multi-faceted protections
for consumers. We, and many others, will be
proposing specific regulatory reforms over
the course of the next year. Here, we concluded
with overarching premises that
should guide the new financial regulatory
architecture.
1. The financial sector should serve and
be subordinate to the real economy.
From 2004-2007, financial sector profits
amounted to more than a third of overall
corporate profits. This is and should have
been treated as conclusive evidence of a
financial system out of control, one that was
beginning to devour rather than serve the
real economy. There should be no deference
shown to Wall Street interests complaining
that a new regulatory regime will hurt their
profitability. The Wall Street operators have
destroyed their own institutions, and their
earlier profits are now revealed to be only
the froth from a bubble economy and financial
sleight-of-hand. In any case, the American
economy cannot be based on finance
and the trading of paper. Looking back, we
see that the financial economy did not
increase Americas true wealth, but just the
opposite: Wall Street siphoned profits from
the real economy, and from the checking
accounts of consumers, workers and investors,
until the system collapsed, and consumer,
workers and investors were asked to
foot the bill.
2. Hedge funds and financial derivatives
must be regulated.
What is a hedge fund? As a legal matter, 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). But more important, these nonregulated
entities pose systemic risks to the
SOLD OUT 111
financial sector, not just to the wealthy.
Cities, states, colleges, non-profit organizations,
and every American turned out to be
at risk from the machinations of the socalled
sophisticated financial sector. All
investment vehicles must be subjected to the
same regulatory requirements and those
standards must be elevated dramatically.
Finally, not all financial derivatives should
be permitted to continue to trade. But those
for which a legitimate purpose can be shown
must be brought into the regulatory system,
with guarantees of transparency, restrictions
on leverage and requirements for skin in
the game.
3. Enhanced standards of transparency.
Hedge funds, investment banks, insurance
companies and commercial banks have
engaged in such complicated and intertwined
transactions that no one could track
who owes what, to whom. AIG apparently
didn't even know who it had insured, and on
what terms, through the credit default swaps
it participated in. Moreover, the packaging
and re-packaging of mortgages into various
esoteric securities undermined the ability of
the financial markets to correctly value these
financial instruments. Baseline transparency
requirements must include an end to off-thebooks
transactions, detailed reporting of
holdings by all investment funds, and selling
and trading of all permitted financial derivatives
on regulated and public exchanges.
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, tranching of
securities214) that add complexity and confusion,
but no social value.
4. Prohibit certain financial instruments.
Wall Street has proved Warren Buffett right
in labeling financial derivatives weapons of
financial destruction. Synthetic collateralized
debt obligations a kind of credit
default swap215 are among the worst
abuses of the current system, enabling
legalized, large-scale betting by entities not
party to the underlying transaction. 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. They should
214 For further discussion of the case for
prohibiting tranching, see Robert Kuttner,
Financial Regulation: After the Fall,
Demos, January 2009, available at:
<http://www.demos.org/publication.cfm?cur
rentpublicationID=B8B65B84%2D3FF4%2
D6C82%2D5F3F750B53E44E1B>.
215 See also this helpful discussion explaining
synthetic CDOs from Portfolios Felix
Salmon, available at:
<http://www.portfolio.com/views/blogs/mar
ket-movers/2008/11/28/understandingsynthetics>.
Essential, synthetic CDOs
involve the creation of insurance on a bond
(someone pays for the insurance, and
someone agrees to insure against failure of
the bond), with one important condition:
neither party actually holds the bond.
112 SOLD OUT
be prohibited.
5. Adopt the precautionary principle216
for exotic financial instruments.
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. They should be required to show
the affirmative, social benefit of the new
instrument, and prove why these benefits
outweigh risks. They should be specifically
required to explain why the instrument does
not worsen financial systemic risk, taking
into account recent experience where purported
diversification of risk led to its spread
and exponential increase. Regulators should
maintain a strong bias against complicated
new instruments, recognizing that complexity
both introduces inherent uncertainty and
is often used to obscure dangers, risks and
bad investments.217
216 The precautionary principle is a term most
frequently used in the environmental
context. It suggests that, for example, before
a chemical can be introduced on the market,
it must be shown to be safe. This approach
stands against the notion that a new
chemical is presumed safe and permitted on
the market, until regulators can prove that it
is not.
217 See Plunge: How Banks Aim to Obscure
Their Losses, An Interview with Lynn
Turner, Multinational Monitor,
November/December 2008, available at:
<http://www.multinationalmonitor.org/mm2
008/112008/interview-turner.html> (Wall
Street typically designs these things so that
they hide something from the public or their
investors. So when you have the CDOs
6. Limit leverage.
High flyers like leveraged investments
because they offer the possibility of very
high returns. But, as we have seen, they also
enable extremely risky investments that can
vastly exceed an investor's actual assets.
This degree of leverage turns the financial
system into a game of musical chairs
those left standing when the music stops are
wiped out. 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. There should be
stringent restrictions on the use of leverage
by all players in the financial system. These
include enhanced capital requirements for
banks and investment banks (and especially
the build-up of capital in good times); and
increased margin requirements, so that
parties buying securities, futures or options
must put up more collateral.
7. Impose a financial transactions tax.
A small tax on each financial transaction218
[collateralized debt obligations] built on top
of the other CDOs, they hide what the
underlying assets are really like, or what the
underlying mortgages are really like. In
some of the off-balance sheet special
purpose entities, like with Enron, it was to
hide their financing.)
218 Pollin, Baker and Schaberg suggest a .5
percent tax on stock trades, and comparable
burdens on other transactions (for example,
this works out to .01 percent for each
remaining year of maturity on a bond.) See
Robert Pollin, Dean Baker, and Marc
SOLD OUT 113
would discourage speculation, curb the
turbulence in the markets, and, generally,
slow things down. It would give realeconomy
businesses more space to operate
without worrying about how today's decisions
will affect their stock price tomorrow,
or the next hour. And it would be a steeply
progressive tax that could raise substantial
sums for useful public purposes.
8. Crack down on excessive pay and the
Wall Street bonus culture.
Wall Street salaries and bonuses are out of
control. The first and most simple demand is
to ensure no bonus payments for firms
receiving governmental bailout funds. If
they had to be bailed out, why does anyone
in the firm deserve a bonus? Even more
importantly, bonus payments with taxpayer
money is an outrageous misuse of public
funds.
Beyond the bailouts, however, there is
a need to address the Wall Street bonus
culture. Paid on a yearly basis, Wall Street
bonuses can be 10 or 20 times base salary,
and commonly represent as much as four
fifths of employees' pay. In this context, it
makes sense to take huge risks. The payoffs
from benefiting from risky investments or a
bubble are dramatic, and theres no reward
Schaberg, Financial Transactions Taxes for
the U.S. Economy, 2002, Political
Economy Research Institute, available at:
<http://www.peri.umass.edu/236/hash/aef97
d8d65/publication/172>.
for staying out. Wall Street compensation
should be lowered overall, but most important
is imposing legal requirements that
compensation be tied to long-term performance.
If employees had to live with the longterm
consequences of their investment
decisions, they would employ very different
strategies.
9. Adopt a financial consumer protection
agenda.
Commercial banks and Wall Street backers
have, to a considerable extent, built their
business model around abusive lending
practices. Predatory mortgage lenders, credit
card companies, student loan corporations
all pushed unsustainable levels of credit,
on onerous terms frequently indecipherable
to borrowers, and with outrageous hidden
fees and charges. A new financial consumer
protection agency should be established;
interest rates, 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). Impediments to
legal accountability for fraud and other
unlawful conduct, such as the holder in due
course rule, preemption of state laws, and
the Private Securities Litigation Reform Act
should be withdrawn or repealed.
114 SOLD OUT
10. Give consumers the tools to organize
themselves.
Federal law should empower consumers to
organize into independent financial consumers
associations. Lenders should be required
to facilitate such organization by their
borrowers (through mailings to borrowers,
on behalf of independent consumer organizations),
as should corporations to their
shareholders. With independent organizations
funded by small voluntary fees, consumers
could hire their own independent
representatives to review financial players
activities, scour their books, and advocate
for appropriate public policies.
  
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.S. and global economies
in the process.
The deregulatory decisions profiled in
this report were not made on their merits. At
almost every step, 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.
Good arguments could not
compete with the combination of political
influence and a reckless and fanatical zeal
for deregulation. $5 billion buys a lot of
friends. In one sense, this report can be
considered a case study in the need for the
elimination of special interest money from
American politics, but Congress will address
financial re-regulation this year, and reform
of our political process does not appear on
the horizon. The emergent consensus on the
imperative to re-regulate the financial sector
demonstrates that, in the wake of the financial
meltdown, the prevailing regulatory
paradigm has shifted. Whether the forces
that brought Americas economy to the
precipice can be forced to accede to that
shift whether the public interest will
prevail remains to be seen.
  
Appendix 115
Appendix: Leading Financial Firm Profiles of Campaign
Contributions and Lobbying Expenditures
Securities Firms .. 115
1. Bear Stearns ........ 115
2. Goldman Sachs 121
3. Lehman Brothers ......................................................................................... 129
4. Merrill Lynch .............................................................................................. 135
5. Morgan Stanley ....... 142
Commercial Banks . 148
1. Bank of America ............. 148
2. Citigroup ......... 155
3. JP Morgan Chase & Co................................................................................... 164
4. Wachovia Corp. .............................................................................................. 171
5. Wells Fargo ............ 177
Hedge Funds ....... 183
1. Bridgewater Associates ........... 183
2. DE Shaw Group .. 185
3. Farallon Capital Management ......................................................................... 189
4. Och-Ziff Capital Management ........................................................................ 193
5. Renaissance Technologies .......... 196
Accounting Firms 199
1. Arthur Andersen .......... 199
2. Deloitte & Touche ....... 203
3. Ernst & Young ............................................................................................ 210
4. KPMG LLG ................................................................................................ 217
5. Pricewaterhouse .......... 224
129  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 03:01:33 AM
Woof, 7th Post;

80 SOLD OUT
FANNIE AND FREDDIE
ENTER THE SUBPRIME
MARKET
The Federal National Mortgage Association
was created in 1938, during Franklin D.
Roosevelts administration, as a federal
government agency to address the lack of a
consistent supply of mortgage funds. Fannie
Mae, as it is popularly known, became a
private, shareholder-owned corporation in
1968.144 As a government sponsored enterprise
(GSE) chartered by Congress, Fannie
Maes purpose is to purchase mortgages
from private bankers and other lenders so
that they have additional funds to continue
originating new mortgages. Fannie Mae
does not issue or originate new loans, but
private lenders seek to sell their loans to
Fannie, which maintains specific dollar
value ceilings for the repurchasing of single
and multi-family loans and does not purchase
high-end loans (i.e., loans for expensive
homes). Because many private lenders
hope to sell their mortgages to Fannie, its
loan purchasing criteria have a substantial
influence on the prudence of the mortgages
that lenders issue.
The Federal Home Loan Mortgage
Corporation, or Freddie Mac,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. As with
Fannie Mae, Freddie Mac does not issue or
originate new loans. Instead, Freddie buys
loans from private lenders in order to provide
added liquidity to fund Americas
housing needs.146
144 12 U.S.C. 1716b et seq. (1968).
145 Emergency Home Finance Act, 12 U.S.C.
1401 (1970).
146 Federal Home Loan Mortgage Corporation
10
IN THIS SECTION:
At the peak of the housing boom, Fannie Mae
and Freddie Mac were dominant purchasers
in the subprime secondary market. The
Government-Sponsored Enterprises were
followers, not leaders, but they did end up
taking on substantial subprime assets at
least $57 billion. The purchase of subprime
assets was a break from prior practice,
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. In fact, the motivation
was the for-profit nature of the institutions
and their particular executive incentive
schemes. 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. They are responsible
for their own demise, and the resultant
massive taxpayer liability.
SOLD OUT 81
Fannie Mae began converting mortgages
it acquired into mortgage-backed
securities (MBSs) in 1970.147 An MBS is
created by pooling thousands of purchased
mortgages into a single security for trade on
Wall Street. By selling MBSs to investors,
Fannie obtains additional funds to buy
increasing numbers of mortgages from
private lenders who, in turn, use the added
liquidity (cash) to originate new home loans.
By purchasing mortgages from private
lenders, however, Fannie Mae incurs all the
risk of default by borrowers, providing an
incentive for lenders to make risky loans,148
and making it vital that Fannie exercise care
in determining which loans it acquires.
Traditionally, Fannie only purchased high
quality loans that conform to relatively
stringent standards, including that the borrower
provided a 20 percent down payment.
Even after it sells MBSs, Fannie guarantees
payment to buyers of the MBSs effectively
providing insurance on the securities.
The laws establishing Fannie Mae and
website, Frequently Asked Questions
About Freddie Mac, undated, available at:
<http://www.freddiemac.com/corporate/com
pany_profile/faqs/index.html>.
147 Federal National Mortgage Association
website, About Fannie Mae, October 7,
2008, available at:
<http://www.fanniemae.com/aboutfm/index.
jhtml;jsessionid=XUMTTVZMCQYSHJ2F
QSISFGA?p=About+Fannie+Mae>.
148 Ivo Welch, Corporate Finance: An
Introduction, Prentice-Hall, 2008, available
at:
<http://welch.econ.brown.edu/oped/finsyste
m.html>.
Freddie Mac provide no explicit guarantee
of their debt obligations. Nonetheless,
investors throughout the world assumed that
because the entities are so intertwined with
the U.S. government and so central to U.S.
housing policy, the federal government
would never to allow Fannie or Freddie to
default on its debt. Because they were
considered quasi-governmental, Fannie and
Freddie enjoyed the highest-graded rating
(Triple-A) from independent ratings firms,
despite holding little capital in reserve as
against the scale of their outstanding
loans.149
In 1992, Congress passed and President
George H.W. Bush signed into law the
Federal Housing Enterprises Financial
Safety and Soundness Act. This law established
risk-based and minimum capital
standards150 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. OFHEO, however, had limited
authority. The legislation also required
Fannie and Freddie to devote a minimum
percentage of their lending to support affordable
housing.
149 Ivo Welch, Corporate Finance: An
Introduction, Prentice-Hall, 2008, available
at:
<http://welch.econ.brown.edu/oped/finsyste
m.html>.
150 About Fannie Mae: Our Charter, Fannie
Mae website, October 29, 2008, available at:
<http://www.fanniemae.com/aboutfm/charte
r.jhtml>.
82 SOLD OUT
In 1999, Fannie Mae softened the standards
it required of loans that it purchased.
The move came in response to pressure from
the banking and thrift
industries, which wanted to
extend subprime lending
(and wanted Fannie Mae to
agree to purchase subprime
loans), and from federal
officials who wanted Fannie
and Freddie to buy more
private industry mortgages
made to low and moderateincome
families.151
As the housing bubble
inflated starting in 2001,
banks and especially non-bank lenders made
an increasing number of subprime loans,
peaking in the years 2004-2006. Fannie and
Freddie were major players in the secondary
market, buying up bundles of subprime
loans that were traded on Wall Street.
They purchased 44 percent of subprime
securities on the secondary market in 2004,
33 percent in 2005 and 20 percent in
2006.152
151 Steven A. Holmes, Fannie Mae Eases Credit
to Aid Mortgage Lending, New York
Times, September 30, 1999, available at:
<http://query.nytimes.com/gst/fullpage.html
?res=9c0de7db153ef933a0575ac0a96f95826
0&sec=&spon=&pagewanted=all>.
152 Carol D. Leonnig, How HUD Mortgage
Policy Fed the Crisis, Washington Post,
June 10, 2008, available at:
<http://www.washingtonpost.com/wpdyn/
content/article/2008/06/09/AR20080609
02626_pf.html>.
But Fannie and Freddie were not buying
subprime mortgages directly in significant
quantities, in part because the most
predatory subprime loans
did not meet their lending
standards. The two firms
purchased just 3 percent
of all subprime loans
issued from 2004 through
2007, most of that in 2007
alone.153 Subprime loans
represented 2 percent of
Fannie Maes singlefamily
mortgage credit
book of business at the
end of 2006, and 3 percent
at the end of 2005.154
Fannie and Freddies large-scale purchases
of subprime mortgage-back securities
on the secondary market may have facilitated
greater subprime lending than otherwise
would have occurred, but to a considerable
extent the companies were victims
rather than perpetrators of the subprime
crisis. That is, they were not driving the
market, so much as getting stuck with bad
products already placed on the market.
153 Ronald Campbell, Most Subprime Lenders
Werent Subject to Federal Lending Law,
Orange County Register, November 16,
2008, available at:
<http://www.ocregister.com/articles/loanssubprime-
banks-2228728-law-lenders>.
154 Fannie Mae form 10-K, for the fiscal year
ending December 31, 2006, pF-78.
Fannie and Freddies largescale
purchases of subprime
mortgage-back securities on
the secondary market may
have facilitated greater
subprime lending than
otherwise would have
occurred.
SOLD OUT 83
The two companies also trailed the
market, entering into the subprime arena
because they felt at a competitive disadvantage
as against other
housing market players.
Internal Fannie memos
obtained by the House
Oversight Committee
show the company was
very concerned that it was
rapidly losing market
share to Wall Street
securitizers. Our pricing
is uncompetitive. According
to our models, market
participants today are not
pricing legitimately for
risks, noted a top-level memo.155 The same
memo noted the risks of pursuing more
aggressive strategies noting that Fannie
had a lack of knowledge of the credit
risks156 and urged that the company
stay the course. Numerous other internal
sources echoed this recommendation.157 Yet
155 Single Family Guaranty Business: Facing
Strategic Crossroads, June 27, 2005, p. 18,
available at:
<http://oversight.house.gov/documents/2008
1209103003.pdf>.
156 Single Family Guaranty Business: Facing
Strategic Crossroads, June 27, 2205, p. 9,
available at:
<http://oversight.house.gov/documents/2008
1209103003.pdf>.
157 See Opening Statement of Rep. Henry A.
Waxman, Committee on Oversight and
Government Reform, The Role of Fannie
Mae and Freddie Mac in the Financial Crisis,
December 9, 2008, available at:
Fannie increased its direct investment in
riskier loans despite these cautionary warnings
and even as the housing bubble was
coming to an end.
Today, Freddie and
Fannie own or guarantee
more than $5 trillion in
mortgages158 and regularly
issue MBSs. Fannie itself is
the largest issuer and guarantor
of MBSs. Both agencies
were purchasing risky
subprime loans on the
secondary market from
2004 to 2007, but they were
not required to report mortgage
losses on the balance
sheet. As a result, both investors and regulators
were unaware of the extent of their
growing mortgage problems. The companies
significant investments in the riskiest
elements of the market would bring their
demise in Fall 2008, when the federal government
placed them in conservatorship to
prevent them from collapsing altogether.159
The federal government has infused
<http://oversight.house.gov/story.asp?ID=22
52>.
158 Freddie Mac lobbied against regulation bill,
Associated Press, October 19, 2008, available
at:
<http://www.msnbc.msn.com/id/27266607/
>.
159 See statement by Treasury Secretary Henry
Paulson, September 7, 2008, and related materials,
available at:
<http://www.ustreas.gov/press/releases/hp11
29.htm>.
Perceived as quasigovernmental
agencies,
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.
84 SOLD OUT
$200 billion into Fannie and Freddie, and
more will follow. Even if Fannie and
Freddie did not create the financial crisis,
their reckless decisions are now forcing a
mammoth drain of taxpayer resources.
Perceived as quasi-governmental agencies,
Fannie and Freddie were in fact subjected
to government regulation but the
regulators hands were tied by a Congress
lobbied by Fannie and Freddie. The companies
lobbied heavily to avoid requirements
for larger capital reserves, stronger government
oversight, or to limit their acquisition
of packages of risky loans. In general,
Democrats were far more protective of
Fannie and Freddie than Republicans, many
of whom were hostile to the GSEs government
ties. Many Democrats sought to protect
Fannie and Freddie from stringent
regulatory oversight and capital reserve
requirements, but Republicans were heavily
lobbied as well.
In 2005, for example, Freddie Mac paid
$2 million to Republican lobbying firm DCI
Inc. to defeat legislation sponsored by
Senator Chuck Hagel, R-Nebraska, that
would have imposed tougher regulations on
Freddies loan repurchase activities.160 The
legislation languished in the Senate Banking,
Housing and Urban Affairs Committee
160 Freddie Mac Lobbied Against Regulation
Bill, Associated Press, October 19, 2008,
available at:
<http://www.msnbc.msn.com/id/27266607/
>.
with all Republican committee members
supporting it and all Democratic members
opposed. Hagel and 25 other Republican
senators pleaded unsuccessfully with Senate
Majority Leader Bill Frist, R-Tennessee, to
allow a vote on the bill.
If effective regulatory reform legislation
... is not enacted this year, American
taxpayers will continue to be exposed to the
enormous risk that Fannie Mae and Freddie
Mac pose to the housing market, the overall
financial system and the economy as a
whole, the senators wrote in a letter.161
The Associated Press reported, In the
end, there was not enough Republican
support for Hagels 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 The former chair of
the House Financial Services Committee,
Michael Oxley, R-Ohio, complained that
efforts to regulate Fannie and Freddie were
blocked by the Bush administration, the
Treasury Department and the Federal Reserve.
What did we get from the White
House? We got a one-finger salute, Oxley
161 Freddie Mac Lobbied Against Regulation
Bill, Associated Press, October 19, 2008,
available at:
<http://www.msnbc.msn.com/id/27266607/
>.
162 Freddie Mac Lobbied Against Regulation
Bill, Associated Press, October 19, 2008,
available at:
<http://www.msnbc.msn.com/id/27266607/
>.
SOLD OUT 85
would recall in 2008.163
Democrats believed in Fannie and
Freddie as ways to expand credit to low- and
middle-income communities, but they were
also responsive to massive lobbying efforts.
From 1998 to 2008, Fannie Mae spent
$80.53 million on federally registered
lobbyists. During the same period, Freddie
Mac spent $96.16 million on lobbyists.164
  
163 Greg Farrell, Oxley Hits Back at Ideologues,
Financial Times, September 9,
2008.
<http://thinkprogress.org/2008/09/15/barney
-frank-mccain-reform/>.
164 Totals compiled from annual data available
from the Center for Responsive Politics,
<www.opensecrets.org>.
86 SOLD OUT
Community Reinvestment Act: Not Guilty
Congress passed and President Jimmy
Carter signed the Community Reinvestment
Act (CRA) into law in 1977. The purpose of
this law was to encourage banks to increase
their very limited lending in low- and moderate-
income and minority neighborhoods
and more generally to low- and moderateincome
and minority borrowers.165
Congress passed this law in large part because
too many lenders were discriminating
against minority and low- and moderateincome
neighborhoods. 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. The CRA has been in place for 30
years, but some corporate-backed and libertarian
think tanks and policy groups, as well as
some Republican members of Congress, now
claim CRA is responsible for the current
financial disaster. Nothing in the CRA requires
banks to make risky loans.166
Leading regulators agree that CRA was
not responsible for predatory lending, let
165 Federal Financial Institutions Examination
Council website, Community Reinvestment
Act: Background & Purpose, Undated,
available at:
<http://www.ffiec.gov/cra/history.htm>.
166 Federal Reserve Board website, Community
Reinvestment Act, Undated, available at:
<http://www.federalreserve.gov/dcca/cra/>.
alone the broader financial crisis.
John Dugan, Comptroller of the Currency
said, CRA is not the culprit behind the subprime
mortgage lending abuses, or the broader
credit quality issues in the marketplace.167
Federal Reserve Board Governor Randall
S. Kroszner said he has not seen any evidence
that CRA has contributed to the erosion of
safe and sound lending practices.168
FDIC Chairman Sheila Bair said, I
think we can agree that a complex interplay
of risky behaviors by lenders, borrowers,
and investors led to the current financial
storm. To be sure, theres plenty of blame to
go around. However, I want to give you my
verdict on CRA: NOT guilty.169
Most predatory loans were issued by
non-bank lenders that were not subject to
CRA requirements.
167 Reuters, U.S. financial system in better
shape-OCCs Dugan, November 19, 2008,
available at:
<http://www.reuters.com/article/regulatoryN
ewsFinancialServicesAndRealEstate/
idUSN1946588420081119>.
168 Remarks of Randall S. Kroszner, Governor of
the Board of Governors of the Federal Reserve
System, Confronting Concentrated
Poverty Policy Forum, December 3, 2008,
available at:
<http://www.federalreserve.gov/newsevents/s
peech/kroszner20081203a.htm>.
169 Remarks by Sheila Bair, Chairperson of the
FDIC, Before the New America Foundation,
December 17, 2008, available at:
<http://www.fdic.gov/news/news/speeches/ar
chives/2008/chairman/spdec1708.html>.
SOLD OUT 87
MERGER MANIA
Merger mania in the financial industry has
been all the rage for more than 25 years.
Bigger is indeed better, proclaimed the
CEO of Bank of America in announcing its
merger with NationsBank in 1998.170
In the United States, about 11,500 bank
mergers took place from 1980 through 2005,
170 Dean Foust, BofA: A Megabank in the
Making, BusinessWeek, September 13,
1999, available at:
<http://www.businessweek.com/archives/19
99/b3646163.arc.htm>.
an average of about 440 mergers per year.171
The size of the mergers has increased to
phenomenal levels in recent years: In 2003,
Bank of America became a $1.4 trillion
financial behemoth after it bought FleetBoston,
making it the second-largest U.S. bank
holding company in terms of assets.172 In
2004, JPMorgan Chase agreed to buy Bank
One, creating a $1.1 trillion bank holding
company.173
From 1975 to 1985, the number of
commercial banks was relatively stable at
about 14,000. By 2005 that number stood at
7,500, a nearly 50 percent decline.174
171 Loretta J. Mester, Senior Vice President and
Director of Research at the Federal Reserve
Bank of Philadelphia, Some Thoughts on
the Evolution of the Banking System and the
Process of Financial Intermediation, Economic
Review, First & Second Quarters,
2007, available at:
<http://www.frbatlanta.org/filelegacydocs/er
q107_Mester.pdf >.
172 Loretta J. Mester, Senior Vice President and
Director of Research at the Federal Reserve
Bank of Philadelphia, Some Thoughts on
the Evolution of the Banking System and the
Process of Financial Intermediation, Economic
Review, First & Second Quarters,
2007, available at:
<http://www.frbatlanta.org/filelegacydocs/er
q107_Mester.pdf >.
173 Loretta J. Mester, Senior Vice President and
Director of Research at the Federal Reserve
Bank of Philadelphia, Some Thoughts on
the Evolution of the Banking System and the
Process of Financial Intermediation, Economic
Review, First & Second Quarters,
2007, available at:
<http://www.frbatlanta.org/filelegacydocs/er
q107_Mester.pdf >.
174 Loretta J. Mester, Senior Vice President and
Director of Research at the Federal Reserve
Bank of Philadelphia, Some Thoughts on
the Evolution of the Banking System and the
Process of Financial Intermediation, Eco-
11
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, even in
advance of recent moves to combine firms as
a means to preserve the functioning of the
financial system. The megabanks achieved
too-big-to-fail status. While this should have
meant they be treated as public utilities
requiring heightened regulation and risk
control, other deregulatory maneuvers
(including repeal of Glass-Steagall) enabled
these gigantic institutions to benefit from
explicit and implicit federal guarantees, even
as they pursued reckless high-risk investments.
88 SOLD OUT
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 150.175
Regulators rarely challenged bank
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. The current financial crisis
has confirmed these fears.
In the modern era, TBTF reared its
head in 1984, when the federal government
contributed $1 billion to save Continental
Illinois Bank from default. As the seventh
largest bank in the United States, Continental
held large amounts of deposits from
hundreds of smaller banks throughout the
Midwest. The failure of such a large institution
could have forced many smaller banks
into default. As a result, the U.S. Comptroller
of the Currency orchestrated an unprecedented
rescue of the bank, including its
shareholders. During congressional hearings
on the matter, Representative Stewart B.
McKinney, R-Connecticut, pointedly observed,
We have a new kind of bank. It is
nomic Review, First & Second Quarters,
2007, available at:
<http://www.frbatlanta.org/filelegacydocs/er
q107_Mester.pdf >.
175 Based on data from American Banker.
called too big to fail, TBTF, and it is a
wonderful bank.176 The Comptroller of the
Currency agreed that the eleven largest U.S.
banks were too big to fail, implying they
would be rescued regardless of how much
risk they took on.
Seven years later, U.S. banking law
recognized TBTF with passage of the Federal
Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA). 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. FDICIA effectively
implies that any bank whose failure poses a
serious risk to the stability of the U.S.
banking system (i.e. systemic risk) is
exempt from going bankrupt and thus qualifies
for a taxpayer-financed rescue. It constitutes
a significant exception to the FDICIAs
general rule prohibiting the rescue of uninsured
depositors.
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. In 1999, economists
within the Federal Reserve System warned
that some institutions may try to increase
the value of their access to the governments
financial safety net (including deposit insur-
176 Hearings before the Subcommittee on Financial
Institutions, 1984.
SOLD OUT 89
ance, discount window access, payments
system guarantees) through consolidation. If
financial market participants perceive very
large organizations to be too big to fail
i.e., that explicit or implicit government
guarantees will protect debtholders or shareholders
of these organizations there may
be incentives to increase size through consolidation....
177
International comparisons over a 100-
year period show that changes in the structure
and strength of safety net guarantees
may incentivize additional financial institution
risk-taking, and by extension, the
motive to consolidate to increase the value
of access to the safety net.178
Studies have shown that compared to
smaller banks, large banks take on greater
risk in the form of lower capital ratios (i.e.
177 Allen N. Berger, Board of Governors of the
Federal Reserve System, and Rebecca S.
Demsetz and Philip E. Strahan of the Federal
Reserve Bank of New York, The Consolidation
of the Financial Services Industry:
Causes, Consequences, and Implications for
the Future, J. Banking & Finance, Vol. 23,
1999, available at:
<http://www.federalreserve.gov/pubs/feds/1
998/199846/199846pap.pdf>.
178 Allen N. Berger, Board of Governors of the
Federal Reserve System, and Rebecca S.
Demsetz and Philip E. Strahan of the Federal
Reserve Bank of New York, The Consolidation
of the Financial Services Industry:
Causes, Consequences, and Implications for
the Future, J. Banking & Finance, Vol. 23,
1999, available at:
<http://www.federalreserve.gov/pubs/feds/1
998/199846/199846pap.pdf> (citing A.
Saunders and B.K. Wilson, Bank capital
and bank structure: A comparative analysis
of the U.S., U.K., and Canada, J. Banking
& Finance, 1999).
increased leverage),179 more investments in
derivatives,180 higher percentages of uninsured
deposits, lower levels of core deposits,
181 higher percentages of loans,182 and
lower levels of cash and marketable securities.
TBTF policy effectively operates as a
government subsidy and worse, an incentive
for this kind of risk-taking, thereby
increasing the vulnerability of the entire
banking system and the likelihood of massive
taxpayer-funded bailouts. Federal
Reserve economists found that the banking
crisis of the late 1980s occurred because
large banks adopted a riskier stance, be-
179 Rebecca S. Demsetz and Philip E. Strahan,
Federal Reserve Bank of New York, Research
Paper 9506, April 1995, available at:
<http://www.newyorkfed.org/research/staff_
reports/research_papers/9506.pdf>. See also
Arnold Danielson, Getting Ready for the
21st Century: A Look at Recent Banking
Trends, Banking Pol'y Rep., March 15,
1999. (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).
180 Rebecca S. Demsetz and Philip E. Strahan,
Federal Reserve Bank of New York, Research
Paper 9506, April 1995, available at:
<http://www.newyorkfed.org/research/staff_
reports/research_papers/9506.pdf>.
181 Ron J. Feldman and Jason Schmidt, Federal
Reserve Bank of Minneapolis, Increased
use of uninsured deposits: Implications for
market discipline, March 2001. Available
at:
<http://www.minneapolisfed.org/publication
s_papers/pub_display.cfm?id=2178>.
182 Ron J. Feldman and Jason Schmidt, Federal
Reserve Bank of Minneapolis, Increased
use of uninsured deposits: Implications for
market discipline, March 2001. Available
at:
<http://www.minneapolisfed.org/publication
s_papers/pub_display.cfm?id=2178>.
90 SOLD OUT
yond what could sensibly be explained by
scale economies.183
Supporters of bank consolidation argue
that bigger banks create greater efficiencies
because of their larger economies of scale.
But several studies have shown that large
bank mergers during the 1980s and 1990s
failed to improve overall efficiency or
profitability.184 Indeed, 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.185
183 John H. Boyd and Mark Gertler, The Role of
Large Banks in the Recent U.S. Banking
Crisis, 18 Fed. Res. Bank of Minneapolis
Q. Rev. 1, Winter 1994, available at:
<http://www.minneapolisfed.org/research/Q
R/QR1811.pdf>.
184 Allen N. Berger and David B. Humphrey,
The Dominance of Inefficiencies Over
Scale and Product Mix Economies in Banking,
J. Monetary Econ., 117-48, August 28,
1991; Allen N. Berger & David B. Humphrey,
Megamergers in Banking and the
Use of Cost Efficiency as an Antitrust Defense,
37 Antitrust Bull. 541, 554-65
(1992); Simon Kwan & Robert A. Eisenbeis,
Mergers of Publicly Traded Banking Organizations
Revisited, Fed. Res. Bank of
Atlanta, Econ. Rev., 4th Qtr. 1999; Jane C.
Linder & Dwight B. Crane, Bank Mergers:
Integration and Profitability, 7 J. Fin.
Servs. Res. 35, 40-52 (1992); Stavros Peristiani,
Do Mergers Improve the XEfficiency
and Scale Efficiency of U.S.
Banks? Evidence from the 1980s, 29 J.
Money, Credit & Banking 326, 329-33, 336-
37 (1997); Steven J. Pilloff, Performance
Changes and Shareholder Wealth Creation
Associated with Mergers of Publicly Traded
Banking Institutions, 28 J. Money, Credit
& Banking 294, 297-98, 301, 308-09 (1996).
185 Arthur E. Wilmarth, Jr., The Transformation
of the U.S. Financial Services Industry,
1975-2000: Competition, Consolidation and
Evidence indicates executive compensation
plays a central role in the quest for
larger banks. This empire-building, as
Federal Reserve economists put it, occurs
because compensation tends to increase with
firm size, so managers may hope to achieve
personal financial gains by engaging in
[mergers and acquisitions].186 George
Washington University banking law professor
Arthur E. Wilmarth, Jr. agrees. Not
surprisingly, he said, studies have shown
that managerial self-interest plays a major
role in determining the frequency of mergers
among both corporations and banks.187
In words that appear prescient today,
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. Reliance on finan-
Increased Risks 2002 U. Ill. L. Rev. 2 215
(2002), available at:
<http://papers.ssrn.com/sol3/papers.cfm?abs
tract_id=315345>.
186 Allen N. Berger, Board of Governors of the
Federal Reserve System, and Rebecca S.
Demsetz and Philip E. Strahan of the Federal
Reserve Bank of New York, The Consolidation
of the Financial Services Industry:
Causes, Consequences, and Implications for
the Future, Journal of Banking and Finance,
Vol. 23, 1999, available at:
<http://www.federalreserve.gov/pubs/feds/1
998/199846/199846pap.pdf>.
187 Arthur E. Wilmarth, Jr., The Transformation
of the U.S. Financial Services Industry,
1975-2000: Competition, Consolidation and
Increased Risks 2002 U. Ill. L. Rev. 2 215
(2002), available at:
<http://papers.ssrn.com/sol3/papers.cfm?abs
tract_id=315345>.
SOLD OUT 91
cial derivatives, for example, is extremely
concentrated among the largest commercial
banks (the five largest commercial banks
own 97 percent of the
total amount of notional
derivatives), and limited
almost entirely to the
biggest 25.188 All of these
banks are of a size and
most the product of
mergers that regulators
and antitrust enforcers
would not have tolerated a
quarter century ago.
Taxpayers are now
footing the bill for the
financial industrys investment
in risky, overleveraged
and poorly understood financial
schemes. By the end of 2008, the federal
government pledged $8.5 trillion in economic
assistance for financial institutions,189
primarily large commercial banks, that the
federal government says were TBTF. 190
188 Comptroller of the Currency, OCC's Quarterly
Report on Bank Trading and Derivatives
Activities, Second Quarter 2008,
available at:
<http://www.occ.treas.gov/ftp/release/2008-
115a.pdf>.
189 Kathleen Pender, Government bailout hits
$8.5 trillion, San Francisco Chronicle, November
26, 2008, available at:
<http://www.sfgate.com/cgibin/
article.cgi?file=/c/a/2008/11/26/MNVN1
4C8QR.DTL>.
190 U.S. Department of the Treasury, Troubled
Asset Relief Program Transaction Report,
December 9, 2008, available at:
Although the early consolidation of
banks, including related to the authorization
of interstate banking, had some support
among public interest
advocates as a means to
create competition in very
localized markets,191 the
intensive consolidation of
the last 25 years goes far
beyond whatever might
have been needed to enhance
competition. Yet
regulators averted their eyes
from the well-known risks
of banking consolidation.192
As banking regulators
fell under the spell of
industry lobbyists and
propagandists who alleged that bigger banks
would be more efficient, so too did antitrust
enforcement agencies fail to act to slow
banking consolidation.
As with the erosion of effective banking
regulation, the corrosion of antitrust
enforcement traces back more than three
<http://www.treasury.gov/initiatives/eesa/tra
nsactions.shtml>.
191 See The Centralization of Financial Power:
Unintended Consequences of Government-
Assisted Bank Mergers, An Interview with
Bert Foer, Multinational Monitor, November/
December 2008, available at:
<www.multinationalmonitor.org/mm2008/1
12008/interview-foer.html>.
192 Jake Lewis, The Making of the Banking
Behemoths, Multinational Monitor, June
1996, available at:
<http://www.multinationalmonitor.org/hype
r/mm0696.04.html>.
As banking regulators fell
under the spell of industry
lobbyists and propagandists
who alleged that bigger
banks would be more
efficient, so too did antitrust
enforcement agencies
fail to act to slow banking
consolidation.
92 SOLD OUT
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
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.
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
  
194 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 countrys
largest commercial banking concerns,
absorbing C&S/Sovran (itself a merged entity),
Boatmens Bancshares ($9.7 billion
deal), BankSouth and Barnett Bank ($14.8
billion acquisition). Then, in 1998, Nations-
Bank 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
Stanleys ill-fated acquisition of Dean Witter.)
SOLD OUT 93
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, Moodys Investors
Service, Standard & Poors and Fitch Ratings
Ltd.195 Each is supposed to issue independent,
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>.
12
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.
94 SOLD OUT
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 Moodys
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 Moodys 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
A former managing director of credit policy
at Moodys 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 Moodys CEO Ray
McDaniel to the board of directors in October
2007).
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. Lets hope we are all
wealthy and retired by the time this house of
cards falters, a Standard & Poors 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
199Testimony of Jerome S. Fons, Former Managing
Director of Credit Policy, Moodys, 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).
SOLD OUT 95
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
competitors share of the
ratings market, an employee
of the same firm states that
aspects of the firms ratings
methodology would have to
be revisited in order to
recapture market share from
the competing firm.203
The credit rating business
was spectacularly
profitable, as the firms
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). Moodys had the highest
profit margin of any company in the S&P
500 for five years in a row.204 Its ratings on
202 Summary Report of Issues Identified in the
Commission Staffs 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 Staffs Examinations of Select
Credit Rating Agencies, Securities and Exchange
Commission, July 2008, available at:
<http://www.sec.gov/news/studies/2008/cra
examination070808.pdf>.
204Opening Statement of Rep. Henry A. Wax-
MBSs and CDOs heavily weighted with
toxic subprime mortgages contributed to
more than half of the companys ratings
revenue by 2006.205
Although the 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
agencies explicitly relied
on private credit rating
firms to regulate all kinds
of public and private
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>.
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.
96 SOLD OUT
incorporate credit rating requirements
directly into its regulations. In response to
the credit crisis of the early 1970s, 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).206 Rule 15c3-1 requires investment
banks to set aside certain amounts of
capital whenever they purchase a bond from
a corporation or government. By requiring
capital set asides, a financial cushion is
created on which investment banks can fall
in the event of bond default. The amount of
capital required to be set aside depends on
the risk assessment of each bond by the
credit rating firms. Purchasing bonds that
have a high risk of default, as determined by
one of the credit rating companies, requires
a larger capital set asides than bonds that are
assessed to present a low risk of default. The
risk or probability of default is determined
for each bond by a credit rating company
hired by the issuer of the bond.
Since the SECs adoption of the net
capital rule, credit ratings have been incorporated
into hundreds of government regulations
in areas including securities, pensions,
banking, real estate, and insurance.
For example, Moodys Investor Service
206 Arthur R. Pinto, Section III: Commercial and
Labor Law: Control and Responsibility of
Credit Rating Agencies in the United
States, American Journal of Comparative
Law, 54 Am. J. Comp. L. 341, Supplement,
Fall 2006.
gives a rank of C for the lowest rated (i.e.
high risk) bonds and a rank of Aaa
triple A for bonds that are low risk and
earn its highest rating. Examples of highly
rated bonds include those issued by wellcapitalized
corporations, while bonds issued
by corporations with a history of financial
problems earn a low rating.
If a bank begins experiencing financial
problems, Moodys may downgrade the
banks bonds. It might downgrade from a
high grade of Aaa to a medium grade of
Baa or even the dreaded C, depending
on the severity of the banks financial problems.
Downgrading bonds can trigger a
requirement imposed by regulations or
private contracts that require the corporation
to immediately raise capital to protect its
business. Banks might be forced to raise
capital by selling securities or even the real
estate it owns.
Evidence of falling home values began
emerging in late 2006, but there were no
downgrades of subprime mortgage-related
securities by credit rating agencies until June
2007.207 Indeed, the credit ratings firms had
207 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> (citing Gary Gorton,
2008, The Panic of 2007, NBER working
paper #14358); but see Gretchen Moregenson,
Investors in mortgage-backed securities
fail to react to market plunge, International
Herald Tribune, February 18,
SOLD OUT 97
failed to recognize the housing bubble, and
the inevitability that when the enormous
bubble burst, it would lead to massive
mortgage defaults and the severe depreciation
in value of mortgage-backed securities.
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.
The current financial crisis is not the
first time credit rating companies dropped
the ball. During the dot-com bubble of the
late 1990s, they were the last ones to react,
in every case and downgraded companies
only after all the bad news was in, frequently
just days before a bankruptcy filing.
208 In addition, the firms were criticized
in 2003 for failing to alert investors to the
impending collapse of Enron and World-
Com. As a result, Congress passed the
Credit Rating Agency Reform Act of
2006209 which requires disclosure to the
SEC of a general description of each firms
procedures and methodologies for determining
credit ratings, including historical downgrade
and default rates within each of its
credit rating categories. It also grants the
2007, available at:
<http://www.iht.com/articles/2007/02/18/yo
urmoney/morgenson.php>. (Moodys
downgraded only 277 subprime home equity
loan tranches [in 2006], just 2 percent
of the home equity securities rated by the
agency.)
208 Frank Partnoy, Infectious Greed: How Deceit
and Risk Corrupted the Financial Markets
352, New York: Times Books (2003).
209 15 U.S.C. 78o-7.
SEC broad authority to examine all books
and records of the companies. However,
intense lobbying by the rating firms blocked
further reforms, 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. In 2007, SEC
Chair Christopher Cox said, it is not our
role to second-guess the quality of the rating
agencies ratings.210
In the highly deregulated financial
markets of the last few decades, the credit
rating firms were supposed to be the independent
watchdogs that carefully scrutinized
corporations and the financial products that
they offered to investors. Like the federal
agencies and Congress, the credit rating
companies failed to protect the public.
  
210 Testimony of SEC Chairman Christopher
Cox, Before the U.S. Senate Committee on
Banking, Housing and Urban Affairs, September
26, 2007, available at:
<http://www.sec.gov/news/testimony/2007/t
s092607cc.htm>.   
130  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 02:56:20 AM
Woof 6th Post

58 SOLD OUT
FAILURE TO PREVENT
PREDATORY LENDING
Subprime loans are those made to persons
who ostensibly have a poor credit history.
Predatory loans are, to a significant extent, a
subset of subprime loans.103 A bank is
engaged in predatory lending when it
gtak[es] advantage of a borrowerfs lack of
sophistication to give them a loan whose
rates and terms may not be beneficial to the
borrower.h104 Common predatory terms
103 Non-prime mortgages known as Alt-A .
with riskier borrower profiles than prime
mortgages but less so than subprime . also
often contain predatory terms.
104 gThe Foreclosure Epidemic: The Costs to
Families and Communities of the Predictable
Mortgage Meltdown,h An interview
include high fees and charges associated
with the loan; low teaser interest rates,
which skyrocket after an initial grace period;
and negative amortization loans, which
require, for a time, monthly payments less
than the interest due. These are, typically,
unaffordable loans.
The real-world examples of predatory
lending are shocking. In one lawsuit, Albert
Zacholl, a 74-year-old man living in Southern
California, alleges that Countrywide and
a pair of mortgage brokers gcold-called and
aggressively baitedh him. They promised
him $30,000 cash, a mortgage that would
replace his previous mortgage (which was
leaving him owing more each month) and a
monthly payment that would not exceed
$1,700. Zacholl told the brokers that his
income consisted of a pension of $350 a
month and Social Security payments of
$958, and that with help from his son, he
could afford a mortgage up to $1,700.
According to the lawsuit, the broker falsified
his loan application by putting down an
income of $7,000 a month, and then arranged
for a high-interest mortgage that
required him to pay more than $3,000 a
month (and failed to deliver the $30,000
cash payment). The motivation for the scam,
according to the lawsuit, was to collect
with Allen Fishbein, Consumer Federation
of America, Multinational Monitor,
May/June 2007, available at:
<http://www.multinationalmonitor.org/mm2
007/052007/interview-fishbein.html>.
7
IN THIS SECTION:
Even in a deregulated environment, the
banking regulators retained authority to
crack down on predatory lending abuses.
Such enforcement activity would have
protected homeowners, and lessened though
not prevented the current financial crisis. But
the regulators sat on their hands. The Federal
Reserve took three formal actions
against subprime lenders from 2002 to 2007.
The Office of Comptroller of the Currency,
which has authority over almost 1,800 banks,
took three consumer-protection enforcement
actions from 2004 to 2006.
SOLD OUT 59
$13,000 in fees. In court papers, the Center
for Responsible Lending reports, Countrywide
responded that Zacholl gconsented to
the terms of the transactionh and that any
problems were the result of his own gnegligence
and carelessness.h105
Preventing predatory lending practices
would not have prevented the housing
bubble and the subsequent financial meltdown,
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.
Unlike the housing bubble itself, predatory
lending was easily avoidable through
sound regulation.
But federal regulators were asleep at
the switch, lulled into somnolence by cozy
relationships with banks and Wall Street and
a haze-inducing deregulatory ideology.
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. They
declined, refusing either to issue appropriate
regulatory rules or to take enforcement
actions against predatory lenders. (Congress
similarly failed to act in response to the
105 Center for Responsible Lending, gUnfair and
Unsafe: How Countrywidefs irresponsible
practices have harmed borrowers and shareholders,h
February 2008, available at:
<http://www.responsiblelending.org/issues/
mortgage/countrywide-watch/unfair-andunsafe.
html>.
alarm bells sounded by public interest
advocates.)
Reviewing the record of the past seven
years shows that:
1. Federal regulators . and Members
of Congress . 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.
2. Federal regulators . and Congress
. refused to issue appropriate regulatory
rules to stem predatory lending.
3. Action at the state level showed that
predatory lending rules could limit
abusive loans.
4. Federal regulators failed to take enforcement
actions against predatory
lenders.
5. After the housing bubble had
popped, and the subprime lending
industry collapsed, federal regulators
in 2008 issued new rules to
limit predatory practices. While
highly imperfect, the new rules evidence
what might have been done in
2001 to prevent abuses.
Early Warnings on Predatory Lending
Yield No Regulatory Action
There are only limited federal substantive
statutory requirements regarding predatory
lending. These are established in the Home
60 SOLD OUT
Ownership and Equity Protection Act
(HOEPA), which was adopted in 1994.
HOEPA effectively put an end to certain
predatory practices, but
only for loans containing
upfront fees or charges of
more than 8 percent of the
loan amount, or interest
rates above a varying, but
very high threshold. Predatory
lenders easily devised
ways to work around these
limitations.
In 2000 and 2001, the Federal Deposit
Insurance Corporation (FDIC), the Federal
Reserve and the Office of Thrift Supervision,
among other federal agencies, adopted
or considered rules to further restrict predatory
lending. The adopted binding rules,
issued by the Federal Reserve pursuant to
HOEPA, however, focused very narrowly
on certain egregious practices.106 More
expansive statements on predatory lending
were issued only as non-binding guidelines.
The reliance on non-binding guidelines
continued through the decade.
As regulators were issuing non-binding
guidelines, public interest advocates were
praising their recognition of the problem .
but urging that more forceful action be
106 12 C.F.R. 226 (Regulation Z; Docket No. R-
1090), 66 Fed. Reg. 245, 65604-65622
(2001) (adjusting the price trigger for coverage
under HOEPA and prohibiting certain
acts).
taken.
gClearly, the FDIC recognizes that
there is a grave problem throughout the
U.S., particularly affecting
low income and minority
households and neighborhoods,h
wrote the National
Consumer Law Center and
the Consumer Federation
of America in January
2001 comments submitted
to the FDIC. gWhile many
regulators recognize the
gravity of the predatory lending problem,
the appropriate . and politically feasible .
method of addressing the problem still
appears elusive.h107
What was needed, the consumer groups
argued, was binding regulation. gAll agencies
should adopt a bold, comprehensive and
specific series of regulations to change the
mortgage marketplace,h the groups wrote, so
that gpredatory mortgage practices are either
specifically prohibited, or are so costly to
the mortgage lender that they are not economically
feasibleh while ensuring that
gnecessary credit is made available with
appropriate rates and terms to all Ameri-
107 National Consumer Law Center and the
Consumer Federation of America, gHow to
Avoid Purchasing or Investing in Predatory
Mortgage Loans,h January 31, 2001, available
at:
<http://www.nclc.org/issues/predatory_mort
gage/fdic.shtml>.
Unlike the housing bubble
itself, predatory lending
was easily avoidable
through sound regulation.
But federal regulators were
asleep at the switch.
SOLD OUT 61
cans.h108
Public interest groups would repeat this
advice again and again over the subsequent
years, pointing to growing abuses and
proposing specific remedies.
But federal agencies, operating under
the prevailing laissez-faire ideology of the
Bush Administration, declined to issue any
binding regulations in response to mushrooming
predatory lending. They did issue
additional guidance statements, but these
were non-binding and consistently behind
the curve of evolving lender abuses. Not
surprisingly, they failed to curtail predatory
lending practices.
A Failure to Enforce
Federal regulators also failed to enforce the
rules that were on the books.
From 2003 through the start of 2007,
the Federal Reserve, which has jurisdiction
over the entire banking industry, took a mere
three formal enforcement actions109 to stop
108 National Consumer Law Center and the
Consumer Federation of America, gHow to
Avoid Purchasing or Investing in Predatory
Mortgage Loans,h January 31, 2001, available
at:
<http://www.nclc.org/issues/predatory_mort
gage/fdic.shtml>.
109 gGenerally, the Federal Reserve takes formal
enforcement actions against [banks] for violations
of laws, rules, or regulations, unsafe
or unsound practices, breaches of fiduciary
duty, and violations of final orders. Formal
enforcement actions include cease and desist
orders, written agreements, removal and
prohibition orders, and orders assessing civil
money penalties.h The Federal Reserve
Board, gEnforcement Actions,h available at:
predatory lending.110 The Office of the
Comptroller of the Currency (OCC), which
has regulatory authority over roughly 1,800
nationally chartered banks, similarly took
three public enforcement actions from 2004
to 2006.111 These numbers reflect a startling
regulatory failure during the peak period of
abusive subprime lending. Subprime loans
made up between one-in-six and one-in-five
home mortgage loans in 2004, 2005 and
2006.112
Although Federal Reserve officials now
acknowledge that they should have done
more, the OCC says it took appropriate
action. Both agencies insist that they also
addressed abuses on an informal, bank-bybank
basis, ordering improved practices in
connection with the agencyfs routine examinations
of individual banks. The informal
and non-public nature of this approach
<http://www.federalreserve.gov/boarddocs/e
nforcement>.
110 James Tyson, Craig Torres and Alison Vekshin,
gFed Says It Could Have Acted Sooner
on Subprime Rout,h Bloomberg, March 22,
2007, available at:
<http://www.bloomberg.com/apps/news?pid
=20601087&sid=a1.KbcMbvIiA&refer=ho
me>.
111 Craig Torres and Alison Vekshin, gFed, OCC
Publicly Chastised Few Lenders During
Boom,h Bloomberg, March 14, 2007, available
at:
<http://www.bloomberg.com/apps/news?pid
=20601103&sid=a6WTZifUUH7g&refer=u
s>.
112 Chris Mayer and Karen Pence, gSubprime
Mortgages: What, Where and to Whom,h
Figure 1B, Federal Reserve, 2008, available
at:
<http://www.federalreserve.gov/pubs/feds/2
008/200829/200829pap.pdf>.
62 SOLD OUT
means that Fed and OCCfs claims cannot be
easily verified.
Even if there were extensive private enforcement
actions or
conversations, such
moves fail to perform
important public functions.
They do not signal
appropriate behavior and
clear rules to other lenders;
and they do not
provide information to
victimized borrowers,
thereby depriving them of
an opportunity to initiate follow-on litigation
to recover for harms perpetrated against
them.
State Action Shows What Could Have Been
Done
While federal regulators sat on their hands,
some states adopted meaningful antipredatory
lending laws and brought enforcement
actions against abusive lenders.
This report does not explore state regulatory
successes and failures, but the ability of
states to regulate and address abusive lender
behavior demonstrates what federal regulators
might have done.
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, without affecting
borrowers access to subprime credit. gStates
with anti-predatory lending laws reduced the
proportion of loans with targeted [predatory]
terms by 30 percentage
points,h the study determined.
Even this number
masked the superior performance
of those with the
toughest laws. gStates with
the strongest laws . Massachusetts,
New Jersey,
New Mexico, New York,
North Carolina, and West
Virginia . are generally
associated with the largest declines in targeted
terms relative to states without significant
protections,h the study found.113
The Center for Responsible Lending
study also concluded that lending continued
at a constant rate in states with antipredatory
lending laws, and that gstate laws
have not increased interest rates and, in
some cases, borrowers actually paid lower
rates for subprime mortgages after their state
laws became effective compared to borrowers
in states without significant protections.h
In other words, eliminating abusive fees did
not translate into higher interest rates.114
113 Wei Li and Keith S. Ernst, gThe Best Value
in the Subprime Market: State Predatory
Lending Reforms,h Center for Responsible
Lending, February, 23, 2006, available at:
<http://www.responsiblelending.org/pdfs/rr0
10-State_Effects-0206.pdf>.
114 Wei Li and Keith S. Ernst, gThe Best Value
in the Subprime Market: State Predatory
Federal agencies, operating
under the prevailing laissezfaire
ideology of the Bush
Administration, declined to
issue any binding regulations
in response to mushrooming
predatory lending.
SOLD OUT 63
Partially Closing the Barn Door (after the
horses left and a foreclosure sign is posted)
After years of inaction, and confronted with
signs of the economic meltdown to come,
the Federal Reserve in January 2008 finally
proposed binding regulations that would
apply to all lenders, not just nationally
chartered banks.
The Federal Reserve proposal noted the
growth of subprime 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 g[r]ecently, however,
some of this benefit has eroded. In the
last two years, 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.h115
With slight modification, the Fed
adopted these rules in July.116 The new
regulations establish a new category of
ghigher-priced mortgagesh intended to
include virtually all subprime loans. The
regulations prohibit a number of abusive
practices in connection with these newly
Lending Reforms,h Center for Responsible
Lending, February, 23, 2006, available at:
<http://www.responsiblelending.org/pdfs/rr0
10-State_Effects-0206.pdf>.
115 Federal Reserve System, Truth In Lending, 73
Fed. Reg. 6, 1673-74 (2008).
116 Federal Reserve System, 12 C.F.R. 226,
[Regulation Z; Docket No. R-1305], 73 Fed.
Reg. 147, 44521-614 (2008).
defined ghigher-priced mortgages.h117 They
also apply some measures . such as specified
deceptive advertising practices . for
all loans, regardless of whether they are
subprime.118
117 Key elements of these regulations:
. Prohibit a lender from engaging in a
pattern or practice of making loans
without considering the borrowersf ability
to repay the loans from sources other
than the homefs value.
. Prohibit a lender from making a loan by
relying on income or assets that it does
not verify.
. Restrict prepayment penalties only to
loans that meet certain conditions, including
the condition that the penalty
expire at least sixty days before any
possible increase in the loan payment.
. Require that the lender establish an escrow
account for the payment of property
taxes and homeownersf insurance.
The lender may only offer the borrower
the opportunity to opt out of the escrow
account after one year.
118 These regulatory provisions, applying to all
mortgages, regardless of whether they are
subprime:
. Prohibit certain servicing practices,
such as failing to credit a payment to a
consumerfs account when the servicer
receives it, failing to provide a payoff
statement within a reasonable period of
time, and gpyramidingh late fees.
. Prohibit a creditor or broker from coercing
or encouraging an appraiser to misrepresent
the value of a home.
. Prohibit seven misleading or deceptive
advertising practices for closed-end
loans; for example, using the term
gfixedh to describe a rate that is not
truly fixed. It would also require that all
applicable rates or payments be disclosed
in advertisements with equal
prominence as advertised introductory
or gteaserh rates.
. Require truth-in-lending disclosures to
borrowers early enough to use while
shopping for a mortgage. Lenders could
not charge fees until after the consumer
receives the disclosures, except a fee to
64 SOLD OUT
These measures are not inconsequential.
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.
But the 2008 regulations remain inadequate,
as a coalition of consumer and housing
groups has specified in great detail,119
because they fail to break with longstanding
deregulatory nostrums. The Fed continues to
emphasize the importance of enabling
lenders to make credit available to minority
and lower-income communities . historically,
a deep-rooted concern . while failing
to acknowledge that the overriding problem
has become lenders willing to make credit
available, but on abusive terms.
gThe proposed regulations continue to
be most protective of the flawed concept
that access to credit should be the guiding
principle for credit regulation. These regulations
need to be significantly strengthened in
order for consumers to be adequately proobtain
a credit report.
119 National Consumer Law Center, Consumer
Action, Consumer Federation of America,
Consumers Union, Leadership Conference
on Civil Rights, National Association of
Consumer Advocates, National Fair Housing
Alliance, and the Empire Justice Center
(gNational Consumer Law Center et. al.h),
gComments to the Board of Governors of
the Federal Reserve System Regarding Proposed
Regulations Relating to Unfair Trade
Practices In Connection with Mortgage
Lending,h April 2008, available at:
<http://www.consumerfed.org/pdfs/HOEPA
_comments_NCLC_final.pdf>.
tected,h argue the consumer and housing
groups. They provide an extensive list of
needed revisions to the proposed regulations,
including that the regulations:
. Cover all loans, including prime
loans;
. Require an gability to repayh analysis
for each loan;
. Ban prepayment penalties;
. Address lender and originator incentives
for appraisal fraud; and
. Provide effective private litigation
remedies for victimized borrowers.
120
  
120 National Consumer Law Center, et. al.,
gComments to the Board of Governors of
the Federal Reserve System Regarding Proposed
Regulations Relating to Unfair Trade
Practices In Connection with Mortgage
Lending,h April 2008, available at:
<http://www.consumerfed.org/pdfs/HOEPA
_comments_NCLC_final.pdf>.
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, themselves due in
significant part to political choices.
First, 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. Low
interest rates had beneficial effects in
spurring economic activity, but they also
created the conditions for the housing
bubble, as cheap credit made mortgage
financing an attractive proposition for
home buyers.
Cheap credit was not a result only of
Fed interest rate decisions. A second
contributing factor to the housing bubble
was the massive influx of capital into the
United States from China. Chinafs capital
surplus was the mirror image of the
U.S. trade deficit . U.S. corporations
were sending dollars to China in exchange
for goods sold to U.S. consumers.
China then reinvested much of that
surplus in the U.S. bond market, with the
effect of keeping U.S. interest rates low.
Cheap credit did not automatically
mean there would be a housing bubble.
Crucially, government officials failed to
intervene to pop the housing bubble. As
economists Dean Baker and Mark Weisbrot
of the Center for Economic and
Policy Research insisted at the time,
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.
He declined, and even denied the
existence of a bubble.
There were reasons why Greenspan
and other top officials did not act to pop
the bubble. They advanced expanded
home ownership as an ideological goal.
While this objective is broadly shared
across the political spectrum, the Bush
administration and Greenspanfs 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, or the loans they were
getting. Perhaps more importantly, the
housing bubble was the engine of an
66 SOLD OUT
economy that otherwise was stalled.
Rising home prices contributed to the
huge growth of the construction industry;
Wall Street grew rich on mortgagerelated
securities and exotic financial
instruments; 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
vulnerable borrowers through predatory
lending terms. The terms of your loan
donft matter, they effectively purred to
borrowers, so long as the value of your
house is going up. They duped borrowers
into conditions they could not possibly
satisfy, making the current rash of
defaults and foreclosures on subprime
loans inevitable. Effective regulation of
lending practices could have prevented
the abusive loans.
  
SOLD OUT 67
FEDERAL PREEMPTION OF
STATE CONSUMER
PROTECTION LAWS
In 2003, the Comptroller of the Currency,
John D. Hawke, Jr., announced that he was
preempting state predatory lending laws.
This ruling meant that nationally chartered
banks . which include the largest U.S.
banks . would be subject to federal banking
standards, but not the more stringent
consumer protection rules adopted by many
states.
The Comptrollerfs decision was a direct
response to a request from the nationfs
biggest banks. It was prompted by a petition
from Cleveland-based National City Bank,
which challenged the application of the
Georgia Fair Lending Act to its operations
in Georgia.
The Comptroller agreed with National
Cityfs contention that the federal banking
laws, 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.121
In its petition, National City argued that
the effect of the Georgia law gis to limit
National Cityfs ability to originate and to
establish the terms of credit on residential
real estate loans and lines of credit, including
loans or lines of credit submitted by a
third party mortgage broker. GFLA [the
Georgia Fair Lending Act] has significantly
impaired National Cityfs ability to originate
residential real estate loans in Georgia.h
It is instructive to identify the provisions
of the Georgia law, a path breaking
anti-predatory lending initiative, to which
National City objected. 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 Cityfs ability to
121 Office of the Comptroller of the Currency
[Docket No. 03-17] Preemption Determination
and Order, august 5, 2003, Federal Register,
Vol. 688. No. 150, 46264.)
8
IN THIS SECTION:
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. gIn
2003,h as Eliot Spitzer recounted, gduring
the height of the predatory lending crisis, 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, thereby
rendering them inoperative. The OCC also
promulgated new rules that prevented states
from enforcing any of their own consumer
protection laws against national banks.h
68 SOLD OUT
make these loans. All Home Loans are
subject to restrictions on the terms of
credit and certain loan related fees, including
the prohibition of financing of credit
insurance, debt cancellation and suspension
coverage, and limiting late charges
and prohibiting payoff and release fees. 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, 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
High Cost Home Loan, 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. GFLA regulates National
Cityfs ability to determine the borrowerfs
ability to repay the High Cost
Home Loan. GFLA restricts, and in some
cases prohibits, the imposition by National
City of certain credit terms or servicing
fees on High Cost Home Loans, including:
prepayment penalties, balloon
payments, advance loan payments, acceleration
in the lenderfs discretion, negative
amortization, post-default interest and fees
to modify, renew, amend or extend the
loan or defer a payment. Any High Cost
Home Loan must contain a specific disclosure
that it is subject to special rules,
including purchaser and assignee liability,
under GFLA. Finally, GFLA imposes preforeclosure
requirements. GFLA currently
creates strict assignee liability for all subsequent
holders of a home loan. GFLA
provides a private right of action for borrowers
against lenders, mortgage brokers,
assignees and servicers for injunctive and
declaratory relief as well as actual damages,
including incidental and consequential
damages, statutory damages equal to
forfeiture of all interest or twice the interest
paid, punitive damages, attorneysf fees
and costs. In addition, the Georgia Attorney
General, district attorneys, the Commissioner
of Banking and Finance and,
with respect to the insurance provisions,
the Commissioner of Insurance has the jurisdiction
to enforce GFLA through their
general state regulatory powers and civil
process. Criminal penalties are also available.
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. Following
passage of the Garn-St. Germain Depository
Institutions Act of 1982, the OCC had by
regulation specifically preempted a number
of state law consumer protections, including
the minimum requirements for down
payments, loan repayment schedules and
minimum periods of time for loans. These
state rules afforded consumers greater
protection than federal statutes. The 2003
decision concluded that Georgiafs rules
transgressed some of these longstanding
regulatory preemptions, but then went
further and preempted the Georgia rules
entirely, as they applied to national banks.
In conjunction with the OCCfs announcement
on the Georgia case, it launched
a rulemaking on the general issue of federal
preemption of all state regulation of national
banks. In January 2004, it issued rules
preempting all state regulation of national
banks.123 The OCC also announced rules
122 Letter from Thomas Plant to Julie Williams
(National Cityfs Request for OCC preemption
of the Georgia Fair Lending Act), February
11, 2003, appendix to Office of the
Comptroller of the Currency, Docket No.
03-04, Notice of Request for preemption
Determination and Order.
123 Office of the Comptroller of the Currency, 12
CFR Parts 7 and 34, [Docket No. 04-xx],
RIN 1557-AC73.
SOLD OUT 69
prohibiting state regulators from exercising
gvisitorial powersh . meaning inspection,
supervision and oversight . of national
banks.124
The stated rationale
for these preemptive
moves was that differing
state standards subjected
national banks to extra
costs and reduced the
availability of credit.
gToday,h said Hawke in
announcing the new rules,
gas a result of technology
and our mobile society,
many aspects of the
financial services business
are unrelated to geography
or jurisdictional
boundaries, and efforts to
apply restrictions and
directives that differ based
on a geographic source
increase the costs of
offering products or result in a reduction in
their availability, or both. In this environment,
the ability of national banks to operate
under consistent, uniform national standards
administered by the OCC will be a crucial
factor in their business future.h125 Hawke
124 Office of the Comptroller of the Currency, 12
CFR Part 7, [Docket No. 04-xx], RIN 1557-
AC78.
125 Statement of Comptroller of the Currency
John Hawke, Jr., Regarding the Issuance of
argued that national banks were not engaged
in predatory lending on any scale of consequence;
that federal regulation was sufficient;
and that federal guidance on predatory
lending . issued in conjunction
with the preemptive
moves . provided
additional and satisfactory
guarantees for consumers.
Former New York
State Attorney General (and
former Governor) Eliot
Spitzer put these actions in
perspective in a February
2008 opinion column in the
Washington Post.126
gPredatory lending was
widely understood [earlier
in the decade] to present a
looming national crisis,h
Spitzer wrote. gThis threat
was so clear that as New
York attorney general, I
joined with colleagues in
the other 49 states in attempting to fill the
void left by the federal government. Indi-
Regulations Concerning Preemption and
Visitorial Powers, January 7, 2004, available
at: <http://occ.gov/newrules.htm>.
126 Eliot Spitzer, gPredatory Lendersf Partner in
Crime How the Bush Administration
Stopped the States From Stepping In to Help
Consumers,h Washington Post, February 14,
2008, available at:
<http://www.washingtonpost.com/wpdyn/
content/article/2008/02/13/AR20080213
02783.html>.
Referring to the OCCfs preemptive
measures, Spitzer
wrote, gNot only did the
Bush administration do
nothing to protect consumers,
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.h
70 SOLD OUT
vidually, 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. Several state legislatures,
including New Yorkfs, enacted laws aimed
at curbing such practices.h
Referring to the OCCfs preemptive
measures, Spitzer wrote, gNot only did the
Bush administration do nothing to protect
consumers, 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. c The
federal governmentfs actions were so egregious
and so unprecedented that all 50 state
attorneys general, and all 50 state banking
superintendents, actively fought the new
rules.h
gBut the unanimous opposition of the
50 states did not deter, or even slow, the
Bush administration in its goal of protecting
the banks,h Spitzer noted.
When state law enforcement agencies
tried to crack down on predatory lending in
their midst, the OCC intervened to stop
them. Wrote Spitzer, gIn fact, when my
office opened an investigation of possible
discrimination in mortgage lending by a
number of banks, the OCC filed a federal
lawsuit to stop the investigation.h
John Hawkefs successor as Comptroller
John Dugan, denies Spitzerfs assertions.
gThe OCC established strong protections
against predatory lending practices years
ago, and has applied those standards through
examinations of every national bank,h he
said. gAs a result, predatory mortgage
lenders have avoided national banks like the
plague. The abuses consumers have complained
about most . such as loan flipping
and equity stripping . are not tolerated in
the national banking system. 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, when underwriting standards
were weakest, and delinquency rates on
those loans are well below the national
average.h127
Even if it is true that federal banks
originated fewer abusive loans, they clearly
financed predatory subprime loans through
bank intermediaries, securitized predatory
subprime loans and held them in great
quantities. In any case, the scale of federal
bank financing of predatory loans was still
substantial. 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.
127 John Dugan, gComptroller Dugan Responds
to Governor Spitzer,h news release, February
14, 2008, available at:
<http://www.occ.gov/ftp/release/2008-
16.htm>.
SOLD OUT 71
Cohen of the National Consumer Law
Center notes as well that the OCCfs preemptive
actions protected federal banks from
three distinct set of consumer
protections. First,
they were immunized
from state banking laws
that offered consumers
greater protection than the
OCCfs standards. Second,
the national banks were
protected from private
lawsuits brought under
state law to enforce
consumer rights. As noted
above, federal voluntary
standards made it difficult
for victimized borrowers to file suit. Third,
the OCC preempted the application of
general state consumer protection law (as
distinct from banking-specific rules) to
national banks. This includes even basic
contract and tort law.
Finally, Cohen emphasizes that the
OCC preemptive measures applied not just
to the national banks themselves, but to their
non-supervised affiliates and agents.
Meanwhile, the federal agency responsible
for regulating federally chartered
savings and loans, the Office of Thrift
Supervision (OTS), adopted parallel preemptive
actions.
In 2003, OTS announced its determination
that New York and Georgiafs antipredatory
lending laws did not apply to
federal thrifts. Like OCC, OTS took an
aggressive posture, arguing that it goccupied
the fieldh for regulation of
federally chartered institutions.
OTS was explicit that
it wanted to preserve
gmaximum flexibilityh for
thrifts to design loans. The
agency said its objective
was to genable federal
savings associations to
conduct their operations in
accordance with best practices
by efficiently delivering
low-cost credit to the
public free from undue regulatory duplication
and burden.h128
gFederal law authorizes OTS to provide
federal savings associations with a uniform
national regulatory environment for their
lending operations,h said OTS Director
James E. Gilleran in announcing the preemptive
decision. gThis enables and encourages
federal thrifts to provide low-cost credit
safely and soundly on a nationwide basis.
By requiring federal thrifts to treat custom-
128 Letter from Carolyn J. Buck, Chief Counsel,
Office of Thrift Supervision, January 30,
2003, available at:
<http://www.ots.gov/index.cfm?p=PressRel
eases&ContentRecord_id=f8613720-2c1d-
42f4-8608-
f6362c04b6e2&ContentType_id=4c12f337-
b5b6-4c87-b45c-
838958422bf3&YearDisplay=2003>.
Even if it is true that federal
banks originated fewer
abusive loans, they clearly
financed predatory subprime
loans through bank
intermediaries, securitized
predatory subprime loans
and held them in great
quantities.
72 SOLD OUT
ers in New York differently, the New York
law would impose increased costs and an
undue regulatory burden.h129
The federal governmentfs regulatory
approach ultimately boomeranged on the
regulated institutions. 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. IndyMac and
Washington Mutual are two federal thrifts
that collapsed as a result of the bad subprime
mortgage loans that they administered.
  
129 gOTS Says New York Law Doesnft Apply To
Federal Thrifts,h news release, January 30,
2003, available at:
<http://www.ots.gov/index.cfm?p=PressRel
eases&ContentRecord_id=f8613720-2c1d-
42f4-8608-
f6362c04b6e2&ContentType_id=4c12f337-
b5b6-4c87-b45c-
838958422bf3&YearDisplay=2003>.
SOLD OUT 73
ESCAPING ACCOUNTABILITY:
ASSIGNEE LIABILITY
gAssignee liabilityh is the principle that
legal responsibility for wrongdoing in
issuing a loan extends to a third party that
acquires a loan. Thus, if a mortgage bank
issues a predatory loan and then sells the
loan to another bank, assignee liability
would hold the second bank liable for any
legal claims that the borrower might be able
to bring against the original lender.
Competing in the law with assignee liability
is the gholder-in-due-courseh doctrine,
which establishes that a third party
purchasing a debt instrument is not liable for
problems with the debt instrument, so long
as those problems are not apparent on the
face of the instrument. Under the holder-indue-
course-doctrine, a second bank acquiring
a predatory loan is not liable for claims
that may be brought by the borrower against
the original lender, so long as those potential
claims are not obvious.
The Home Ownership and Equity Protection
Act (HOEPA),130 the key federal
protection against predatory loans, attempted
to reconcile these conflicting principles.
Passed in 1994, HOEPA does establish
assignee liability, but it only applies to a
limited category of very high-cost loans
(i.e., loans with very high interest rates
and/or fees). For those loans, a borrower
may sue an assignee of a mortgage that
violates HOEPAfs anti-predatory lending
terms, seeking either damages or rescission
(meaning all fees and interest payments will
be applied to pay down the principle of the
loan, after which the borrower could refinance
with a non-predatory loan). For all
130 The Home Ownership and Equity Protection
Act of 1994 amended the Truth-in-Lending
Act by adding Section 129 of the Act, 15
U.S.C. 1639. It is implemented by Sections
226.31 and 226.32 of Regulation Z, 12
C.F.R. 226.31 and 226.32.
9
IN THIS SECTION:
Under existing federal law, 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.
This arrangement effectively immunized
acquirers of the mortgage (gassigneesh) for
any problems with the initial loan, and
relieved them of any duty to investigate the
terms of the loan. Wall Street interests could
purchase, bundle and securitize subprime
loans . including many with pernicious,
predatory terms . without fear of liability
for illegal loan terms. The arrangement left
victimized borrowers with no cause of action
against any but the original lender, and
typically with no defenses against being
foreclosed upon. Representative Bob Ney, 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.
74 SOLD OUT
other mortgage loans, federal law applies the
holder in due course doctrine.131
The rapid and extensive transfer of
subprime loans, including abusive predatory
loans, among varying parties was central to
the rapid proliferation of subprime lending.
Commonly, mortgage brokers worked out
deals with borrowers, who then obtained a
mortgage from an initial mortgage lender
(often a non-bank lender, such as Countrywide,
with which the broker worked). The
mortgage lender would then sell the loan to
a larger bank with which it maintained
relations. Ultimately, such mortgages were
pooled with others into a mortgage-backed
security, sold by a large commercial bank or
investment bank.
Under existing federal law, 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). 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.132 It also left the borrow-
131 Lisa Keyfetz, gThe Home Ownership and
Equity Protection Act of 1994: Extending
Liability for Predatory Subprime Loans to
Secondary Mortgage Market Participants,h
18 Loy. Consumer L. Rev. 2, 151 (2005).
132 See Eric Nalder, gPoliticians, lobbyists
shielded financiers: Lack of liability laws
fueled firms' avarice,h Seattle Post-
Intelligencer, October 10, 2008, available at:
<http://seattlepi.nwsource.com/business/382
707_mortgagecrisis09.html>. (gA principle
known as assignee liability would have alers
with no cause of action against any but
the original lender. In many cases, this
lender no longer exists as a legal entity.
And, even where the initial lender still
exists, while it can pay damages, it no longer
has the ability to cure problems with the
mortgage itself; only the current holder of
the mortgage can modify it. Thus, a borrower
could not exercise a potential rescission
remedy, 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. A
hypothetical recovery of damages from the
original lender long after the home is foreclosed
upon is of little solace to the homeowner.
The severe consequences of not applying
assignee liability in the mortgage context
have long been recognized. Consumer
advocates highlighted the problem early in
the 2000fs boom in predatory lending.
Margot Saunders of the National Consumer
Law Center explained the problem in
testimony to the House of Representativesf
Financial Services Committee in 2003.
lowed borrowers to sue anyone holding paper
on their loan, from the originators who
sold it to them to the Wall Street investment
bankers who ultimately funded it. Without
the measure in place, Wall Street increased
by eightfold its financing of subprime and
nontraditional loans between 2001 and 2006,
including mortgages in which borrowers
with no proof of income, jobs or assets were
encouraged by brokers to take out loans, according
to statistics provided by mortgage
trackers.h)
SOLD OUT 75
gTake, for example, the situation where
homeowners sign a loan and mortgage for
home improvements secured by their home.
The documents do not
include the required FTC
Notice of Preservation of
Claims and Defenses, and
the contact information
provided by the home
improvement contractor is
useless. The home improvement
work turns out
to be shoddy and useless,
but the assignee of the
loan claims to have no
knowledge of the status of
the work, instead claiming
it is an innocent third
party assignee that merely wants its monthly
payments. When the homeowners refuse to
pay, the assignee claims the rights of a
holder in due course and begins foreclosure
proceedings.h
The absence of assignee liability enabled
Wall Street interests to bundle subprime
loans . including many with pernicious,
predatory terms . and securitize
them, without fear of facing liability for
unconscionable terms in the loans. Had a
regime of assignee liability been in place,
securitizers and others up the lending chain
would have been impelled to impose better
systems of control on brokers and initial
mortgage lenders, because otherwise they
would have faced liability themselves.
For community development and consumer
advocates, the case for expanded
assignee liability has long
been clear. Argued Saunders
in her 2003 testimony,
gMost importantly consider
the question of who should
bear the risk in a faulty
transaction. Assume 1) an
innocent consumer (victim
of an illegal loan), 2) an
originator guilty of violating
the law and profiting from
the making of an illegal
loan, and 3) an innocent
holder of the illegal note.
As between the two innocent
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, but the corporate assignee.h
133
133 Margot Saunders, Testimony Before the
Subcommittee on Housing and Community
Opportunity & Subcommittee on Financial
Institutions and Consumer Credit of the Financial
Services Committee, U.S. House of
Representatives, gProtecting Homeowners:
Preventing Abusive Lending While Preserving
Access to Credit,h November 5, 2003,
available at:
<http://financialservices.house.gov/media/p
df/110503ms.pdf>.
Had a regime of assignee
liability been in place, securitizers
and others up the
lending chain would have
been impelled to impose
better systems of control
on brokers and initial mortgage
lenders, because otherwise
they would have
faced liability themselves.
76 SOLD OUT
Making the case even more clear, players
in the secondary market . the acquirers
of mortgages . were not innocent parties.
They were often directly involved in enabling
predatory lending by mortgage brokers,
and were well aware of the widespread
abuses in the subprime market. Explain
reporters Paul Muolo and Mathew Padilla,
authors of Chain of Blame: How Wall Street
Caused the Mortgage and Credit Crisis,
gBrokers wouldnft even exist without
wholesalers, and wholesalers wouldnft be
able to fund loans unless Wall Street was
buying. It wasnft the loan brokersf job to
approve the customerfs application and
check all the financial information; that was
the wholesalerfs job, or at least it was supposed
to be. Brokers didnft design the loans,
either. The wholesalers and Wall Street did
that. If Wall Street wouldnft buy, then there
would be no loan to fund.h134
The securitizers had a counterargument
against calls for assignee liability.
They claimed that assignee liability would
impose unrealistic monitoring duties on
purchasers of mortgage loans, and would
therefore freeze up markets for securitized
loans. The result, they said, would be less
credit for homebuyers, especially those with
imperfect credit histories.
Lenders and securitizers opposed pro-
134 Paul Muolo and Mathew Padilla, Chain of
Blame: How Wall Street Caused the Mortgage
and Credit Crisis, New York: Wiley,
2008. 295.
posals to require subsequent purchasers of
mortgage debt to bear legal responsibility.
gLegislators must be extremely cautious in
making changes that upset secondary market
dynamics,h warned Steve Nadon, chair of
the industry group the Coalition for Fair and
Affordable Lending (CFAL) and Chief
Operating Officer of Option One Mortgage,
an H&R Block subsidiary, in 2003 congressional
testimony, gbecause unfettered access
to the capital markets is largely responsible
for having dramatically increased nonprime
credit availability and for lowering costs for
millions of Americans. 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. In
any case, 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.h135
gPredatory lending is harmful and
135 Testimony of Steve Nadon, chair of the
Coalition for Fair and Affordable Lending
(CFAL) and chief operating officer of Option
One Mortgage on gProtecting Homeowners:
Preventing Abusive Lending While
Preserving Access to Credith before the
Subcommittees on Housing and Community
Opportunity & Financial Institutions and
Consumer Credit of the Financial Services
Committee, U.S. House of Representatives,
November 5, 2003, available at:
<http://financialservices.house.gov/media/p
df/110503sn.pdf>.
SOLD OUT 77
needs to be stopped. Imposing open-ended
liability on secondary market participants
for the actions of lenders, however, will
ultimately have the effect of limiting credit
for those who need it most,h
echoed Micah Green, president
of The Bond Market
Association, two years
later.136 (Proponents of
assignee liability emphasize
they have sought not openended
liability, but the kind
of measurable liability that
applies under HOEPA.)
Securitizers not only defended the default
federal application of the holder in due
course doctrine for non-HOEPA loans, they
supported legislation introduced by Representative
Bob Ney, R-Ohio . who subsequently
went to prison in connection with
the Jack Abramoff corruption scandal137 .
that would have preempted state rules
applying assignee liability.138 gUsing any-
136 gThe Bond Market Association and the
American Securitization Forum Applaud
Responsible Lending Act,h news release,
March 15, 2005, available at:
<http://www.americansecuritization.com/sto
ry.aspx?id=264>.
137 Philip Shenon, gNey Is Sentenced to 2 1.2
Years in Abramoff Case,h New York Times,
January 20, 2007, available at:
<http://www.nytimes.com/2007/01/20/washi
ngton/20ney.html?_r=>.
138 Diana B. Henriques with Jonathan Fuerbringer,
gBankers Opposing New State
Curbs on Unfair Loans,h New York Times,
February 14, 2003, available at:
<http://query.nytimes.com/gst/fullpage.html
?res=9405E2D7153AF937A25751C0A9659
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
secondary market,h Green
testified before the House
Financial Services Committee
in 2005. gFaced
with this type of environment,
secondary
market participants may
find it less attractive to
purchase and repackage
subprime loans.h139
In a 2004 statement submitted to the
House Financial Services Committee, the
Housing Policy Council, made up of 17 of
the largest U.S. mortgage finance companies,
argued that diverse state standards
relating to assignee liability were unfairly
impinging on lenders and undermining
access to credit among poor communities.
gIn the absence of a national law, lenders
face growing problems: (1) a number of
states, and even cities and counties, pass
C8B63&sec=&spon=&pagewanted=all>.
139 Testimony of Micah Green, president, The
Bond Market Association, on gLegislative
Solution to Abusive Market Lending Practices,h
before the Financial Services Committee,
Subcommittee on Housing and
Community Opportunity and Subcommittee
on Financial Institutions and Consumer
Credit, U.S. House of Representatives, May
24, 2005, available at:
<http://financialservices.house.gov/media/p
df/052405msg.pdf>.
Securitizers continue to
defend their position on
assignee liability, even
though it encourages the
practices that helped fuel
the subprime mess.
78 SOLD OUT
widely different legislation that causes a
variety of administrative and legal problems.
What is permitted in some locales is not in
others, sometimes even within the same
state; (2) states and subdivisions begin
competing to devise new restrictions; (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; (4) litigation adversely impacts
the reputations of lenders, 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,
and assignees decide that buying or
lending against these loans is also not worth
the risk for them. The end result is actually
less credit for borrowers.h140
Further, the Housing Policy Council asserted,
under a national standard, assignee
liability should only apply where an assignee
had actual knowledge that a loan was
flawed, or intentionally failed to use due
diligence (itself a weak standard). 141
140 Statement of the Housing Policy Council of
the Financial Services Roundtable, before
the Subcommittee on Financial Institutions
and Consumer Credit and the Subcommittee
on Housing and Community Opportunity,
gPromoting Homeownership by Ensuring
Liquidity in the Subprime Mortgage Market,h
June 23, 2004, available at:
<http://financialservices.house.gov/media/p
df/062304hpc.pdf>.
141 Statement of the Housing Policy Council of
the Financial Services Roundtable, Before
the Subcommittee on Financial Institutions
Neyfs preemptive legislation regarding
assignee liability never became law, but it
helped frame the debate so that the mortgage
lenders, banks and Wall Street were on the
offensive . demanding even reduced
standards of assignee liability, 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.
Securitizers continue to defend their
position on assignee liability, even though it
encourages the practices that helped fuel the
subprime mess.
In a June 2007 paper, the American Securitization
Forum (ASF) argued that, gIn
addition to being largely unnecessary, any
federal legislation that would expose secondary
market participants to assignee liability
that is very high or unquantifiable would
have severe repercussions.h The ASF repeats
the arguments of yesterday: that
securitization has increased capital available
and Consumer Credit and the Subcommittee
on Housing and Community Opportunity,
gPromoting Homeownership by Ensuring
Liquidity in the Subprime Mortgage Market,h
June 23, 2004, available at:
<http://financialservices.house.gov/media/p
df/062304hpc.pdf>. gActions and defenses,h
asserted the Housing Policy Council, gmust
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, or intentional failure to use appropriate
due diligence in reviewing the loans assigned.h
SOLD OUT 79
to subprime markets and helped expand
homeownership; that assignees have an
economic incentive to ensure acquired loans
that are unlikely to default; that it is unreasonable
to ask assignees to investigate all
securitized loans; and that assignee liability
would dry up the secondary loan market
with dire consequences.142
Asserted the ASF, gThe 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. As a
result, at precisely the time when increased
liquidity is essential to ensuring the financial
health of the housing market, schemes
imposing overly burdensome assignee
liability threaten to cause a contraction and
deleterious repricing of mortgage credit.h143
142 American Securitization Forum, gAssignee
Liability in the Secondary Mortgage Market:
Position Paper of the American Securitization
Forum,h June 2007, available at:
<http://www.americansecuritization.com/upl
oaded-
Files/Assignee%20Liability%20Final%20V
ersion_060507.pdf>.
143 American Securitization Forum, gAssignee
Liability in the Secondary Mortgage Market:
Position Paper of the American Securitization
Forum,h June 2007, available at:
<http://www.americansecuritization.com/upl
oaded-
Files/Assignee%20Liability%20Final%20V
That these arguments are overblown
and misplaced was clear at the start of the
subprime boom. They are now utterly implausible.
As a fairness matter, assignees
will often be the only party able to offer
relief to victims of predatory loans, and
victims often need to be able to bring claims
against assignees in order to prevent unjust
foreclosures; the hypothetical incentives for
assignees to avoid loans that could not be
paid off proved illusory; assignees have
ample capacity to police the loans they
acquire, including by hiring third-party
investigators or by contractual arrangement
with mortgage originators; and the overarching
problem for lower-income families and
communities since 2001 has not been too
little credit, but too much poor quality
credit.
  
ersion_060507.pdf>.
131  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 02:46:35 AM
Woof, 5th Post;

SOLD OUT 39
THE EXECUTIVE BRANCH
REJECTS FINANCIAL
DERIVATIVE REGULATION
Over-the-counter financial derivatives are
unregulated. By all accounts, this has been a
disaster. As Warren Buffett warned in 2003,
financial derivatives represent weapons of
mass financial destruction because [l]arge
amounts of risk, particularly credit risk, 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.
48
A financial derivative is a financial instrument
whose value is determined by the
value of an underlying financial asset, such
as a mortgage contract, stock or bond, or by
financial conditions, such as interest rates or
currency values. The value of the contract is
determined by fluctuations in the price of
the underlying asset. Most derivatives are
characterized by high leverage, meaning
they are bought with enormous amounts of
borrowed money.
Derivatives are not a recent invention.
48 Warren Buffett, Chairman, Berkshire Hathaway,
Report to Shareholders, February 21,
2003. Wrote Buffet: Another problem
about derivatives is that they can exacerbate
trouble that a corporation has run into for
completely unrelated reasons. This pile-on
effect occurs because many derivatives contracts
require that a company suffering a
credit downgrade immediately supply collateral
to counterparties. Imagine, then, that
a company is downgraded because of general
adversity and that its derivatives instantly
kick in with their requirement, imposing
an unexpected and enormous demand
for cash collateral on the company. The need
to meet this demand can then throw the
company into a liquidity crisis that may, in
some cases, trigger still more downgrades. It
all becomes a spiral that can lead to a corporate
meltdown. Available at:
<http://www.berkshirehathaway.com/letters/
2002pdf.pdf>.
3
IN THIS SECTION:
Financial derivatives are unregulated. By all
accounts this has been a disaster, as Warren
Buffets warning that they represent weapons
of mass financial destruction has
proven prescient. Financial derivatives have
amplified the financial crisis far beyond the
unavoidable troubles connected to the
popping of the housing bubble.
The Commodity Futures Trading
Commission (CFTC) has jurisdiction over
futures, options and other derivatives connected
to commodities. During the Clinton
administration, the CFTC sought to exert
regulatory control over financial derivatives.
The agency was quashed by opposition from
Treasury Secretary Robert Rubin and, above
all, Fed Chair Alan Greenspan. They challenged
the agencys jurisdictional authority;
and insisted that CFTC regulation might
imperil existing financial activity that was
already at considerable scale (though
nowhere near present levels). Then-Deputy
Treasury Secretary Lawrence Summers told
Congress that CFTC proposals cas[t] a
shadow of regulatory uncertainty over an
otherwise thriving market.
40 SOLD OUT
Traditional, non-financial derivatives include
futures contracts traded on exchanges
such as the Chicago Mercantile Exchange,
and regulated by the Commodity Futures
Trading Commission. A traditional futures
contract might include, for example, futures
on oranges, where buyers and sellers agree
to deliver or accept delivery of a specified
number of oranges at some point in the
future, at a price determined now, irrespective
of the price for oranges at that future
time. This kind of futures contract can help
farmers and others gain some price certainty
for commodities whose value fluctuates in
uncertain ways. Over-the-counter (OTC)
financial derivatives, by contrast, are negotiated
and traded privately (not on public
exchanges) and are not subjected to public
disclosure, government supervision or other
requirements applicable to those traded on
exchanges.
Derivatives and the current financial crisis
In the 1990s, the financial industry began to
develop increasingly esoteric types of derivatives.
One over-the-counter derivative
that has exacerbated the current financial
crisis is the credit default swap (CDS).
CDSs were invented by major banks in the
mid-1990s as a way to insure against possible
default by debtors (including mortgage
holders). Investment banks that hold mortgage
debt, including mortgage-backed
securities, can purchase a CDS from a seller,
such as an insurance company like AIG,
which agrees to become liable for all the
debt in the event of a default 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.49
Banks and hedge funds also began to
sell CDSs and even trade them on Wall
Street. Billions in these insurance policies
were traded every day, with traders essentially
betting on the likelihood of default on
mortgage-backed securities. 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.
The current financial crisis has exposed
how poorly the sellers and the buyers understood
the value of the derivatives they were
trading.
Once home values stopped rising in
2006 and mortgage default became more
commonplace, the value of the packages of
mortgages known as mortgage-backed
securities plunged. At that point, the CDS
agreements called for the sellers of the
CDSs to reimburse the purchasers for the
losses in the mortgage-backed securities.
49 Lewis Braham, Credit Default Swaps: Is
Your Fund at Risk? BusinessWeek, February
21, 2008, available at:
<http://www.businessweek.com/magazine/c
ontent/08_09/b4073074480603.htm>.
SOLD OUT 41
Firms that had sold CDS contracts, like
AIG, became responsible for posting billions
of dollars in collateral or paying the purchasers.
The global market
value of CDS contracts
(notional value) reached
over $60 trillion in 2007,
surpassing the gross
domestic product of every
country in the world
combined. The value of
the entire global derivatives
market reached $683 trillion by mid-
2008, more than 20 times the total value of
the U.S. stock market.50
The total dollars actively at risk from
CDSs is a staggering $3.1 trillion.51 The
amount at risk is far less than $60 trillion
because most investors were simultaneously
on both sides of the CDS trade. For example,
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.52 When a
mortgage-backed security defaulted, the
50 Bureau of International Settlements, Table 19:
Amounts Outstanding of Over-the-counter
Derivatives, available at:
<www.bis.org/statistics/derstats.htm>.
51 Bureau of International Settlements, Table 19:
Amounts Outstanding of Over-the-counter
Derivatives, available at:
<www.bis.org/statistics/derstats.htm>.
52 Adam Davidson, How AIG fell apart,
Reuters, September 18, 2008, available at:
<http://www.reuters.com/article/newsOne/id
USMAR85972720080918>.
banks might have to pay some money out,
but they would also be getting money back
in. So, while the total value of each CDS
buy and sell order equaled
$60 trillion in 2007, the
actual value at risk was a
fraction of that but still
large enough to rock the
financial markets.
The insurance giant
AIG, however, did not buy
CDS contracts it only
sold them. AIG issued $440
billion53 worth of such contracts, making it
liable for loan defaults, including billions in
mortgage-backed securities that went bad
after the housing bubble burst. In addition,
the companys debt rating was downgraded
by credit rating firms, a move that triggered
a clause in its CDS contracts that required
AIG to put up more collateral to guarantee
its ability to pay. Eventually, AIG was unable
to provide enough collateral or pay its obligations
from the CDS contracts. Its stock price
tumbled, making it impossible for the firm to
attract investors. Many banks throughout the
world were at risk because they had bought
CDS contracts from AIG. The financial spiral
downward ultimately required a taxpayerfinanced
bailout by the Federal Reserve,
which committed $152.5 billion to the com-
53 Adam Davidson, How AIG fell apart,
Reuters, September 18, 2008, available at:
<http://www.reuters.com/article/newsOne/id
USMAR85972720080918>.
The value of the entire global
derivatives market reached
$683 trillion by mid-2008,
more than 20 times the total
value of the U.S. stock
market.
42 SOLD OUT
pany in 2008, in order to minimize disruption
to the financial markets.54
Federal Agencies Reject Regulation of
Financial Derivatives.
Some industry observers warned of the
dangers of over-the-counter derivatives. But
acceding to political pressure from the
powerful financial industry, the federal
agencies with the responsibility to safeguard
the integrity of the financial system refused
to permit regulation of financial derivatives,
55 especially the credit default swaps
that have exacerbated the current financial
meltdown.
In 1996, President Clinton appointed
Brooksley Born chair of the Commodity
Futures Trading Commission (CFTC).56 The
CFTC is an independent federal agency with
the mandate to regulate commodity futures
and option markets in the United States.
Born was outspoken and adamant about
the need to regulate the quickly growing but
largely opaque area of financial derivatives.
She found fierce opposition in SEC Chair
54 Erik Holm, AIG Sells Mortgage-Backed
Securities to Fed Vehicle, Bloomberg.com,
December 15, 2008.
55 Exchange-traded and agricultural derivatives
are generally regulated by the Commodity
Futures Trading Commission (CFTC). Overthe-
counter financial derivatives not
traded on an exchange were and are not
subject to CFTC jurisdiction. This report
primarily uses the shorthand term financial
derivative to reference over-the-counter financial
derivatives.
56 <http://www.cftc.gov/anr/anrcomm98.htm>
Arthur Levitt, Treasury Secretary Robert
Rubin and Federal Reserve Chair Alan
Greenspan, all of whom felt that the financial
industry was capable of regulating itself.
An April 1998 meeting of the Presidents
Working Group on Financial Markets,
which consisted of Levitt, Greenspan, Rubin
and Born, turned into a standoff between the
three men and Born. The men were determined
to derail her efforts to regulate derivatives,
but left the meeting without any
assurances.57
Pressing back against her critics, Born
published a CFTC concept paper in 1998
describing how the derivatives sector might
be regulated. Born framed the CFTCs
interest in mild terms: The substantial
changes in the OTC derivatives market over
the past few years require the Commission
to review its regulations, said Born. The
Commission is not entering into this process
with preconceived results in mind. We are
reaching out to learn the views of the public,
the industry and our fellow regulators on the
appropriate regulatory approach to todays
OTC derivatives marketplace.58
57 Anthony Faiola, Ellen Nakashima and Jill
Drew, The Crash: What Went Wrong, The
Washington Post, October 15, 2008, available
at:
<http://www.washingtonpost.com/wpdyn/
content/story/2008/10/14/ST200810140
3344.html>.
58 CFTC Issues Concept Release Concerning
Over-the-Counter Derivatives Market, May
7, 1998, available at:
<http://www.cftc.gov/opa/press98/opa4142-
98.htm>.
SOLD OUT 43
The publication described the growth of
derivatives trading (Use of OTC derivatives
has grown at very substantial rates over
the past few years, to a notional value of
more than $28 trillion) and raised questions
about financial derivatives rather than
proposed specific regulatory initiatives.
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, and its probing
questions suggested a range of meaningful
regulatory measures measures which, if
they had been adopted, likely would have
reduced the severity of the present crisis.
While OTC derivatives serve important
economic functions, these products, like
any complex financial instrument, can
present significant risks if misused or misunderstood
by market participants, the
CFTC noted.59 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.60
59 Commodity Futures Trading Commission,
Concept Release: Over-the-Counter Derivatives,
May 7, 1998, available at:
<http://www.cftc.gov/opa/press98/opamntn.
htm#issues_for_comment>.
60 Commodity Futures Trading Commission,
Concept Release: Over-the-Counter Derivatives,
May 7, 1998, available at:
<http://www.cftc.gov/opa/press98/opamntn.
htm#issues_for_comment>.
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);
Require financial derivatives to be
traded over a regulated exchange;
Require registration of person or entities
trading financial derivatives;
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, and to avoid excessive
use of borrowed money); and
Require issuers of derivatives to
disclose the risks accompanying
those instruments.
The uproar from the financial industry
was immediate. During the next two months,
industry lobbyists met with CFTC commissioners
at least 13 times.62 Meanwhile, Born
faced off against Greenspan and others in
61 Commodity Futures Trading Commission,
Concept Release: Over-the-Counter Derivatives,
May 7, 1998, available at:
<http://www.cftc.gov/opa/press98/opamntn.
htm#issues_for_comment>.
62 Sharona Coutts and Jake Bernstein, Former
Clinton Official Says Democrats, Obama
Advisers Share Blame for Market Meltdown,
ProPublica, October 9, 2008, available
at:
<http://www.propublica.org/feature/formerclinton-
official-says-democrats-obamaadvisers-
share-blame-for-marke/>.
44 SOLD OUT
numerous antagonistic congressional hearings.
Senator Richard Lugar, R-Indiana,
chair of the Senate Agricultural Committee,
stepped into the fray.
Lugar, who received
nearly $250,000 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.64 The stalemate
continued.
The Treasury Department weighed in
with its view that derivatives should remain
unregulated. President Clintons then-Deputy
Treasury Secretary, Lawrence H. Summers
(now head of the Obama administrations
National Economic Council), complained
that Borns proposal cast the shadow of
regulatory uncertainty over an otherwise
63 Center for Responsive Politics,
<http://www.opensecrets.org/politicians/ind
ustries.php?cycle=1998&cid=N00001764>.
64 Senator Richard Lugar, Regulation of Over
the Counter (OTC) Derivatives and Derivatives
Markets, Hearing of the Senate Agriculture,
Nutrition and Forestry Committee,
July 30, 1998 (t is essential that the government
not create legal uncertainty for
swaps. I hope it will not be necessary, but
there are circumstances that could compel
Congress to act preemptively in the near
term.) For a full account of the dispute, see:
<http://www.washingtonpost.com/wpdyn/
content/story/2008/10/14/ST200810140
3344.html>.
thriving market 65
Federal Reserve Chair Alan Greenspan
echoed the Treasury Department view, arguing
that regulation would be
both unnecessary and harmful.
Regulation of derivatives
transactions that are
privately negotiated by
professionals is unnecessary.
Regulation that serves no
useful purpose hinders the
efficiency of markets to
enlarge standards of living.
66
In September 1998, Long Term Capital
Management, a hedge fund heavily focused
on derivatives, informed the Fed it was on
the brink of collapse, and couldnt cover $4
billion in losses.67 The New York Federal
Reserve quickly recruited 14 private banks
to bail out Long Term Capital by investing
$3.6 billion.68
65 Lawrence H. Summers, Testimony Before the
Senate Committee on Agriculture, Nutrition,
and Forestry, July 30, 1998, available at:
<http://www.ustreas.gov/press/releases/rr26
16.htm>.
66 Alan Greenspan, Regulation of Over the
Counter (OTC) Derivatives and Derivatives
Markets, Hearing of the Senate Agriculture,
Nutrition and Forestry Committee, July
30, 1998.
67 Anthony Faiola, Ellen Nakashima and Jill
Drew, The Crash: What Went Wrong, The
Washington Post, October 15, 2008, available
at:
<http://www.washingtonpost.com/wpdyn/
content/story/2008/10/14/ST200810140
3344.html>.
68 Sharona Coutts and Jake Bernstein, Former
Lawrence Summers complained
that a proposal to
regulate derivatives cast a
shadow of regulatory uncertainty
over an otherwise
thriving market.
SOLD OUT 45
This episode should serve as a wake-up
call about the unknown risks that the overthe-
counter derivatives market may pose to
the U.S. economy and to financial stability
around the world, Born told the House
Banking Committee two days later. 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.
69 But what should have been a
moment of vindication for Born was swept
aside by her adversaries, and Congress
enacted a six-month moratorium on any
CFTC action regarding derivatives or the
swaps market.70 (Permanent congressional
action would soon follow, as the next section
details.) In May 1999, Born resigned in
frustration.
Borns replacement, William Rainer,
went along with Greenspan, Summers
Clinton Official Says Democrats, Obama
Advisers Share Blame for Market Meltdown,
ProPublica, October 9, 2008, available
at:
<http://www.propublica.org/feature/formerclinton-
official-says-democrats-obamaadvisers-
share-blame-for-marke/>.
69 Brooksley Born, CFTC Chair, Testimony
Before the House Committee on Banking
and Financial Services, October 1, 1998,
available at:
<http://financialservices.house.gov/banking/
10198bor.pdf>.
70 Anthony Faiola, Ellen Nakashima and Jill
Drew, The Crash: What Went Wrong, The
Washington Post, October 15, 2008, available
at:
<http://www.washingtonpost.com/wpdyn/
content/story/2008/10/14/ST200810140
3344.html>.
(whom Clinton had appointed Treasury
Secretary) and Levitts campaign to block
any CFTC regulation. In November 1999,
the inter-agency Presidents Working Group
on Financial Markets released a new report
on derivatives recommending no regulation,
saying it would perpetuate legal uncertainty
or impose unnecessary regulatory burdens
and constraints upon the development of
these markets in the United States.71
Among other rationalizations for this nonregulatory
posture, the report argued, the
sophisticated counterparties that use OTC
derivatives simply do not require the same
protections as retail investors.72 The report
briefly touched upon, but did not take seriously,
the idea that financial derivatives
posed overall financial systemic risk. To the
extent that such risk exists, the report concluded,
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. Government
regulation should serve to supplement,
rather than substitute for, private market
71 The Presidents Working Group on Financial
Markets, Over-the-Counter Derivatives
Markets and the Commodity Exchange
Act, November 1999, available at:
<http://www.treas.gov/press/releases/reports
/otcact.pdf>.
72 The Presidents Working Group on Financial
Markets, Over-the-Counter Derivatives
Markets and the Commodity Exchange
Act, November 1999, available at:
<http://www.treas.gov/press/releases/reports
/otcact.pdf>.
46 SOLD OUT
discipline. In general, private counterparty
credit risk management has been employed
effectively by both regulated and unregulated
dealers of OTC derivatives, and the
tools required by federal regulators already
exist.73
  
73 The Presidents Working Group on Financial
Markets, Over-the-Counter Derivatives
Markets and the Commodity Exchange
Act, November 1999, available at:
<http://www.treas.gov/press/releases/reports
/otcact.pdf>.
SOLD OUT 47
CONGRESS BLOCKS
FINANCIAL DERIVATIVE
REGULATION
Long before financial derivatives became
the darlings of Wall Street, there were some
in Congress who believed that the federal
government should be given greater power
to regulate derivatives.
In 1994, Senator Donald Riegle, DMichigan,
and Representative Henry Gonzalez,
D-Texas, introduced separate bills
calling for derivatives regulation;74 both
went nowhere.75 Opposing regulation was a
74 The Derivatives Supervision Act of 1994, in
the Senate; the Derivatives Safety and
Soundness Supervision Act of 1994, in the
House.
75 Anthony Faiola, Ellen Nakashima and Jill
Drew, The Crash: What Went Wrong, The
Washington Post, October 15, 2008, available
at:
<http://www.washingtonpost.com/wpdyn/
content/story/2008/10/14/ST200810140
3344.html>.
bipartisan affair and inaction ruled the day.76
In 2000, a year after the outspoken
Brooksley Born left the Commodity Futures
Trading Commission (CFTC), Congress and
President Clinton codified regulatory inaction
with passage of the Commodity Futures
Modernization Act (CFMA).77 The legislation
included an Enron loophole, which
prohibited regulation of energy futures
contracts and thereby contributed to the
collapse of scandal-ridden Enron in 2001.
CFMA formally exempted financial derivatives,
including the now infamous credit
default swaps, from regulation and federal
government oversight. 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.78 Gramm led the
congressional effort to block federal agencies
from regulating derivatives, complaining
that anks are already heavily regulated
institutions.79 Gramm predicted
76 The action that Congress did take the sixmonth
moratorium on CFTC regulation described
in the previous section cut against
the need for regulation.
77 Pub. L. No. 106-554, Appendix E, amending
the Commodity Exchange Act, 7 U.S.C. 1
et. seq.
78 Dirk van Dijk, Credit Default Swaps Explained,
Zacks Investment Research, September
24, 2008, available at:
<http://www.zacks.com/stock/news/14884/
Credit+Default+Swaps+Explained>.
79 Sen. Phil Gramm, 106th Congress, 2nd Session,
146 Cong. Rec. S. 11867, December
15, 2000, available at:
4
IN THIS SECTION:
The deregulation or non-regulation of
financial derivatives was sealed in 2000,
with the Commodities Futures Modernization
Act (CFMA), passage of which was engineered
by then-Senator Phil Gramm, RTexas.
The Commodities Futures Modernization
Act exempts financial derivatives,
including credit default swaps, from regulation
and helped create the current financial
crisis.
48 SOLD OUT
CFMA will be noted as a major achievement
and as a watershed, where we turned
away from the outmoded, Depression-era
approach to financial regulation.80 He said
the legislation protects financial institutions
from over-regulation, and provides legal
certainty for the $60 trillion market in
swaps81 in other words, it offered a
guarantee that they would not be regulated.
By 2008, Gramms UBS was reeling
from the global financial crisis he had
helped create. The firm declared nearly $50
billion in credit losses and write-downs,
prompting a $60 billion bailout by the Swiss
government.82
Senator Gramm remains defiant today,
telling the New York Times, There is this
idea afloat that if you had more regulation
you would have fewer mistakes. I dont see
any evidence in our history or anybody
<http://frwebgate.access.gpo.gov/cgibin/
getpage.cgi?position=all&page=S11867
&dbname=2000_record>.
80 Sen. Phil Gramm, 106th Congress, 2nd Session,
146 Cong. Rec. S. 11868, December
15, 2000, available at:
<http://frwebgate.access.gpo.gov/cgibin/
getpage.cgi?position=all&page=S11868
&dbname=2000_record>.
81 106th Congress, 2nd Session, 146 Cong. Rec.
S. 11866, Dec. 15, 2000, available at:
<http://frwebgate.access.gpo.gov/cgibin/
getpage.cgi?position=all&page=S11866
&dbname=2000_record>.
82 Eric Lipton and Stephen Labaton, The
Reckoning: Deregulator Looks Back, Unswayed,
New York Times, November 16,
2008, available at:
<http://www.nytimes.com/2008/11/17/busin
ess/economy/
17gramm.html?_r=1&pagewanted=1&
em>.
elses to substantiate it. The markets have
worked better than you might have
thought.83
Others have a more reality-based view.
Former SEC Commissioner Harvey J.
Goldschmid, conceded that in hindsight,
theres no question that we would have been
better off if we had been regulating derivatives.
84
While credit default swaps are not the
underlying cause of the financial crisis, they
dramatically exacerbated it. As mortgages
and mortgage-backed securities plummeted
in value from declining real estate values,
big financial firms were unable to meet their
insurance obligations under their credit
default swaps.
Another action by Congress must be
mentioned here. In 1995, bowing to the
financial lobby after years of lobbying,
Congress passed the Private Securities
Litigation Reform Act.85 The measure
greatly restricted the rights of investors to
sue Wall Street trading, accounting and
investment firms for securities fraud. The
author of the legislation was Representative
83 Eric Lipton and Stephen Labaton, Deregulator
Looks Back, Unswayed, New York
Times, November 16, 2008, available at:
<http://www.nytimes.com/2008/11/17/busin
ess/economy/17gramm.html?pagewanted=al
l>
84 The Crash: What Went Wrong? Washington
Post website, Undated, available at:
<http://www.washingtonpost.com/wpsrv/
business/risk/index.html?hpid=topnews>
.
85 15 U.S.C. 78u-4.
SOLD OUT 49
Christopher Cox, R-California, who President
Bush later appointed Chair of the
Securities and Exchange Commission.
In the debate over the bill in the House
of Representatives, Representative Ed
Markey, D-Massachusetts, proposed an
amendment that would have exempted
financial derivatives from the Private Securities
Litigation Reform Act.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, in many instances with the
promise that they are quite safe for a municipality
to purchase. The objective of
the Markey amendment out here is to ensure
that investors are protected when they are
misled into products of this nature, which by
their very personality cannot possibly be
understood by ordinary, unsophisticated
investors. By that, I mean the town treasurers,
the country treasurers, the ordinary
individual that thinks that they are sophisticated,
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 26-
or 28-year-old summa cum laude in mathematics
from Cal Tech or from MIT who
constructed it. No one else in the firm un-
86 Rep. Edward Markey, 104th Congress 1st
Session, 141 Cong. Rec. H. 2826, March 8,
1995, available at:
<http://frwebgate.access.gpo.gov/cgibin/
getpage.cgi?dbname=1995_record&pag
e=H2826&position=all>.
derstands it. The lesson that we are learning
is that the heads of these firms turn a blind
eye, because the profits are so great from
these products that, in fact, the CEOs of the
companies do not even want to know how it
happens until the crash.
Representative Cox led the opposition
to the Markey amendment. He was able to
cite the opposition of Alan Greenspan, chair
of the Federal Reserve, and President Clintons
SEC Chair Arthur Levitt. He quoted
Greenspan saying that singling out derivative
instruments for special regulatory
treatment would be a serious mistake. He
also quoted Levitt, who warned, It would
be a grave error to demonize derivatives.87
The amendment was rejected. The
specter of litigation is a powerful deterrent
to wrongdoing. 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.
  
87 Rep. Christopher Cox, 104th Congress 1st
Session, 141 Cong. Rec. H. 2828, March 8,
1995, available at:
<http://frwebgate.access.gpo.gov/cgibin/
getpage.cgi?position=all&page=H2828
&dbname=1995_record>.
50 SOLD OUT
THE SECS VOLUNTARY
REGULATION REGIME FOR
INVESTMENT BANKS
Until the current financial crisis, investment
banks regularly borrowed funds to purchase
securities and debt instruments. A highly
leveraged financial institution is one that
owns financial assets that it acquired with
substantial amounts of borrowed money.
The Securities and Exchange Commission
(SEC) prohibited broker-dealers (i.e. stock
brokers and investment banks) from exceeding
established limits on the amount of
borrowed money used for buying securities.
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.88
As a result, the five major Wall Street
investment banks maintained net capital
ratios far below the 12 to 1 limit. The rule
also required broker-dealers to maintain a
designated amount of set-aside capital based
on the riskiness of their investments; the
riskier the investment, the more they would
need to set aside. 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, and to
ensure that the broker or investment bank
could meet its contractual obligations to
other firms.89 The rule was adopted by the
88 17 C.F.R. 240, 15c3-1.
89 Toxic Waste Build Up: How Regulatory
Changes Let Wall Street Make Bigger Risky
Bets, An Interview with Lee Pickard, Multinational
Monitor, November/December
2008, available at:
<http://www.multinationalmonitor.org/mm2
5
IN THIS SECTION:
In 1975, the SECs trading and markets
division promulgated a rule requiring
investment banks to maintain a debt-to-netcapital
ratio of less than 12 to 1. It forbid
trading in securities if the ratio reached or
exceeded 12 to 1, so most companies maintained
a ratio far below it. In 2004, however,
the SEC succumbed to a push from the big
investment banks led by Goldman Sachs,
and its then-chair, 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. This
essentially involved complicated mathematical
formulas that imposed no real limits, and
was voluntarily administered. With this new
freedom, investment banks pushed borrowing
ratios to as high as 40 to 1, as in the case of
Merrill Lynch. This super-leverage not only
made the investment banks more vulnerable
when the housing bubble popped, it enabled
the banks to create a more tangled mess of
derivative investments so that their
individual failures, or the potential of failure,
became systemic crises. Former SEC Chair
Chris Cox has acknowledged that the voluntary
regulation was a complete failure.
SOLD OUT 51
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.
In 2004, the SEC
abolished its 19-year old
debt-to-net-capital rule
in favor of a voluntary
system that allowed
investment banks to
formulate their own
rule.90 Under this new
scheme, large investment
banks would assess their
level of risk based on
their own risk management computer models.
The SEC acted at the urging of the big
investment banks led by Goldman Sachs,
which was then headed by Henry M. Paulson
Jr., who would become Treasury secretary
two years later, and was the architect of
the Bush administrations response to the
current financial debacle: the unprecedented
taxpayer bailout of banks, investment firms,
insurers and others. After a 55-minute
discussion, the SEC voted unanimously to
abolish the rule.91
008/112008/interview-pickard.html>.
90 Final Rule: Alternative Net Capital Requirements
for Broker-Dealers that are Part of
Consolidated Entities, 17 C.F.R. 200 and
240 (2004). Available at:
<www.sec.gov/rules/final/34.49830.htm>.
91 Stephen Labaton, Agencys 04 Rule Let
The SECs new policy, foreseeably, enabled
investment banks to make much
greater use of borrowed funds. The top five
investment banks participated
in the SECs voluntary
program: Bear Steams,
Goldman Sachs, Morgan
Stanley, Merrill Lynch and
Lehman Brothers. By 2008,
these firms had borrowed
20, 30 and 40 dollars for
each dollar in capital, far
exceeding the standard 12 to
1 ratio. Much of the borrowed
funds were used to
purchase billions of dollars
in subprime-related and
other mortgage-backed securities (MBSs)
and their associated derivatives, including
credit default swaps. The securities were
purchased at a time when real estate values
were skyrocketing and few predicted an end
to the financial party. As late as the March
2008 collapse of Bear Stearns, 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, he said.92
Banks Pile Up New Debt, New York
Times, October 2, 2008, available at:
<http://www.nytimes.com/2008/10/03/busin
ess/03sec.html?_r=1>.
92 Stephen Labaton, Agencys 04 Rule Let
Banks Pile Up New Debt, New York
Times, October 2, 2008, available at:
<http://www.nytimes.com/2008/10/03/busin
The SECs Inspector General
concluded that it is undisputable
that the SEC failed
to carry out its mission in
its oversight of Bear
Stearns, which collapsed in
2008 under massive
mortgage-backed securities
losses.
52 SOLD OUT
The SEC had abolished the net capital
rule with the caveat that it would continue
monitoring the banks for financial or operational
weaknesses. But a 2008 investigation
by the SECs Inspector General (IG) found
that the agency had neglected its oversight
responsibilities. The IG concluded that it is
undisputable that the SEC failed to carry
out its mission in its oversight of Bear
Stearns, which collapsed in 2008 under
massive mortgage-backed securities losses,
leading the Federal Reserve to intervene
with taxpayer dollars to prevent significant
harm to the broader financial system. The
IG said the SEC became aware of numerous
potential red flags prior to Bear Stearns
collapse, including its concentration of
mortgage securities and high leverage, but
did not take actions to limit these risk factors.
Moreover, concluded the IG, the SEC
was aware ... that Bear Stearns concentration
of mortgage securities was increasing
for several years and was beyond its internal
limits. Nevertheless, it did not make any
efforts to limit Bear Stearns mortgage
securities concentration. The IG said the
SEC was aware that Bear Stearns leverage
was high; but made no effort to require the
firm to reduce leverage despite some
authoritative sources describing a linkage
between leverage and liquidity risk. Furthermore,
the SEC became aware that risk
management of mortgages at Bear Stearns
ess/03sec.html?_r=1>.
had numerous shortcomings, including lack
of expertise by risk managers in mortgagebacked
securities and persistent understaffing;
a proximity of risk managers to
traders suggesting a lack of independence;
turnover of key personnel during times of
crisis; and the inability or unwillingness to
update models to reflect changing circumstances.
Notwithstanding this knowledge,
the SEC missed opportunities to push Bear
Steams aggressively to address these identified
concerns.
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 SECs voluntary
program had been overwhelmed by
human error, overly optimistic assumptions,
including that the housing bubble would not
burst, and a failure to contemplate systemwide
asset deflation. Similar computer
models failed to prevent the demise of
Long-Term Capital Management, a heavily
leveraged hedge fund that collapsed in 1998,
and the stock market crash of October
1987.93 The editors at Scientific American
magazine lambasted the SEC and the investment
banks for their
  • verreliance on
financial software crafted by physics and
93 Stephen Labaton, Agencys 04 Rule Let
Banks Pile Up New Debt, New York
Times, October 2, 2008 (citing Leonard D.
Bole, software consultant), available at:
<http://www.nytimes.com/2008/10/03/busin
ess/03sec.html?_r=1>.
SOLD OUT 53
math Ph.D.s.94
By the fall of 2008, the number of major
investment banks on Wall Street dropped
from five to zero. All five securities grants
either disappeared or became bank holding
companies in order to avail themselves of
taxpayer bailout money. JP Morgan bought
Bear Stearns, Lehman Brothers filed for
bankruptcy protection, Bank of America
announced its rescue of Merrill Lynch by
purchasing it, while Goldman Sachs and
Morgan Stanley became bank holding
companies with the Federal Reserve as their
new principal regulator.
On September 26, 2008, as the crisis
became a financial meltdown of epic proportions,
SEC Chair Cox, who spent his entire
public career as a deregulator, conceded the
last six months have made it abundantly
clear that voluntary regulation does not
work.95
  
94 The Editors, After the Crash: How Software
Models Doomed the Markets, Scientific
American, November 2008, available at:
<http://www.sciam.com/article.cfm?id=after
-the-crash>.
95 Anthony Faiola, Ellen Nakashima and Jill
Drew, The Crash: What Went Wrong, The
Washington Post, October 15, 2008, available
at:
<http://www.washingtonpost.com/wpdyn/
content/story/2008/10/14/ST200810140
3344.html>.
54 SOLD OUT
BANK SELF-REGULATION
GOES GLOBAL: PREPARING TO
REPEAT THE MELTDOWN?
Banks are inherently highly leveraged
institutions, meaning they hold large
amounts of debt compared to their net worth
(or equity). As a result, their debt-to-equity
(or debt-to-capital) ratios are generally
higher than for other types of corporations.
Regulators have therefore required banks to
maintain an adequate cushion of capital to
protect against unexpected losses, especially
losses generated on highly leveraged investments.
Generally, banks are required to
keep higher capital amounts in reserve in
order to hold assets with higher risks and,
inversely, lower capital for lower risk assets.
In other words, banks with riskier credit
exposures are required to retain more capital
to back the banks obligations.
In 1988, national bank regulators from
the largest industrial countries adopted a set
of international banking guidelines known
as the Basel Accords. The Basel Accords
determine how much capital a bank must
hold as a cushion. Ultimately, the purpose of
the Basel Accords is to prevent banks from
creating a systemic risk, or a risk to the
financial health of the entire banking system.
The idea of an international agreement
was to level the playing field for capital
regulation as among banks based in different
countries.
The first Basel Accords, known as
Basel I, did not well distinguish between
loans involving different levels of risk. This
gave rise to two sets of problems. Banks had
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. For example, Basel I
categorized all commercial loans into the 8
percent capital category meaning 8
percent of a banks 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
6
IN THIS SECTION:
In 1988, global bank regulators adopted a
set of rules known as Basel I, to impose a
minimum global standard of capital adequacy
for banks. Complicated financial
maneuvering made it hard to determine
compliance, however, which led to negotiations
over a new set of regulations. Basel II,
heavily influenced by the banks themselves,
establishes varying capital reserve requirements,
based on subjective factors of agency
ratings and the banks own internal riskassessment
models. The SEC experience with
Basel II principles illustrates their fatal
flaws. Commercial banks in the United States
are supposed to be compliant with aspects of
Basel II as of April 2008, but complications
and intra-industry disputes have slowed
implementation.
SOLD OUT 55
incentive to engage in regulatory capital
arbitrage, 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
banks overall risk has not diminished.
Securitization is the main method used by
banks to engage in regulatory capital arbitrage.
Securitized loans are listed on a
banks trading account, which requires
less set-aside capital than the banking
book, where loans are maintained.96
To address these problems, the Basel
Committee on Banking Supervision agreed
in 2004 to an updated bank capital accord
(Basel II), formally known as the International
Convergence of Capital Measurement
and Capital Standards: a Revised Framework.
The Committees members come
from Belgium, Canada, France, Germany,
Italy, Japan, Luxembourg, the Netherlands,
Spain, Sweden, Switzerland, the United
Kingdom and the United States; the United
States Federal Reserve serves as a participating
member.
Rather than dealing directly with the issue
of differentiated levels of risk within
categories and the problem of regulatory
96 David Jones and John Mingo, Industry
Practices in Credit Risk Modeling and Internal
Capital Allocations: Implications for a
Models-Based Regulatory Capital Standard,
4 FRBNY Econ. Poly Rev. 3, 53
(1998), available at:
<http://www.newyorkfed.org/research/epr/9
8v04n3/9810jone.pdf>.
arbitrage by establishing updated and more
granular capital standards, Basel II authorized
banks to use their own internal models
for assessing risk. Critics say that under
this system, banks will be able to employ
their internal risk models to transform highrisk
assets into low risk.
For example, where Basel I categorized
all commercial loans into the 8 percent
capital category, internal bank models would
have allowed for capital allocations on
commercial loans that vary from 1 percent
to 30 percent, depending on the loans
estimated risk. The revised framework under
Basel II gives banks the leeway to lump
commercial loans into these differing capital
adequacy requirements, depending on risk as
estimated by banks, not the regulators. Basel
II rules appear set to reduce the overall
capital requirements for banks.97
U.S. federal financial regulatory agencies
the Federal Reserve, Office of the
Comptroller of the Currency, the Federal
Deposit Insurance Corporation, and the
Office of Thrift Supervision have struggled
to find an operationally satisfactory
means to implement Basel II. It now appears
U.S. application will be limited to large
commercial banks only, with some Basel II
97 Testimony of Daniel K. Tarullo, Hearing on
the Development of the New Basel Capital
Accords, Committee on Banking, Housing
and Urban Affairs, United States Senate,
November, 10 2005, available at:
<http://banking.senate.gov/public/_files/taru
llo.pdf>.
56 SOLD OUT
requirements coming into effect via regulation
as of April 2008.98 The Securities and
Exchange Commission (SEC) imposed
parallel requirements on Wall Street investment
banks in 2004. According
to the Federal
Reserve, Basel II is supposed
to improve the
consistency of capital
regulations internationally,
make regulatory capital
more risk sensitive, and
promote enhanced riskmanagement
practices among large, internationally
active banking organizations.99
But the SECs experience with the
Basel II approach reveals a fundamental
flaw in allowing banks to make their own
risk assessments. Investment bank Bear
Stearns collapsed in 2008 even though its
own risk analysis showed it to be a sound
institution. SEC Chairman Christopher Cox
said the rapid collapse of Bear Stearns ...
challenged the fundamental assumptions
behind the Basel standards and the other
program metrics. At the time of its nearfailure,
Bear Stearns had a capital cushion
98 Office of the Comptroller of the Currency,
Basel II Advanced Approaches and Basel II
Standardized Approach, undated, available
at:
<http://www.occ.treas.gov/law/basel.htm>.
99 Basel II Capital Accord, Basel I Initiatives,
and Other Basel-Related Matters, Federal
Reserve Board, August 28, 2008, available
at:
<http://www.federalreserve.gov/GeneralInfo
/basel2/>.
well above what is required to meet supervisory
standards calculated using the Basel
framework and the Federal Reserves wellcapitalized
standard for bank holding
companies.100 In other
words, Bear Stearns had
been complying with the
relaxed Basel II framework
and it still failed.
Proponents of Basel II
argue that internal risk
assessments will not be
cause for abuse because
regulators will be heavily involved via
added oversight and disclosure. Five years
before the 2008 financial crisis, John D.
Hawke, Jr., then U.S. Comptroller of the
Currency, lauded the Basel II standards,
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. This is categorically not the
case. While a banks internal models and
risk assessment systems will be the starting
point for the calculation of capital, bank
supervisors will be heavily involved at every
stage of the process.101
100 Chairman Christopher Cox, Before the
Committee on Oversight and Government
Reform, U.S. House of Representatives, October
23, 2008, available at:
<http://oversight.house.gov/documents/2008
1023100525.pdf>.
101 John D. Hawke, Jr., Comptroller of the
Currency, Before the Committee on Bank-
The SECs experience with
the Basel II approach reveals
a fundamental flaw in allowing
banks to make their own
risk assessments.
SOLD OUT 57
But the Comptrollers claim is not supported
by the SECs experience. The SECs
Inspector General (IG) found that regulators
were anything but heavily involved in
oversight of Bear Stearns in the years before
its collapse. As noted above (Part I.5), the
IG concluded that it is undisputable that
the SEC failed to carry out its mission in its
oversight of Bear Stearns.
The banks internal risk models performed
horribly in the housing bubble and
subsequent meltdown. Its hard to see the
logic of a system that would embed those
models into regulatory requirements for setaside
capital.102
  
ing, Housing, and Urban Affairs, United
States Senate, June 18, 2003, available at:
<http://frwebgate.access.gpo.gov/cgibin/
getdoc.cgi?dbname=108_senate_hearing
s&docid=f:94514.pdf>.
102 Steven Sloan, Another Reason to Disagree
Over Basel, American Banker, January 6,
2009, available at:
<http://www.aba.com/aba/documents/ICAA
P_WG/Sloan_AB_090106.pdf>. (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,
such as Basel II, Mr. Hoenig [the
president and chief executive of the Federal
Reserve Bank of Kansas City] said. Riskbased
capital standards may also encourage
institutions to lower their capital, instead of
build it up, in the prosperous times that typically
precede a crisis.)s
132  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 02:42:34 AM
Woof, 4th Post;

SOLD OUT 29
million,26 in considerable part to support
Glass-Steagall repeal, now marketed under a
new and deceptive name, Financial Modernization.
The Clinton administration
supported the push
for deregulation. Clintons
Treasury Secretary, Robert
Rubin, who had run Goldman
Sachs, enthusiastically
promoted the legislation. In
1995 testimony before the
House Banking Committee,
for example, Rubin had
argued that the banking
industry is fundamentally different from
what it was two decades ago, let alone in
1933. U.S. banks generally engage in a
broader range of securities activities abroad
than is permitted domestically. Even domestically,
the separation of investment banking
and commercial banking envisioned by
Glass-Steagall has eroded significantly.
Remarkably, he claimed that Glass-Steagall
could conceivably impede safety and
soundness by limiting revenue diversification.
27 At times, the Clinton administration
even toyed with the idea of allowing a total
blurring of the lines between banking and
26 Data from the Center for Responsive Politics.
<www.opensecrets.org>.
27 Rubin Calls for Modernization Through
Reform of Glass-Steagall Act, Journal of
Accountancy, May 1, 1995, available at:
<http://www.allbusiness.com/government/b
usiness-regulations/500983-1.html>.
commerce (meaning non-financial businesses),
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.
28 Rubin played a
key role in obtaining
approval of legislation to
repeal Glass-Steagall, as
both Treasury Secretary
and in his subsequent
private sector role.
A handful of other
personalities were instrumental
in the effort. Senator Phil Gramm, RTexas,
the truest of true believers in deregulation,
was chair of the Senate Banking
Committee, and drove the repeal legislation.
He was assisted by Federal Reserve Chair
Alan Greenspan, 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. Notes Jake Lewis, formerly a
professional staff member of the House
Banking Committee, When the legislation
became snagged on controversial provisions,
28 Jake Lewis, Monster Banks: The Political and
Economic Costs of Banking and Financial
Consolidation, Multinational Monitor,
January/February 2005, available at:
<http://www.multinationalmonitor.org/mm2
005/012005/lewis.html>.
The Clinton administration
was winding down, and the
finance industries were
becoming increasingly
nervous that the legislation
to repeal Glass-Steagall
would not pass.
30 SOLD OUT
Greenspan would invariably draft a letter or
present testimony supporting Gramms
position on the volatile points. It was a
classic back-scratching deal
that satisfied both players
Greenspan got the dominant
regulatory role and
Gramm used Greenspans
wise words of support to
mute opposition and to help
assure a friendly press
would grease passage.29
Also playing a central role were the
CEOs of Citicorp and Travelers Group. In
1998, the two companies announced they
were merging. Such a combination of banking
and insurance companies was illegal
under the Bank Holding Company Act, but
was excused due to a loophole in the BHCA
which provided a two-year review period of
proposed mergers. Travelers CEO Sandy
Weill met with Greenspan prior to the
announcement of the merger, and said
Greenspan had a positive response to the
audacious proposal.30
Citigroups co-chairs Sandy Weill and
John Reed, along with lead lobbyist Roger
Levy, led a swarm of industry executives
29 Jake Lewis, Monster Banks: The Political and
Economic Costs of Banking and Financial
Consolidation, Multinational Monitor,
January/February 2005, available at:
<http://www.multinationalmonitor.org/mm2
005/012005/lewis.html>.
30 Peter Pae, Bank, Insurance Giants Set
Merger: Citicorp, Travelers in $82 Billion
Deal, Washington Post, April 7, 1988.
and lobbyists who badgered the administration
and pounded the halls of Congress until
the final details of a deal were hammered
out. Top Citigroup officials
vetted drafts of the
legislation before they
were formally introduced.
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.
Having recently resigned as Treasury Secretary,
Rubin was at the time negotiating the
terms of his next job as an executive at
Citigroup. But this was not public knowledge
at the time. Deploying the credibility
built up as part of what the media had labeled
The Committee to Save the World
(Rubin, Greenspan and then-Deputy Treasury
Secretary Lawrence Summers, so named
for their interventions in addressing the
Asian financial crisis in 1997), Rubin helped
broker the final deal.
The Financial Services Modernization
Act, also known as the Gramm-Leach-Bliley
Act of 1999, formally repealed Glass-
Steagall. The new law authorized banks,
31 Russell Mokhiber, The 10 Worst Corporations
of 1999, Multinational Monitor, December
1999, available at:
<http://www.multinationalmonitor.org/mm1
999/mm9912.05.html>.
The Depression-era conflicts
and consequences that
Glass-Steagall was intended
to prevent re-emerged once
the Act was repealed.
SOLD OUT 31
securities firms and insurance companies to
combine under one corporate umbrella. 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,
regardless of the parent corporations
main functions. In the congressional debate
over the Financial Services Modernization
Act, Senator Gramm declared, Glass-
Steagall, in the midst of the Great Depression,
thought government was the answer. In
this period of economic growth and prosperity,
we believe freedom is the answer. 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 pre-
Glass-Steagall era.32
Impact of Repeal
The gradual evisceration of Glass-Steagall
over 30 years, culminating in its repeal in
1999, opened the door for banks to enter the
highly lucrative practice of packaging
multiple home mortgage loans into securities
for trade on Wall Street. Repeal of
Glass-Steagall created a climate and culture
32 James R. Barth, R. Dan Brumbaugh Jr. and
James A. Wilcox, The Repeal of Glass-
Steagall and the Advent of Broad Banking,
Economic and Policy Analysis Working
Paper 2000-5, Office of the Comptroller of
the Currency, April 2000, available at:
<http://www.occ.treas.gov/ftp/workpaper/w
p2000-5.pdf>.
where aggressive deal-making became the
norm.
The practice of securitization had virtually
disappeared after it contributed to the
1929 crash, but had made a comeback in the
1970s as Glass-Steagall was being dismantled.
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. Banks would originate and repackage
highly speculative loans, market them as
securities through their retail networks,
using the prestigious brand name of the bank
e.g. Morgan or Chase as a proxy for
the soundness of the security. It was this
practice, and the ensuing collapse when so
much of the paper went bad, that led Congress
to enact the Glass-Steagall Act33 that
separated banks and securities trading.
Whereas bank deposits had been a centerpiece
of the 1929 crash, mortgage loans
and the securities connected to them
are at the center of the present financial
crisis. There is mounting evidence that the
repeal of Glass-Steagall contributed to a
high-flying culture that led to disaster. The
banks suspended careful scrutiny of loans
they originated because they knew that the
loans would be rapidly packaged into mort-
33 Testimony of Robert Kuttner before the
Committee on Financial Services, U.S.
House of Representatives, October 2, 2007,
available at:
<http://financialservices.house.gov/hearing1
10/testimony_-_kuttner.pdf>.
32 SOLD OUT
gage-backed securities and sold off to third
parties. Since the banks werent going to
hold the mortgages in their own portfolios,
they had little incentive to review the borrowers
qualifications carefully.34
But the banks did not in fact escape exposure
to the mortgage market. It appears
that, as they packaged mortgages into securities
and then sold them off into tranches,
the banks often kept portions of the least
desirable tranches in their own portfolios, or
those of off-balance-sheet affiliates. They
also seemed to have maintained liability in
some cases where securitized mortgages
went bad. As banks lost billions on mortgage-
backed securities in 2008, they stopped
making new loans in order to conserve their
assets. 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, the
banks used the money to offset losses on
their mortgage securities investments. Banks
and insurance companies were saddled with
billions more in losses from esoteric credit
default swaps created to insure against
34 See Liz Rappaport and Carrick Mollenkamp,
Banks May Keep Skin in the Game, Wall
Street Journal, February 9, 2009, available
at:
<http://sec.online.wsj.com/article/SB123422
980301065999.html>; Before That, They
Made A Lot of Money: Steps to Financial
Collapse, An Interview with Nomi Prins,
Multinational Monitor, November/
December 2008, available at:
<http://www.multinationalmonitor.org/mm2
008/112008/interview-prins.html>.
mortgage defaults and themselves traded on
Wall Street.
In short, the Depression-era conflicts
and consequences that Glass-Steagall was
intended to prevent re-emerged once the Act
was repealed. The once staid commercial
banking sector quickly evolved to emulate
the risk-taking attitude and practices of
investment banks, with disastrous results.
Notes economist Joseph Stiglitz, The
most important consequence of the repeal of
Glass-Steagall was indirect it lay in the
way repeal changed an entire culture. Commercial
banks are not supposed to be highrisk
ventures; they are supposed to manage
other peoples money very conservatively. It
is with this understanding that the government
agrees to pick up the tab should they
fail. Investment banks, on the other hand,
have traditionally managed rich peoples
money people who can take bigger risks
in order to get bigger returns. When repeal
of Glass-Steagall brought investment and
commercial banks together, the investmentbank
culture came out on top. There was a
demand for the kind of high returns that
could be obtained only through high leverage
and big risk taking.35
  
35 Joseph Stiglitz, Capitalist Fools, Vanity Fair,
January 2009, available at:
<http://www.vanityfair.com/magazine/2009/
01/stiglitz200901>.
SOLD OUT 33
HIDING LIABILITIES:
OFF-BALANCE SHEET
ACCOUNTING
A businesss balance sheet is supposed to
report honestly on a firms financial state by
listing its assets and liabilities. If a company
can move money-losing assets off of its
balance sheet, it will appear to be in greater
financial health. But if it is still incurring
losses from the asset taken off the balance
sheet, then the apparent improvement in
financial health is illusory.
Thanks to the exploitation of loopholes
in accounting rules, commercial banks were
able to undertake exactly this sort of
deceptive financial shuffling in recent years.
Even in good times, placing securitized
mortgage loans off balance sheet had
important advantages for banks, enabling
them to expand lending without setting aside
more reserve-loss capital (money set aside to
protect against loans that might not be
repaid).36 As they made and securitized
more loans shunted off into off-balance
sheet entities, the banks financial
vulnerability kept increasing they had
increased lingering obligations related to
securitized loans, without commensurate
reserve-loss capital. Then, when bad times
hit, off-balance sheet accounting let banks
hide their losses from investors and
regulators. This allowed their condition to
grow still more acute, ultimately imposing
massive losses on investors and threatening
the viability of the financial system.
36 Wall Street recognized this immediately after
the adoption of the relevant accounting rule,
known as FASB 140 (see text below for
more explanation). How the sponsors and
their lawyers and accountants address FASB
140 may have an impact on the continuing
viability of this market, said Gail Sussman,
a managing director at Moody's. If they
have to keep these bonds on their balance
sheet, they have to reserve against them. It
may eat into the profit of these products
[securitized loans]. Michael McDonald,
Derivatives Hit the Wall - Sector Found
Wary Investors in 2001, The Bond Buyer,
March 15, 2002.
2
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.
Banks used off-balance sheet operations
special purpose entities (SPEs), or special
purpose vehicles (SPVs) to hold securitized
mortgages. Because the securitized
mortgages were held by an off-balance sheet
entity, however, the banks did not have to
hold capital reserves as against the risk of
default thus leaving them so vulnerable.
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.
34 SOLD OUT
The scale of banks off-balance sheet
assets is enormous 15.9 times the amount
on the balance sheets in 2007. This ratio
represents a massive surge over the last
decade and half: During the period 1992-
2007, on-balance sheet assets grew by 200
percent, while off-balance sheet asset grew
by a whopping 1,518 [percent].37
One Wall Street executive described
off-balance sheet accounting as a bit of a
magic trick38 because losses disappear from
the balance sheet, making lenders appear
more financially stable than they really are.
A former SEC official called it nothing
more than just a scam.39
The Securities and Exchange
Commission (SEC) has statutory authority
to establish financial accounting and
reporting standards, but it delegates this
37 Joseph Mason, Off-balance Sheet Accounting
and Monetary Policy Ineffectiveness, RGE
Monitor, December 17, 2008, available at:
<http://www.rgemonitor.com/financemarket
s-monitor/254797/offbalance_
sheet_accounting_and_monetary_p
olicy_ineffectiveness>.
38 Alan Katz and Ian Katz, Greenspan Slept as
Off-Books Debt Escaped Scrutiny,
Bloomberg.com, October 30, 2008,
available at:
<http://www.bloomberg.com/apps/news?pid
=20601170&refer=home&sid=aYJZOB_gZi
0I> (quoting Pauline Wallace, partner at
PriceWaterhouseCoopers LLP and team
leader in London for financial instruments).
39 Plunge: How Banks Aim to Obscure Their
Losses, An Interview with Lynn Turner,
former SEC chief accountant, Multinational
Monitor, November/December 2008,
available at:
<http://www.multinationalmonitor.org/mm2
008/112008/interview-turner.html>.
authority to the Financial Accounting
Standards Board (FASB). The FASB is an
independent, private sector organization
whose purpose is to establish financial
accounting standards, including the
standards that govern the preparation of
financial reports. FASBs 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 companys
balance sheet.
Pursuant to Statement 140, a lender
may sell blocks of its mortgages to separate
trusts or companies known as Qualified
Special Purpose Entities (QSPEs), or
special investment vehicles (SIVs),
created by the lender. As long as the
mortgages are sold to the QSPE, the lender
is authorized not to report the mortgages on
its balance sheet. The theory is that the
lender no longer has control or responsibility
for the mortgages. The Statement 140 test of
whether a lender has severed responsibility
for mortgages is to ask whether a true sale
has taken place.
But whether a true sale of the
mortgages has occurred is often unclear
because of the complexities of mortgage
securitization. Lenders often retain some
control over the mortgages even after their
sale to a QSPE. So, while the sale results in
moving mortgages off the balance sheet, the
lender may still be liable for mortgage
SOLD OUT 35
defaults. This retained liability is concealed
from the public by virtue of moving the
assets off the balance sheet.
Under Statement
140, a sale of mortgages
to a QSPE occurs when
the mortgages are put
beyond the reach of the
transferor [i.e. the lender]
and its creditors. This is
a true sale because the lender relinquishes
control of the mortgages to the QSPE. But
the current financial crisis has revealed that
while lenders claimed to have relinquished
control, and thus moved the mortgages off
the balance sheet, they had actually retained
control in violation of Statement 140. A
considerable portion of the banks
mortgage-related losses remain off the
books, however, contributing to the
continuing uncertainty about the scale of the
banks losses.
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. The defaults revealed that the
mortgages were not actually put beyond the
reach of the lender after the QSPE bought
them. As such, they should have been included
on the lenders balance sheet pursuant
to Statement 140.
The Securities and Exchange Commission
(SEC) was forced to clarify its rules on
the matter to allow lenders to renegotiate
loans without losing off-balance sheet status.
Former SEC Chair Christopher Cox announced
to Congress in
2007 that loan restructuring
or modification activities,
when default is reasonably
foreseeable, does not preclude
continued off-balance
sheet treatment under
Statement 140.40
The problems with off-balance sheet
accounting are a matter of common sense. If
there was any doubt, however, the
deleterious impact of off-balance sheet
accounting was vividly illustrated by the
notorious collapse of Enron in December
2001. Enron established off-balance sheet
partnerships whose purpose was to borrow
from banks to finance the companys
growth. The partnerships, also known as
special purpose entities (SPEs), borrowed
heavily by using Enron stock as collateral.
The debt incurred by the SPEs was kept off
Enrons balance sheet so that Wall Street
40 (Chairman Christopher Cox, in a letter to Rep.
Barney Frank, Chairman, Committee on Financial
Services, U.S. House of Representatives,
July 24, 2007, available at:
<http://www.house.gov/apps/list/press/finan
cialsvcs_dem/sec_response072507.pdf>.)
The SEC's Office of the Chief Accountant
agreed with Chairman Cox in a staff letter to
industry in 2008. (SEC Office of the Chief
Accountant, in a staff letter to Arnold
Hanish, Financial Executives International,
January 8, 2008, available at:
<http://www.sec.gov/info/accountants/staffl
etters/hanish010808.pdf>).
A former SEC official called
off-balance sheet accounting
nothing more than just a
scam.
36 SOLD OUT
and regulators were unaware of it. Credit
rating firms consistently gave Enron high
debt ratings as they were unaware of the
enormous off-balance sheet liabilities.
Investors pushing Enrons stock price to
sky-high levels were
oblivious to the enormous
amount of debt incurred to
finance the companys
growth. The skyrocketing
stock price allowed Enron
to borrow even more funds
while using its own stock
as collateral. At the time of
bankruptcy, the companys
on-balance sheet debt was
$13.15 billion, but the
company had a roughly equal amount of offbalance
sheet liabilities.
In the fallout of the Enron scandal, the
FASB adopted a policy to address offbalance
sheet arrangements. Under its FIN
46R guidance, a company must include any
SPE on the balance sheet if the company is
entitled to the majority of the SPEs risks or
rewards, regardless of whether a true sale
occurred. But the guidance has one caveat:
QSPEs holding securitized assets may still
be excluded from the balance sheet. The
caveat, known as the scope exception,
means that many financial institutions are
not subject to the heightened requirements
provided under FIN 46R. The lessons of
Enron were thus ignored for financial
institutions, setting the stage for the current
financial crisis.
The Enron fiasco got the attention of
Congress, which soon began considering
systemic accounting reforms. The Sarbanes-
Oxley Act, passed in 2002,
attempted to shine more
light on the murky
underworld of off-balance
sheet assets, but the final
measure was a watereddown
compromise; more
far-reaching demands were
defeated by the financial
lobby.
Sarbanes-Oxley requires
that companies make some
disclosures about their QSPEs, even if they
are not required to include them on the
balance sheet. Specifically, it requires
disclosure of the existence of off-balancesheet
arrangements, including QSPEs, if
they are reasonably likely to have a
material impact on the companys
financial condition. But lenders have sole
discretion to determine whether a QSPE will
have a material impact. Moreover,
disclosures have often been made in such a
general way as to be meaningless. After
Enron, with Sarbanes-Oxley, we tried
legislatively to make it clear that there has to
be some transparency with regard to offbalance
sheet entities, Senator Jack Reed of
Rhode Island, the chair of the Securities,
The Sarbanes-Oxley Act,
passed in 2002, attempted
to shine more light on the
murky underworld of offbalance
sheet assets, but
the final measure was a
watered-down compromise.
SOLD OUT 37
Insurance and Investment subcommittee of
the Senate Banking Committee, said in early
2008 as the financial crisis was unfolding.41
We thought that was already corrected and
the rules were clear and we would not be
discovering new things every day, he said.
The FASB has recognized for years
that Statement 140 is flawed, concluding in
2006 that the rule was irretrievably
broken.42 The merits of the true sale
theory of Statement 140 notwithstanding, its
detailed and complicated rules created
sufficient loopholes and exceptions to
enable financial institutions to circumvent
its purported logic as a matter of course.43
FASB Chairman Robert Herz likened
off-balance sheet accounting to spiking the
punch bowl. Unfortunately, he said, it
seems that some folks used [QSPEs] like a
punch bowl to get off-balance sheet
treatment while spiking the punch. That has
led us to conclude that now its time to take
away the punch bowl. And so we are
proposing eliminating the concept of a
41 Floyd Norris, Off-the-balance-sheet
mysteries, International Herald Tribune,
February. 28, 2008, available at:
<http://www.iht.com/articles/2008/02/28/bu
siness/norris29.php>.
42 FASB and International Accounting Standards
Board, Information for Observers, April
21, 2008, available at:
<www.iasplus.com/resource/0804j03obs.pdf
>.
43 See Thomas Selling, FAS 140: Lets Call the
Whole Thing Off, August 11, 2008,
available at:
<http://accountingonion.typepad.com/theacc
ountingonion/2008/08/fas-140-letsca.
html>.
QSPE from the U.S. accounting literature.44
It is not, however, a certainty that the
FASB will succeed in its effort. The Board
has repeatedly tried to rein in off-balance
sheet accounting, but failed in the face of
financial industry pressure.45 The
commercial banking industry and Wall
Street are waging a major effort to water
down the rule and delay adoption and
implementation.46 Ironically, the banking
44 FASB Chairman Bob Herz, Lessons Learned,
Relearned, and Relearned Again from the
Credit Crisis Accounting and Beyond,
September 18, 2008, available at:
<http://www.fasb.org/articles&reports/12-
08-08_herz_speech.pdf>.
45 Plunge: How Banks Aim to Obscure Their
Losses, An Interview with Lynn Turner,
former SEC chief accountant, Multinational
Monitor, November/December 2008,
available at:
<http://www.multinationalmonitor.org/mm2
008/112008/interview-turner.html>.
46 See FAS Amendments, American
Securitization Forum, available at:
<http://www.americansecuritization.com/sto
ry.aspx?id=76>. (Throughout this process
[consideration of revisions of Statement
140], representatives of the ASF have met
on numerous occasions with FASB board
members and staff, as well as accounting
staff of the SEC and the bank regulatory
agencies, to present industry views and
recommendations concerning these
proposed accounting standards and their
impact on securitization market activities.);
George P. Miller, Executive Director,
American Securitization Forum, and Randy
Snook, Senior Managing Director, Securities
Industry and Financial Markets Association,
letter to Financial Accounting Standards
Board, July 16, 2008, available at:
<http://www.americansecuritization.com/sto
ry.aspx?id=2906>. (Arguing for delay of
new rules until 2010, 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
38 SOLD OUT
industry and Wall Street lobbyists argue that
disclosure of too much information will
confuse investors. These lobby efforts are
meeting with success,47 in part because of
the likelihood that forcing banks to
recognize their off-balance sheet losses will
reveal them to be insolvent.
  
too little.); John A. Courson, Chief
Operating Officer, Mortgage Bankers
Association, letter to Financial Accounting
Standards Board, October 31, 2008,
available at:
<http://www.mbaa.org/files/Advocacy/Testi
monyandCommentLetters/MBACommentLe
tter-10-31-2008-
AmendmentstoFASBInterpretationNo.46R.p
df>. (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.)
47 Jody Shenn and Ian Katz, FASB Postpones
Off-Balance-Sheet Rule for a Year,
Bloomberg, July 30, 2008, available at:
<http://www.bloomberg.com/apps/news?pid
=20601009&sid=a4O4VjK.fX5Q&>. (The
Financial Accounting Standards Board
postponed a measure, opposed by Citigroup
Inc. and the securities industry, forcing
banks to bring off-balance-sheet assets such
as mortgages and credit-card receivables
back onto their books. FASB, the Norwalk,
Connecticut-based panel that sets U.S.
accounting standards, voted 5-0 today to
delay the rule change until fiscal years
starting after
133  Politics, Religion, Science, Culture and Humanities / Politics & Religion / For The Record/Begin on: December 11, 2011, 02:29:43 AM
Woof, 3rd Post;
 Yes, our government is corrupt, both Party's, top to bottom and they've got us pointing fingers at eachother while they screw all of us.

Sold Out
How Wall Street and Washington
Betrayed America
March 2009
Essential Information * Consumer Education Foundation
www.wallstreetwatch.org
2 SOLD OUT
SOLD OUT 3
Sold Out
How Wall Street and Washington
Betrayed America
March 2009
Essential Information * Consumer Education Foundation
www.wallstreetwatch.org
4 SOLD OUT
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
SOLD OUT 5
www.wallstreetwatch.org
Table of Contents
Introduction: A Call to Arms, by Harvey Rosenfield ..ccccc. 6
Executive Summary cccccccccccccccccc... 14
Part I: 12 Deregulatory Steps to Financial Meltdown ....................... 21
1. Repeal of the Glass-Steagall Act and the Rise of the Culture of cccc.. 22
Recklessness
2. Hiding Liabilities: Off-Balance Sheet Accounting cccccccccc 33
3. The Executive Branch Rejects Financial Derivative Regulation cccc.. 39
4. Congress Blocks Financial Derivative Regulation cccccccccc 47
5. The SECfs Voluntary Regulation Regime for Investment Banks cccc. 50
6. Bank Self-Regulation Goes Global: Preparing to Repeat the Meltdown? c 54
7. Failure to Prevent Predatory Lending ccccccccccccccc 58
8. Federal Preemption of State Consumer Protection Laws ccccccc.. 67
9. Escaping Accountability: Assignee Liability cccccccccccc 73
10. Fannie and Freddie Enter the Subprime Market ccccccccccc 80
11. Merger Mania cccccccccccccccccccccccc 87
12. Rampant Conflicts of Interest: Credit Ratings Firmsf Failure ccccc.. 93
Part II: Wall Streetfs Washington Investment ..cccccccc. 98
Conclusion and Recommendations:
Principles for a New Financial Regulatory Architecture ..cc... 109
Appendix: Leading Financial Firm Profiles of Campaign
Contributions and Lobbying Expenditures ...cccccccc 115
6 SOLD OUT
Introduction:
A Call to Arms
by Harvey Rosenfield*
Americafs economy is in tatters, and the
situation grows dire by the day. Nearly
600,000 Americans lost their jobs in January,
for a total of 1.8 million over the last
three months.
Millions more
will lose theirs
over the next
year no matter
what happens.
Students can no
longer pursue a college education. Families
cannot afford to see a doctor. Many Americans
owe more on their homes than they are
worth. Those lucky enough to have had
pensions or retirement funds have watched
helplessly as 25 percent of their value
evaporated in 2008.
What caused this catastrophe? As this
report chronicles in gruesome detail, over
the last decade, Wall Street showered Washington
with over $1.7 billion in what are
prettily described as gcampaign contributions.h
This money went into the political
coffers of everyone from the lowliest mem-
* President, Consumer Education Foundation
1 Source: Center for Responsive Politics,
<www.opensecrets.org>.
ber of Congress to the President of the
United States. The Money Industry spent
another $3.4 billion on lobbyists whose job
it was to press for deregulation . Wall
Streetfs license to steal from every American.
In return for the investment of more than
$5.1 billion, the Money Industry was able to
get rid of many of the reforms enacted after
the Great Depression and to operate, for
most of the last
ten years, without
any effective
rules or restraints
whatsoever.
The report,
prepared by
Essential Information and the Consumer
Education Foundation, details step-by-step
many of the events that led to the financial
debacle. Here are the ghighlightsh of our
economic downfall:
. Beginning in 1983 with the Reagan
Administration, the U.S. 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.
. Between 1998 and 2000, Congress
and the Clinton Administration repeatedly
blocked efforts to regulate
Industry1 $ to Politicians $ to Lobbyists
Securities $512 million $600 million
Commercial Banks $155 million $383 million
Insurance Cos. $221 million $1002 million
Accounting $81 million $122 million
SOLD OUT 7
gfinancial derivativesh . including
the mortgage-related credit default
swaps that became the basis of trillions
of dollars in speculation.
. In 1999, Congress repealed the Depression-
era law that barred banks
from offering investment and insurance
services, and vice versa, enabling
these firms to engage in speculation
by investing money from
checking and savings accounts into
financial gderivativesh and other
schemes understood by only a handful
of individuals.
. Taking advantage of historically low
interest rates in the early part of this
decade, shady mortgage brokers and
bankers began offering mortgages
on egregious terms to purchasers
who were not qualified. When these
predatory lending practices were
brought to the attention of federal
agencies, they refused to take serious
action. Worse, when states
stepped into the vacuum by passing
laws requiring protections against
dirty loans, the Bush Administration
went to court to invalidate those reforms,
on the ground that the inaction
of federal agencies superseded
state laws.
. The financial industryfs friends in
Congress made sure that those who
speculate in mortgages would not be
legally liable for fraud or other illegalities
that occurred when the
mortgage was made.
. Egged on by Wall Street, two government-
sponsored corporations,
Fannie Mae and Freddie Mac,
started buying large numbers of
subprime loans from private banks
as well as packages of mortgages
known as gmortgage-backed securities.h
. In 2004, 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, authorized investment
banks to decide for themselves
how much money they were
required to set aside as rainy day reserves.
Some firms then entered into
$40 worth of speculative trading for
every $1 they held.
. With the compensation of CEOs increasingly
tied to the value of the
firmfs total assets, a tidal wave of
mergers and acquisitions in the financial
world . 11,500 between
1980 and 2005 . led to the predominance
of just a relative handful
banks in the U.S. financial system.
Successive administrations failed to
enforce antitrust laws to block these
mergers. The result: less competi8
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tion, higher fees and charges for
consumers, and a financial system
vulnerable to collapse if any single
one of the banks ran into trouble.
. Investors and even government authorities
relied on private gcredit ratingh
firms to review corporate balance
sheets and proposed investments
and report to potential investors
about their quality and safety.
But the credit rating companies had
a grave conflict of interest: they are
paid by the financial firms to issue
the ratings. Not surprisingly, they
gave the highest ratings to the investments
issued by the firms that
paid them, even as it became clear
that the ratings were inflated and the
companies were in precarious condition.
The financial lobby made sure
that regulation of the credit ratings
firms would not solve these problems.
None of these milestones on the road to
economic ruin were kept secret. The dangers
posed by unregulated, greed-driven financial
speculation were readily apparent to any
astute observer of the financial system. But
few of those entrusted with the responsibility
to police the marketplace were willing to
do so. And as the report explains, those
officials in government who dared to propose
stronger protections for investors and
consumers consistently met with hostility
and defeat. The power of the Money Industry
overcame all opposition, on a bipartisan
basis.
Itfs not like our elected leaders in Washington
had no warning: The California
energy crisis in 2000, and the subsequent
collapse of Enron . at the time unprecedented
. was an early warning that the
nationfs system of laws and regulations was
inadequate to meet the conniving and trickery
of the financial industry. The California
crisis turned out to be a foreshock of the
financial catastrophe that our country is in
today. It began with the deregulation of
electricity prices by the state legislature.
Greased with millions in campaign contributions
from Wall Street and the energy industry,
the legislation was approved on a bipartisan
basis without a dissenting vote.
Once deregulation took effect, Wall
Street began trading electricity and the
private energy companies boosted prices
through the roof. Within a few weeks, 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. Blackouts
ensued. At the time, Californians were
chastised for having caused the shortages
through gover-consumption.h But the energy
shortages were orchestrated by Wall Street
rating firms, investment banks and energy
companies, in order to force Californiafs
taxpayers to bail out the utility companies.
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Californiafs political leadership and utility
regulators largely succumbed to the blackmail,
and $11 billion in public money was
used to pay for electricity at prices that
proved to be artificially manipulated by c
Wall Street traders. The state of California
was forced to increase utility rates and
borrow over $19 billion . through Wall
Street firms . to cover these debts.
Its electricity trading activities under investigation,
Enronfs vast accounting shenanigans,
including massive losses hidden in
off-balance sheet corporate entities, came to
light, and the company collapsed within a
matter of days. It looked at the time as
though the California deregulation disaster
and the Enron scandal would lead to
stronger regulation and corporate accountability.
But then 9/11 occurred. And for most of
the last decade, the American people have
been told that our greatest enemy lived in a
cave. The subsequent focus on external
threats, real and imagined, distracted attention
from deepening problems at home. As
Franklin Roosevelt observed seventy years
ago, gour enemies of today are the forces of
privilege and greed within our own borders.h
Today, the enemies of American
consumers, taxpayers and small investors
live in multimillion-dollar palaces and pull
down seven-, eight- or even nine-figure
annual paychecks. Their weapons of mass
destruction, as Warren Buffett famously put
it, were derivatives: pieces of paper that
were backed by other pieces of paper that
were backed by packages of mortgages,
student loans and credit card debt, the
complexity and value of which only a few
understood. Meanwhile, 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, the house of cards finally collapsed.
For those who might have heard the
gblame the victimh propaganda emanating
from the free marketers whose philosophy
lies in a smoldering ruin alongside the
economy, the report sets the record straight:
consumers are not to blame for this debacle.
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). Nor can we blame the Americans
who were offered amazing terms for mortgages
but forgot to bring a Ph.D. and a
lawyer to their gclosing,h 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.
Rather, Americafs economic system is
at or beyond the verge of depression today
because gambling became the financial
sectorfs principal preoccupation, and the pile
of chips grew so big that the Money Industry
displaced real businesses that provided real
10 SOLD OUT
goods, services and jobs. By that time, 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. When all the
speculators tried to cash out, starting in
2007, there really wasnft enough money to
cover all the bets.
If we Americans are to blame for anything,
itfs for allowing Wall Street to do
what it calls a gleveraged buy outh of our
political system by spending a relatively
small amount of capital in the Capitol in
order to seize control of our economy.
Of course, the moment the Money Industry
realized that the casino had closed, it
turned . as it always does . to Washington,
this time for the mother of all favors: a
$700 billion bailout of the biggest financial
speculators in the country. Thatfs correct:
the people who lost hundreds of billions of
dollars of investorsf money were given
hundreds of billions of dollars more. The
bailout was quickly extended to insurance
companies, credit card companies, auto
manufacturers and even car rental firms. In
addition to cash infusions, the government
has blown open the federal bank vaults to
offer the Money Industry a feast of discount
loans, loan guarantees and other taxpayer
subsidies. The total tally so far? At least $8
trillion.
Panicked by Wall Streetfs threat to pull
the plug on credit, Congress rebuffed efforts
to include safeguards on how taxpayer
money would be spent and accounted for.
Thatfs why many of the details of the bailout
remain a secret, hiding the fact that no one
really knows why certain companies were
given our money, or how it has been spent.
Bankers used it pay bonuses, to buy back
their own bank stock, or to build their empires
by purchasing other banks. But very
little of the money has been used for the
purpose it was ostensibly given: to make
loans. One thing is certain: this last Washington
giveaway . the Greatest Wall Street
Giveaway of all time . has not fixed the
economy.
Meanwhile, at this very moment of national
threat, the banks, 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. The only thing that has
changed is that many of these firms are
using taxpayer money . our money . to do
so.
Thatfs why you wonft 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. Or that Americafs economic
security is intolerably jeopardized when
pushing paper around constitutes a quarter
or more of our economy. Or that credit
default swaps and other derivatives should
SOLD OUT 11
be prohibited, or limited just like slot machines,
roulette wheels and other forms of
gambling.
In most of the United States, you can go
to jail for stealing a loaf of bread. But if you
have paid off Washington, you can steal the
life-savings, livelihoods, homes and dreams
of an entire nation, and you will be allowed
to live in the fancy homes you own, drive
multiple cars, throw multi-million dollar
birthday parties. Punishment? You might not
be able to get your bonus this year or, worst
come to worst, 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, you may end
up having to live off your past riches because
you can only earn a measly $500,000
while you are on the dole. (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).
Like their predecessors, Presidentelected
Obamafs key appointments to the
Treasury, the SEC and other agencies are
veterans of the Money Industry. They are
unlikely to challenge the narrow boundaries
of the debate that has characterized Washingtonfs
response to the crisis. So long as
the Money Industry remains in charge of the
federal agencies and keeps our elected
officials in its deep pockets, nothing will
change.
Here are seven basic principles that
Americans should insist upon.
Relief. Itfs been only five months since
Congress authorized $700 billion to bail out
the speculators. Congress was told that the
bailout would alleviate the gcredit crunchh
and encourage banks to lend money to
consumers and small businesses. But the
banks have hoarded the money, or misspent
it. If the banks arenft going to keep their end
of the bargain, the government should use its
power of eminent domain to take control of
the banks, or seize the money and let the
banks go bankrupt. On top of the $700
billion bailout, the Federal Reserve has been
loaning public money to Wall Street firms
money at as little as .25 percent. These
companies are then turning around and
charging Americans interest rates of 4
percent to 30 percent for mortgages and
credit cards. There should be a cap on what
banks and credit card companies can charge
us when we borrow our own money back
from them. Similarly, transfers of taxpayer
money should be conditioned on acceptance
of other terms that would help the public,
such as an agreement to waive late fees, and
an agreement not to lobby the government.
And, 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.
12 SOLD OUT
Restitution. Companies that get taxpayer
money must be required to repay it on terms
that are fair to taxpayers. When Warren
Buffett acquired preferred shares in Goldman
Sachs, he demanded that Goldman
Sachs pay 10 percent interest; taxpayers are
only getting back 5 percent. The Congressional
Oversight Panel estimates that taxpayers
received preferred shares worth about
two-thirds of what was given to the initial
bailout recipients. Even worse are the taxpayer
loan guarantees offered to Citigroup.
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,
paying 8 percent interest. Now the Obama
administration has suggested that it might
offer a dramatically expanded guarantee
program for toxic assets, putting the taxpayer
on the hook for hundreds of billions
more.
Regulation. The grand experiment in letting
Wall Street regulate itself under the assumption
that free market forces will police the
marketplace has failed catastrophically.
Wall Street needs to operate under rules that
will contain their excessive greed. Derivatives
should be prohibited unless it can be
shown that they serve a useful purpose in
our economy; those that are authorized
should be traded on exchanges subject to
full disclosure. Further mergers of financial
industry titans should be barred under the
antitrust laws, and the current monopolistic
industry should be broken up once the
country has recovered.
Reform. 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. 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.
Responsibility. Americans are tired of
watching corporate criminals get off with a
slap on the wrist when they plunder and
loot. Accountability is necessary to maintain
not only the honesty of the marketplace but
the integrity of American democracy. 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.
State and local law enforcement agencies,
with the assistance of the federal government,
should join to build a national network
for the investigation and prosecution of the
corporate crooks.
Return . to a real economy. In 2007, more
than a quarter of all corporate profits came
SOLD OUT 13
from the Money Industry, 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, creativity, and innovation . and
both government and business must serve
that end. 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 gthe problem, not the solution.h
In fact, as this report shows, government has
been the solution for the Money Industry all
along.
Now Washington must serve America,
not Wall Street. Massive government intervention
is not only appropriate when it is
necessary to save banks and insurance
companies. For the $20 billion in taxpayer
money that the government gave Citigroup
in November, we could have bought the
company lock, stock and barrel, and then we
would have our own credit card, student
loan and mortgage company, run on careful
business principles but without the need to
turn an enormous profit. Think of the assistance
that that would offer to Main Street,
not to mention the competitive effect it
would have on the market. And massive
government intervention is whatfs really
needed in the health care system, which
private enterprise has plundered and then for
so many Americans abandoned.
Revolt. Things will not change so long as
Americans acquiesce to business as usual in
Washington. Itfs time for Americans to
make their voices heard.
  
14 SOLD OUT
Executive Summary
Blame Wall Street for the current financial
crisis. Investment banks, hedge funds and
commercial banks made reckless bets using
borrowed money. They created and trafficked
in exotic investment vehicles that
even top Wall Street executives . not to
mention firm directors . did not understand.
They hid risky investments in offbalance-
sheet vehicles or capitalized on their
legal status to cloak investments altogether.
They engaged in unconscionable predatory
lending that offered huge profits for a time,
but led to dire consequences when the loans
proved unpayable. And they created, maintained
and justified a housing bubble, the
bursting of which has thrown the United
States and the world into a deep recession,
resulted in a foreclosure epidemic ripping
apart communities across the country.
But while Wall Street is culpable for
the financial crisis and global recession,
others do share responsibility.2
For the last three decades, financial
regulators, Congress and the executive
branch have steadily eroded the regulatory
system that restrained the financial sector
from acting on its own worst tendencies.
The post-Depression regulatory system
2 This report uses the term gWall Streeth in the
colloquial sense of standing for the big players
in the financial sector, not just those located
in New Yorkfs financial district.
aimed to force disclosure of publicly relevant
financial information; established limits
on the use of leverage; drew bright lines
between different kinds of financial activity
and protected regulated commercial banking
from investment bank-style risk taking;
enforced meaningful limits on economic
concentration, especially in the banking
sector; provided meaningful consumer
protections (including restrictions on usurious
interest rates); and contained the financial
sector so that it remained subordinate to
the real economy. This hodge-podge regulatory
system was, of course, highly imperfect,
including because it too often failed to
deliver on its promises.
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, steadily gaining momentum until it
reached fever pitch in the late 1990s and
continued right through the first half of
2008. Even now, Wall Street continues to
defend many of its worst practices. Though
it bows to the political reality that new
regulation is coming, it aims to reduce the
scope and importance of that regulation and,
if possible, use the guise of regulation to
further remove public controls over its
operations.
This report has one overriding message:
financial deregulation led directly to the
financial meltdown.
It also has two other, top-tier messages.
SOLD OUT 15
First, the details matter. 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.
Second, Wall Street didnft obtain these
regulatory abeyances based on the force of
its arguments. At every step, critics warned
of the dangers of further deregulation. Their
evidence-based claims could not offset the
political and economic muscle of Wall
Street. The financial sector showered campaign
contributions on politicians from both
parties, invested heavily in a legion of
lobbyists, paid academics and think tanks to
justify their preferred policy positions, and
cultivated a pliant media . especially a
cheerleading business media complex.
Part I of this report presents 12 Deregulatory
Steps to Financial Meltdown. For
each deregulatory move, we aim to explain
the deregulatory action taken (or regulatory
move avoided), its consequence, and the
process by which big financial firms and
their political allies maneuvered to achieve
their deregulatory objective.
In Part II, we present data on financial
firmsf campaign contributions and disclosed
lobbying investments. The aggregate data
are startling: The financial sector invested
more than $5.1 billion in political influence
purchasing over the last decade.
The entire financial sector (finance, insurance,
real estate) drowned political
candidates in campaign contributions over
the past decade, spending more than $1.7
billion in federal elections from 1998-2008.
Primarily reflecting the balance of power
over the decade, about 55 percent went to
Republicans and 45 percent to Democrats.
Democrats took just more than half of the
financial sectorfs 2008 election cycle contributions.
The industry spent even more . topping
$3.4 billion . on officially registered
lobbying of federal officials during the same
period.
During the period 1998-2008:
. Accounting firms spent $81 million
on campaign contributions and $122
million on lobbying;
. Commercial banks spent more than
$155 million on campaign contributions,
while investing nearly $383
million in officially registered lobbying;
. Insurance companies donated more
than $220 million and spent more
than $1.1 billion on lobbying;
. Securities firms invested nearly
$513 million in campaign contributions,
and an additional $600 million
in lobbying.
All this money went to hire legions of
lobbyists. The financial sector employed
2,996 lobbyists in 2007. Financial firms
employed an extraordinary number of
former government officials as lobbyists.
16 SOLD OUT
This report finds 142 of the lobbyists employed
by the financial sector from 1998-
2008 were previously high-ranking officials
or employees in the Executive Branch or
Congress.
  
These are the 12 Deregulatory Steps to
Financial Meltdown:
1. 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, which prohibited
commercial banks from offering investment
banking and insurance services. In a form of
corporate civil disobedience, Citibank and
insurance giant Travelers Group merged in
1998 . a move that was illegal at the time,
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. They did. 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, investment gambles that
rocked the financial markets in 2008.
2. Hiding Liabilities:
Off-Balance Sheet Accounting
Holding assets off the balance sheet generally
allows companies to exclude gtoxich or
money-losing assets from financial disclosures
to investors in order to make the
company appear more valuable than it is.
Banks used off-balance sheet operations .
special purpose entities (SPEs), or special
purpose vehicles (SPVs) . to hold securitized
mortgages. Because the securitized
mortgages were held by an off-balance sheet
entity, however, the banks did not have to
hold capital reserves as against the risk of
default . thus leaving them so vulnerable.
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.
3. The Executive Branch Rejects
Financial Derivative Regulation
Financial derivatives are unregulated. By all
accounts this has been a disaster, as Warren
Buffetfs warning that they represent gweapons
of mass financial destructionh has
proven prescient.3 Financial derivatives have
3 Warren Buffett, Chairman, Berkshire
Hathaway, Report to Shareholders, February
21, 2003. Available at:
<http://www.berkshirehathaway.com/letters/
SOLD OUT 17
amplified the financial crisis far beyond the
unavoidable troubles connected to the
popping of the housing bubble.
The Commodity Futures Trading Commission
(CFTC) has jurisdiction over futures,
options and other derivatives connected
to commodities. During the Clinton
administration, the CFTC sought to exert
regulatory control over financial derivatives.
The agency was quashed by opposition from
Treasury Secretary Robert Rubin and, above
all, Fed Chair Alan Greenspan. They challenged
the agencyfs jurisdictional authority;
and insisted that CFTC regulation might
imperil existing financial activity that was
already at considerable scale (though nowhere
near present levels). Then-Deputy
Treasury Secretary Lawrence Summers told
Congress that CFTC proposals gcas[t] a
shadow of regulatory uncertainty over an
otherwise thriving market.h
4. Congress Blocks Financial Derivative
Regulation
The deregulation . or non-regulation . of
financial derivatives was sealed in 2000,
with the Commodities Futures Modernization
Act (CFMA), passage of which was
engineered by then-Senator Phil Gramm, RTexas.
The Commodities Futures Modernization
Act exempts financial derivatives,
including credit default swaps, from regulation
and helped create the current financial
2002pdf.pdf>.
crisis.
5. The SECfs Voluntary Regulation
Regime for Investment Banks
In 1975, the SECfs trading and markets
division promulgated a rule requiring investment
banks to maintain a debt-to-netcapital
ratio of less than 12 to 1. It forbid
trading in securities if the ratio reached or
exceeded 12 to 1, so most companies maintained
a ratio far below it. In 2004, however,
the SEC succumbed to a push from the big
investment banks . led by Goldman Sachs,
and its then-chair, 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. This
essentially involved complicated mathematical
formulas that imposed no real limits,
and was voluntarily administered. With this
new freedom, investment banks pushed
borrowing ratios to as high as 40 to 1, as in
the case of Merrill Lynch. This superleverage
not only made the investment
banks more vulnerable when the housing
bubble popped, it enabled the banks to
create a more tangled mess of derivative
investments . so that their individual
failures, or the potential of failure, became
systemic crises. Former SEC Chair Chris
Cox has acknowledged that the voluntary
regulation was a complete failure.
18 SOLD OUT
6. Bank Self-Regulation Goes Global:
Preparing to Repeat the Meltdown?
In 1988, global bank regulators adopted a set
of rules known as Basel I, to impose a
minimum global standard of capital adequacy
for banks. Complicated financial
maneuvering made it hard to determine
compliance, however, which led to negotiations
over a new set of regulations. Basel II,
heavily influenced by the banks themselves,
establishes varying capital reserve requirements,
based on subjective factors of agency
ratings and the banksf own internal riskassessment
models. The SEC experience
with Basel II principles illustrates their fatal
flaws. Commercial banks in the United
States are supposed to be compliant with
aspects of Basel II as of April 2008, but
complications and intra-industry disputes
have slowed implementation.
7. Failure to Prevent Predatory Lending
Even in a deregulated environment, the
banking regulators retained authority to
crack down on predatory lending abuses.
Such enforcement activity would have
protected homeowners, and lessened though
not prevented the current financial crisis.
But the regulators sat on their hands. The
Federal Reserve took three formal actions
against subprime lenders from 2002 to 2007.
The Office of Comptroller of the Currency,
which has authority over almost 1,800
banks, took three consumer-protection
enforcement actions from 2004 to 2006.
8. 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. gIn
2003,h as Eliot Spitzer recounted, gduring
the height of the predatory lending crisis, 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, thereby
rendering them inoperative. The OCC also
promulgated new rules that prevented states
from enforcing any of their own consumer
protection laws against national banks.h
9. Escaping Accountability:
Assignee Liability
Under existing federal law, with only limited
exceptions, 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. This
arrangement effectively immunized acquirers
of the mortgage (gassigneesh) for any
problems with the initial loan, and relieved
them of any duty to investigate the terms of
the loan. Wall Street interests could purchase,
bundle and securitize subprime loans
. including many with pernicious, predatory
terms . without fear of liability for
SOLD OUT 19
illegal loan terms. The arrangement left
victimized borrowers with no cause of
action against any but the original lender,
and typically with no defenses against being
foreclosed upon. Representative Bob Ney,
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.
10. Fannie and Freddie Enter the
Subprime Market
At the peak of the housing boom, Fannie
Mae and Freddie Mac were dominant purchasers
in the subprime secondary market.
The Government-Sponsored Enterprises
were followers, not leaders, but they did end
up taking on substantial subprime assets .
at least $57 billion. The purchase of subprime
assets was a break from prior practice,
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. In fact, the motivation
was the for-profit nature of the institutions
and their particular executive incentive
schemes. 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. They are responsible
for their own demise, and the resultant
massive taxpayer liability.
11. Merger Mania
The effective abandonment of antitrust and
related regulatory principles over the last
two decades has enabled a remarkable
concentration in the banking sector, even in
advance of recent moves to combine firms
as a means to preserve the functioning of the
financial system. The megabanks achieved
too-big-to-fail status. While this should have
meant they be treated as public utilities
requiring heightened regulation and risk
control, other deregulatory maneuvers
(including repeal of Glass-Steagall) enabled
these gigantic institutions to benefit from
explicit and implicit federal guarantees, even
as they pursued reckless high-risk investments.
12. Rampant Conflicts of Interest:
Credit Ratings Firmsf Failure
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
20 SOLD OUT
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.
  
Wall Street is presently humbled, but not
prostrate. Despite siphoning trillions of
dollars from the public purse, Wall Street
executives continue to warn about the perils
of restricting gfinancial innovationh . even
though it was these very innovations that led
to the crisis. And they are scheming to use
the coming Congressional focus on financial
regulation to centralize authority with industry-
friendly agencies.
If we are to see the meaningful regulation
we need, Congress must adopt the view
that Wall Street has no legitimate seat at the
table. With Wall Street having destroyed the
system that enriched its high flyers, and
plunged the global economy into deep
recession, itfs time for Congress to tell Wall
Street that its political investments have also
gone bad. This time, legislating must be to
control Wall Street, not further Wall Streetfs
control.
This reportfs conclusion offers guiding
principles for a new financial regulatory
architecture.
  
SOLD OUT 21
Part I:
12 Deregulatory Steps to
Financial Meltdown
22 SOLD OUT
REPEAL OF THE GLASSSTEAGALL
ACT AND THE RISE OF
THE CULTURE OF RECKLESSNESS
Perhaps the signature deregulatory move of
the last quarter century was the repeal of the
1933 Glass-Steagall Act4 and related legislation.
5 The repeal removed the legal prohibi-
4 Glass-Steagall repealed at Pub. L. 106.102,
title I, 101(a), Nov. 12, 1999, 113 Stat.
1341.
5 See amendments to the Bank Holding Company
Act of 1956, 12 U.S.C. 1841-1850,
1994 & Supp. II 1997 (amended 1999).
tion on combinations between commercial
banks on the one hand, and investment
banks and other financial services companies
on the other. Glass-Steagallfs strict
rules originated in the U.S. Governmentfs
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.
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).
As banks eyed the higher profits in
higher risk activity, however, they began to
breach the regulatory walls between commercial
banking and other financial services.
Starting in the 1980s, responding to a steady
drumbeat of requests, regulators began to
weaken the strict prohibition on crossownership.
In 1999, after a long industry
campaign, Congress tore down the legal
walls altogether. The Gramm-Leach-Bliley
Act6 removed the remaining legal restrictions
on combined banking and financial
service firms, and ushered in the current
hyper-deregulated era.
6 Pub. L. No. 106-102.
1
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, which prohibited
commercial banks from offering investment
banking and insurance services. In a form of
corporate civil disobedience, Citibank and
insurance giant Travelers Group merged in
1998 . a move that was illegal at the time,
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. They did. 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, investment gambles that
rocked the financial markets in 2008.
SOLD OUT 23
The overwhelming direct damage inflicted
by Glass-Steagall repeal was the
infusion of investment banking culture into
the conservative culture of commercial
banking. After repeal, commercial banks
sought high returns in risky ventures and
exotic financial instruments, with disastrous
results.
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. Banks keep only a
specified fraction of deposits in their vaults.
They lend the rest out to borrowers or invest
the deposits to generate income. Depositors
depend on the bankfs stability, and communities
and businesses depend on banks to
provide credit on reasonable terms. The
difficulties faced by depositors in judging
the quality of bank assets has required
government regulation to protect the safety
of depositorsf money and the well being of
the banking system.
In the 19th and early 20th centuries, the
Supreme Court prohibited commercial banks
from engaging directly in securities activities,
7 but bank affiliates . subsidiaries of a
7 See California Bank v. Kennedy, 167 U.S. 362,
370-71 (1897) (holding that national bank
may neither purchase nor subscribe to stock
of another corporation); Logan County Natfl
Bank v. Townsend, 139 U.S. 67, 78 (1891)
(holding that national bank may be liable as
shareholder while in possession of bonds
holding company that also owns banks .
were not subject to the prohibition. As a
result, commercial bank affiliates regularly
traded customer deposits in the stock market,
often investing in highly speculative
activities and dubious companies and derivatives.
The Pecora Hearings
The economic collapse that began with the
1929 stock market crash hit Americans hard.
By the time the bottom arrived, in 1932, the
Dow Jones Industrial Average was down 89
percent from its 1929 peak.8 An estimated
15 million workers . almost 25 percent9 of
the workforce . were unemployed, real
output in the United States fell nearly 30
percent and prices fell at a rate of nearly 10
percent per year.10
obtained under contract made absent legal
authority); National Bank v. Case, 99 U.S.
628, 633 (1878) (holding that national bank
may be liable for stock held in another
bank).
8 Floyd Norris, gLooking Back at the Crash of
f29,h New York Times on the web, 1999,
available at:
<http://www.nytimes.com/library/financial/i
ndex-1929-crash.html>.
9 Remarks by Federal Reserve Board Chairman
Ben S. Bernanke, gMoney, Gold, and the
Great Depression,h March 2, 2004, available
at:
<http://www.federalreserve.gov/boarddocs/s
peeches/2004/200403022/default.htm>.
10 Remarks by Federal Reserve Board Chairman
Ben S. Bernanke, gMoney, Gold, and the
Great Depression,h March 2, 2004, available
at:
<http://www.federalreserve.gov/boarddocs/s
peeches/2004/200403022/default.htm>.
24 SOLD OUT
The 1932-34 Pecora Hearings,11 held
by the Senate Banking and Currency Committee
and named after its chief counsel
Ferdinand Pecora, investigated the causes of
the 1929 crash. The committee uncovered
blatant conflicts of interest
and self-dealing by commercial
banks and their
investment affiliates. For
example, commercial banks
had misrepresented to their
depositors the quality of
securities that their investment
banks were underwriting
and promoting, leading
the depositors to be overly
confident in commercial banksf stability.
First National City Bank (now Citigroup)
and its securities affiliate, the National City
Company, had 2,000 brokers selling securities.
12 Those brokers had repackaged the
bankfs Latin American loans and sold them
to investors as new securities (today, this is
known as gsecuritizationh) without disclosing
to customers the bankfs confidential
findings that the loans posed an adverse
11 The Pecora hearings, formally titled gStock
Exchange Practices: Hearings Before the
Senate Banking Committee,h were
authorized by S. Res. No. 84, 72d Cong., 1st
Session (1931). The hearings were convened
in the 72d and 73d Congresses (1932-1934).
12 Federal Deposit Insurance Corporation
website, gThe Roaring 20s,h Undated,
available at:
<http://www.fdic.gov/about/learn/learning/
when/1920s.html>.
risk.13 Peruvian government bonds were sold
even though the bankfs staff had internally
warned that gno further national loan can be
safely madeh to Peru. The Senate committee
found conflicts when commercial banks
were able to garner confidential
insider information
about their corporate
customersf deposits and
use it to benefit the bankfs
investment affiliates. In
addition, commercial
banks would routinely
purchase the stock of
firms that were customers
of the bank, as opposed to
firms that were most financially stable.
The Pecora hearings concluded that
common ownership of commercial banks
and investment banks created several distinct
problems, among them: 1) jeopardizing
depositors by investing their funds in the
stock market; 2) loss of the publicfs confidence
in the banks, which led to panic
withdrawals; 3) the making of unsound
loans; and 4) an inability to provide honest
investment advice to depositors because
banks were conflicted by their underwriting
relationship with companies.14
13 Federal Deposit Insurance Corporation
website, gThe Roaring 20s,h Undated,
available at:
<http://www.fdic.gov/about/learn/learning/
when/1920s.html>.
14 Joan M. LeGraw and Stacey L. Davidson,
gGlass-Steagall and the eSubtle Hazardsf of
The Pecora hearings
concluded that common
ownership of commercial
banks and investment banks
created several distinct
problems.
SOLD OUT 25
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;15
. Section 21 prohibited investment
banks from engaging in any commercial
banking activities;16
. Section 20 prohibited any Federal
Reserve-member bank from affiliating
with an investment bank or other
company gengaged principallyh in
securities trading;17 and
Judicial Activism,h 24 New Eng. L. Rev.
225, Fall 1989.
15 12 U.S.C. 24, Seventh (1933) (provided that
a national bank gshall not underwrite any
issue of securities or stockh ).
16 12 U.S.C. 378(a) (1933) (git shall be
unlawful - (1) For any person, firm,
corporation, association, business trust, or
other similar organization, engaged in the
business of issuing, underwriting, selling, or
distributing, at wholesale or retail, or
through syndicate participation, stocks,
bonds, debentures, notes, or other securities,
to engage at the same time to any extent
whatever in the business of [deposit
banking].h
17 12 U.S.C. 377 (1933) (prohibited affiliations
between banks that are members of the
Federal Reserve System and organizations
gengaged principally in the issue, flotation,
underwriting, public sale, or distribution at
wholesale or retail or through syndicate
participation of stocks, bonds, debentures,
notes, or other securities.....h). Federal
Reserve member banks include all national
banks and some state-chartered banks and
are subject to regulations of the Federal
Reserve System, often referred to as the
. Section 32 prohibited individuals
from serving simultaneously with a
commercial bank and an investment
bank as a director, officer, employee,
or principal.18
One exception in Section 20 permitted
securities activities by banks in limited
circumstances, such as the trading of municipal
general obligation bonds, U.S.
government bonds, and real estate bonds. It
also permitted banks to help private companies
issue gcommercial paperh for the purpose
of obtaining short-term loans. (Commercial
paper is a debt instrument or bond
equivalent to a short-term loan; companies
issue gcommercial paperh to fund daily (i.e.,
short-term) operations, including payments
Federal Reserve or simply gthe Fed.h The
Fed, created in 1913, is the central bank of
the United States comprised of a central,
governmental agency . the Board of
Governors . in Washington, D.C., and
twelve regional Federal Reserve Banks,
located in major cities throughout the nation.
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. It is
considered an independent central bank
because its decisions do not have to be
ratified by the President and Congress.
Federal Reserve member banks must
comply with the Fed's minimum capital
requirements. (See gThe Structure of the
Federal Reserve System,h Federal Reserve,
available at:
<http://federalreserve.gov/pubs/frseries/frser
i.htm>.)
18 12 U.S.C. 78 (1933) (provided that no
officer, director, or employee of a bank in
the Federal Reserve System may serve at the
same time as officer, director, or employee
of an association primarily engaged in the
activity described in section 20).
26 SOLD OUT
to employees and financing inventories.
Most commercial paper has a maturity of 30
days or less. Companies issue commercial
paper as an alternative to taking out a loan
from a bank.)
Glass-Steagall was a
key element of the Roosevelt
administrationfs
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.
While the financial
industry was cowed by
the Depression, it did not
fully embrace the New
Deal, and almost immediately sought to
maneuver around Glass-Steagall. A legal
construct known as a gbank holding companyh
was not subject to the Glass-Steagall
restrictions. Under the Federal Reserve
System, bank holding companies are gpaperh
or gshellh companies whose sole purpose
is to own two or more banks. Despite
the prohibitions in Glass-Steagall, a single
company could own both commercial and
investment banking interests if those interests
were held as separate subsidiaries by a
bank holding company. Bank holding companies
became a popular way for financial
institutions and other corporations to subvert
the Glass-Steagall wall separating commercial
and investment banking. In response,
Congress enacted the Bank Holding Company
Act of 1956 (BHCA)
to prohibit bank holding
companies from acquiring
gnon-banksh or engaging in
gactivities that are not
closely related to banking.h
Depository institutions were
considered gbanksh while
investment banks (e.g. those
that trade stock on Wall
Street) were deemed gnonbanksh
under the law. As
with Glass-Steagall, Congress
expressed its intent to
separate customer deposits
in banks from risky investments
in securities. Importantly, the BHCA
also mandated the separation of banking
from insurance and non-financial commercial
activities. The BHCA also required
bank holding companies to divest all their
holdings in non-banking assets and forbade
acquisition of banks across state lines.
But the BHCA contained a loophole
sought by the financial industry. It allowed
bank holding companies to acquire nonbanks
if the Fed determined that the nonbank
activities were gclosely related to
banking.h The Fed was given wide latitude
Glass-Steagall was a key
element of the Roosevelt
administrationfs 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.
SOLD OUT 27
under the Bank Holding Company Act to
approve or deny such requests. In the decades
that followed passage of the BHCA, the
Federal Reserve frequently invoked its
broad authority to approve bank holding
company acquisitions of investment banking
firms, thereby weakening the wall separating
customer deposits from riskier trading
activities.
Deference to regulators
In furtherance of the Fedfs authority under
BHCA, 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. As long as a
Federal Reserve Board interpretation of the
BHCA is greasonableh and gexpressly
articulated,h judges should not intervene, the
court concluded.19 The ruling was a victory
for opponents of Glass Steagall because it
increased the power of bank-friendly regulators.
It substantially freed bank regulators to
authorize bank holding companies to conduct
new non-banking activities without
judicial interference,20 rendering a significant
blow to Glass-Steagall. As a result,
banks whose primary business was managing
customer deposits and making loans
began using their bank holding companies to
19 Investment Company Inst. v. Camp, 401 U.S.
617 (1971).
20 Jonathan Zubrow Cohen, 8 Admin. L.J. Am.
U. 335, Summer 1994.
buy securities firms. For example, Bank-
America purchased stock brokerage firm
Charles Schwab in 1984.21 The Federal
Reserve had decided that Schwabfs service
of executing buy and sell stock orders for
retail investors was gclosely related to
bankingh and thus satisfied requirements of
the BHCA.
In December 1986, the Fed reinterpreted
the phrase gengaged principally,h in
Section 20 of the BHCA, which prohibited
banks from affiliating with companies
engaged principally in securities trading.
The Fed decided that up to 5 percent of a
bankfs gross revenues could come from
investment banking without running afoul of
the ban.22
Just a few months later, in the spring of
1987, the Fed entertained proposals from
Citicorp, J.P Morgan and Bankers Trust to
loosen Glass-Steagall regulations further by
allowing banks to become involved with
commercial paper, municipal revenue bonds
and mortgage-backed securities. The Federal
Reserve approved the proposals in a 3-2
vote.23 One of the dissenters, then-Chair
Paul Volcker, was soon replaced by Alan
21 Securities Industry Association v. Federal
Reserve System, 468 U.S. 207 (1984).
22 gThe Long Demise of Glass-Steagall,h PBS
Frontline, May 8, 2003, available at:
<http://www.pbs.org/wgbh/pages/frontline/s
hows/wallstreet/weill/demise.html>.
23 gThe Long Demise of Glass-Steagall,h PBS
Frontline, May 8, 2003, available at:
<http://www.pbs.org/wgbh/pages/frontline/s
hows/wallstreet/weill/demise.html>.
28 SOLD OUT
Greenspan, a strong proponent of deregulation.
In 1989, the Fed enlarged the BHCA
loophole again, at the request of J.P. Morgan,
Chase Manhattan, Bankers Trust and
Citicorp, permitting banks to generate up to
10 percent of their revenue from investment
banking activity.
In 1993, the Fed approved an acquisition
by a bank holding company, in this case
Mellon Bank, of TBC Advisors, an administrator
and advisor of stock mutual funds. By
acquiring TBC, Mellon Bank was authorized
to provide investment advisory services to
mutual funds.
By the early 1990s, the Fed had authorized
commercial bank holding companies to
own and operate full service brokerages and
offer investment advisory services. Glass
Steagall was withering at the hands of
industry-friendly regulators whose free
market ideology conflicted with the Depression-
era reforms.
The Financial Services Modernization Act
While the Fed had been progressively
undermining Glass-Steagall through deregulatory
interpretations of existing laws, the
financial industry was simultaneously
lobbying Congress to repeal Glass-Steagall
altogether. Members of Congress introduced
major deregulation legislation in 1982,
1988, 1991, 1995 and 1998.
Big banks, securities firms and insurance
companies24 spent lavishly in support
of the legislation in the late 1990s. During
the 1997-1998 Congress, the thre
134  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 01:10:23 AM
SECOND POST:

Woof,
 I bet it's just those evil Repub's doing this stuff!! Ha!


By Newsmax Wires

Former Speaker Nancy Pelosi bought stock in initial public offerings (IPOs) that earned hefty returns while she had access to insider information that would have been illegal for an average citizen to trade with even though its perfectly legal for elected officials, CBSs "60 Minutes" reported Sunday night.

In a piece relying on data collected from the conservative Hoover Institution, "60 Minutes" revealed that elected officials like Pelosi are exempt from insider trading laws regulations that carry hefty prison sentences and fines for any other citizen who trades stocks with private information on companies that can affect their stock price.

In the case of elected officials this secret information ranges from timely details on lucrative federal contracts to legislation that can cause companies stocks to rise and fall dramatically.

How do they get away with it? Lawmakers have exempted themselves from the laws that govern every other citizen.

Pelosi, D-Calif., and her husband have participated in at least eight IPOs while having access to information directly relating to the companies involved. One of those came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit card companies, began making its way through the House.

Undisturbed by a potential conflict of interest the Pelosis purchased 5,000 shares of Visa at the initial price of $44 dollars. Two days later it was trading at $64. The credit card legislation never made it to the floor of the House, Steve Kroft of "60 Minutes" reported.

Kroft confronted Pelosi at a regular press conference after she declined an interview.

Kroft: Madam Leader, I wanted to ask you why you and your husband back in March of 2008 accepted and participated in a very large IPO deal from Visa at a time there was major legislation affecting the credit card companies making its way through the through the House.

Nancy Pelosi: But

Kroft: And did you consider that to be a conflict of interest?

Pelosi: The y I I don't know what your point is of your question. Is there some point that you want to make with that?

Kroft: Well, I I I guess what I'm asking is do you think it's all right for a speaker to accept a very preferential, favorable stock deal?

Pelosi: Well, we didn't.

Kroft: You participated in the IPO. And at the time you were speaker of the House. You don't think it was a conflict of interest or had the appearance--

Pelosi: No, it was not

Kroft: of a conflict of interest?

Pelosi: it doesn't it only has appearance if you decide that you're going to have elaborate on a false premise. But it it   it's not true and that's that.

Kroft: I don't understand what part's not true.

Pelosi: Yes sir. That that I would act upon an investment.

The Hoover Institutions Peter Schweizer stressed that what Pelosi did was completely legal.

There are all sorts of forms of honest grafts that congressmen engage in that allow them to become very, very wealthy. So it's not illegal, but I think it's highly unethical, I think it's highly offensive, and wrong, he told Kroft.

Insider trading on the stock market. If you are a member of Congress, those laws are deemed not to apply, Schweizer added. The fact is, if you sit on a healthcare committee and you know that Medicare, for example, is is considering not reimbursing for a certain drug that's market moving information. And if you can trade stock on off of that information and do so legally, that's a great profit making opportunity. And that sort of behavior goes on.

Pelosis office issued a statement Sunday saying, It is very troubling that 60 Minutes would base their reporting off of an already-discredited conservative author who has made a career out of attacking Democrats.

Schweizers books include Do as I Say (Not as I Do): Profiles in Liberal Hypocrisy, and Architects of Ruin, according to Schweizers page on the Hoover Institution website.

                                                                    P.C.

135  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Corruption on: December 11, 2011, 01:02:13 AM
Woof,  1st post;
 Congress members can do things legally that others get put in jail for. Now is that fair?

 www.cbsnews.com/8301-18560_162-57323527/congress-trading-stock-on-inside-information/

   CBSNews.com|
Steve Kroft reports that members of Congress can legally trade stock based on non-public information from Capitol Hill.
Web Extras
Congress: Trading stock on inside information?What counts as "inside information"?Keeping Congress clean(CBS News)  Editor's Note: The report "Insiders" received quite a reaction the week after it aired. Democratic Congresswoman Nancy Pelosi's office called the report a "right-wing smear." While Republican Speaker John Boehner's office called his inclusion in the story "idiotic." But now, at least 93 members of Congress have signed on as cosponsors of the Stock Act, and for the first time the bill has been introduced in the Senate.



Washington, D.C. is a town that runs on inside information - but should our elected officials be able to use that information to pad their own pockets? As Steve Kroft reports, members of Congress and their aides have regular access to powerful political intelligence, and many have made well-timed stock market trades in the very industries they regulate. For now, the practice is perfectly legal, but some say it's time for the law to change.




--------------------------------------------------------------------------------


The following is a script of "Insiders" which aired on Nov. 13, 2011. Steve Kroft is correspondent, Ira Rosen and Gabrielle Schonder, producers.

The next national election is now less than a year away and congressmen and senators are expending much of their time and their energy raising the millions of dollars in campaign funds they'll need just to hold onto a job that pays $174,000 a year.


Few of them are doing it for the salary and all of them will say they are doing it to serve the public. But there are other benefits: Power, prestige, and the opportunity to become a Washington insider with access to information and connections that no one else has, in an environment of privilege where rules that govern the rest of the country, don't always apply to them.

Questioning Pelosi: Steve Kroft heads to D.C.
When Nancy Pelosi, John Boehner, and other lawmakers wouldn't answer Steve Kroft's questions, he headed to Washington to get some answers about their stock trades.

Most former congressmen and senators manage to leave Washington - if they ever leave Washington - with more money in their pockets than they had when they arrived, and as you are about to see, the biggest challenge is often avoiding temptation.


Peter Schweizer: This is a venture opportunity. This is an opportunity to leverage your position in public service and use that position to enrich yourself, your friends, and your family.


Peter Schweizer is a fellow at the Hoover Institution, a conservative think tank at Stanford University. A year ago he began working on a book about soft corruption in Washington with a team of eight student researchers, who reviewed financial disclosure records. It became a jumping off point for our own story, and we have independently verified the material we've used.


Schweizer says he wanted to know why some congressmen and senators managed to accumulate significant wealth beyond their salaries, and proved particularly adept at buying and selling stocks.


Schweizer: There are all sorts of forms of honest grafts that congressmen engage in that allow them to become very, very wealthy. So it's not illegal, but I think it's highly unethical, I think it's highly offensive, and wrong.


Steve Kroft: What do you mean honest graft?


Schweizer: For example insider trading on the stock market. If you are a member of Congress, those laws are deemed not to apply.


Kroft: So congressman get a pass on insider trading?


Schweizer: They do. The fact is, if you sit on a healthcare committee and you know that Medicare, for example, is-- is considering not reimbursing for a certain drug that's market moving information. And if you can trade stock on-- off of that information and do so legally, that's a great profit making opportunity. And that sort of behavior goes on.


Kroft: Why does Congress get a pass on this?


Schweizer: It's really the way the rules have been defined. And the people who make the rules are the political class in Washington. And they've conveniently written them in such a way that they don't apply to themselves.


The buying and selling of stock by corporate insiders who have access to non-public information that could affect the stock price can be a criminal offense, just ask hedge fund manager Raj Rajaratnam who recently got 11 years in prison for doing it. But, congressional lawmakers have no corporate responsibilities and have long been considered exempt from insider trading laws, even though they have daily access to non-public information and plenty of opportunities to trade on it.


Schweizer: We know that during the health care debate people were trading health care stocks. We know that during the financial crisis of 2008 they were getting out of the market before the rest of America really knew what was going on.


In mid September 2008 with the Dow Jones Industrial average still above ten thousand, Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke were holding closed door briefings with congressional leaders, and privately warning them that a global financial meltdown could occur within a few days. One of those attending was Alabama Representative Spencer Bachus, then the ranking Republican member on the House Financial Services Committee and now its chairman.


Schweizer: These meetings were so sensitive-- that they would actually confiscate cell phones and Blackberries going into those meetings. What we know is that those meetings were held one day and literally the next day Congressman Bachus would engage in buying stock options based on apocalyptic briefings he had the day before from the Fed chairman and treasury secretary. I mean, talk about a stock tip.


While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down. He would make a variety of trades and profited at a time when most Americans were losing their shirts.


Congressman Bachus declined to talk to us, so we went to his office and ran into his Press Secretary Tim Johnson.

(CBS News)  
Kroft: Look we're not alleging that Congressman Bachus has violated any laws. All...the only thing we're interested in talking to him is about his trades.


Tim Johnson: Ok...Ok that's a fair enough request.


What we got was a statement from Congressman Bachus' office that he never trades on non-public information, or financial services stock. However, his financial disclosure forms seem to indicate otherwise. Bachus made money trading General Electric stock during the crisis, and a third of GE's business is in financial services.


During the healthcare debate of 2009, members of Congress were trading health care stocks, including House Minority Leader John Boehner, who led the opposition against the so-called public option, government funded insurance that would compete with private companies. Just days before the provision was finally killed off, Boehner bought health insurance stocks, all of which went up. Now speaker of the House, Congressman Boehner also declined to be interviewed, so we tracked him down at his weekly press conference.


Kroft: You made a number of trades going back to the health care debate. You bought some insurance stock. Did you make those trades based on non-public information?


John Boehner: I have not made any decisions on day-to-day trading activities in my account. And haven't for years. I don't-- I do not do it, haven't done it and wouldn't do it.


Later Boehner's spokesman told us that the health care trades were made by the speaker's financial adviser, who he only consults with about once a year.


[Peter Schweizer: We need to find out whether they're part of a blind trust or not.]


Peter Schweizer thinks the timing is suspicious, and believes congressional leaders should have their stock funds in blind trusts.


Schweizer: Whether it's uh-- $15,000 or $150,000, the principle in my mind is that it's simply wrong and it shouldn't take place.

But there is a long history of self-dealing in Washington. And it doesn't always involve stock trades.


Congressmen and senators also seem to have a special knack for land and real estate deals. When Illinois Congressman Dennis Hastert became speaker of the House in 1999, he was worth a few hundred thousand dollars. He left the job eight years later a multi-millionaire.


Jan Strasma: The road that Hastert wants to build will go through these farm fields right here.


In 2005, Speaker Hastert got a $207 million federal earmark to build the Prairie Parkway through these cornfields near his home. What Jan Strasma and his neighbors didn't know was that Hastert had also bought some land adjacent to where the highway is supposed to go.


Strasma: And five months after this earmark went through he sold that land and made a bundle of money.


Kroft: How much?


Strasma: Two million dollars.


Kroft: What do you think of it?


Strasma: It stinks.


We stopped by the former speaker's farm, to ask him about the land deal, but he was off in Washington where he now works as a lobbyist. His office told us that property values in the area began to appreciate even before the earmark and that the Hastert land was several miles from the nearest exit.


But the same good fortune befell former New Hampshire Senator Judd Gregg, who helped steer nearly $70 million dollars in government funds towards redeveloping this defunct Air Force base, which he and his brother both had a commercial interest in. Gregg has said that he violated no congressional rules.


It's but one more example of good things happening to powerful members of Congress. Another is the access to initial public stock offerings, the opportunity to buy a new stock at insider prices just as it goes on the market. They can be incredibly lucrative and hard to get.


(CBS News)  
Schweizer: If you were a senator, Steve, and I gave you $10,000 cash, one or both of us is probably gonna go to jail. But if I'm a corporate executive and you're a senator, and I give you IPO shares in stock and over the course of one day that stock nets you $100,000, that's completely legal.


And former House Speaker Nancy Pelosi and her husband have participated in at least eight IPOs. One of those came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit card companies, began making its way through the House. Undisturbed by a potential conflict of interest the Pelosis purchased 5,000 shares of Visa at the initial price of $44 dollars. Two days later it was trading at $64. The credit card legislation never made it to the floor of the House.

Congresswoman Pelosi also declined our request for an interview, but agreed to call on us if we attended a news conference.


Kroft: Madam Leader, I wanted to ask you why you and your husband back in March of 2008 accepted and participated in a very large IPO deal from Visa at a time there was major legislation affecting the credit card companies making its way through the-- through the House.


Nancy Pelosi: But--


Kroft: And did you consider that to be a conflict of interest?


Pelosi: The-- y-- I-- I don't know what your point is of your question. Is there some point that you want to make with that?


Kroft: Well, I-- I-- I guess what I'm asking is do you think it's all right for a speaker to accept a very preferential, favorable stock deal?


Pelosi: Well, we didn't.


Kroft: You participated in the IPO. And at the time you were speaker of the House. You don't think it was a conflict of interest or had the appearance--


Pelosi: No, it was not--


Kroft: --of a conflict of interest?


Pelosi: --it doesn't-- it only has appearance if you decide that you're going to have-- elaborate on a false premise. But it-- it-- it's not true and that's that.


Kroft: I don't understand what part's not true.


Pelosi: Yes sir. That-- that I would act upon an investment.


Congresswoman Pelosi pointed out that the tough credit card legislation eventually passed, but it was two years later and was initiated in the Senate.


Pelosi: I will hold my record in terms of fighting the credit card companies as speaker of the House or as a member of Congress up against anyone.


Corporate executives, members of the executive branch and all federal judges are subject to strict conflict of interest rules. But not the people who write the laws.


Schweizer: If you are a member of Congress and you sit on the defense committee, you are free to trade defense stock as much as you want to if you're on the Senate banking committee you can trade bank stock as much as you want and that regularly goes on-- in-- in all these committees.


Brian Baird: There should only be one thing in your mind when you're drafting legislation, 'Is this good for the United States of America?' That's it. If you're starting to say to yourself 'how's this going to affect my investments,' you've got-- you've got a mixed agenda and a mixed purpose for being there.

(CBS News)  
Brian Baird is a former congressman from Washington state who served six terms in the house before retiring last year. He spent half of those 12 years trying to get his colleagues to prohibit insider trading in Congress and establish some rules governing conflicts of interest.


Baird: One line in a bill in Congress can be worth millions and millions of dollars. There was one night, we had a late, late night caucus and you could kind of tell how a vote was going to go the next day. I literally walked home and I thought, 'Man, if you-- if you went online and made-- some significant trades, you could make a lot of money on this.' You-- you could just see it. You could see the potential here.


So in 2004, Baird and Congresswoman Louise Slaughter introduced the Stock Act which would make it illegal for members of Congress to trade stocks on non-public information and require them to report their stock trades every 90 days instead of once a year.


Kroft: How far did you get with this?


Baird: We didn't get anywhere. Just flat died. Went nowhere.


Kroft: How many cosponsors did you get?


Baird: I think we got six.


Kroft: Six doesn't sound like a very big amount.


Baird: It's not, Steve. You-- you could have-- 'National Cherry Pie Week' and get 100 cosponsors.


When Baird finally managed to get a congressional hearing on the Stock Act, almost no one showed up. It's reintroduced every session, but is buried so deep in the Capitol we had trouble finding congressmen who had even heard of it.


Kroft: Have you ever heard of the Stock Act?


Steve Palazzo: The what?


Kroft: The Stock Act. Do you know anything about it?


Congressman: No.


Kroft: Congressman. Congressman. Congressman.


Congressman Quayle: I haven't heard about that one yet.


Kroft: Have you ever heard of something called the Stock Act?


Congressman Watt: No.


Male voice: I've heard about, but not. I can't say it's an issue I've spent a lot of time on.


Male voice: I would have no problem with that.


Kroft: Okay.


Male voice: But then again I am a big fan of, you know, instant disclosure on almost everything.


Kroft: They're looking for co-sponsors.

(Male voice) Yet I've never heard of it.


(CBS News)  
Baird: When you have a bill like this that makes so much sense and you can't get the co-sponsorships, you can't get the leadership to move it, it gets tremendously frustrating. Set aside that it's the right thing to do, it's good politics. People want their Congress to function well. It still baffles me.


But what baffles Baird even more is that the situation has gotten worse. In the past few years a whole new totally unregulated, $100 million dollar industry has grown up in Washington called political intelligence. It employs former congressmen and former staffers to scour the halls of the Capitol gathering valuable non-public information then selling it to hedge funds and traders on Wall Street who can trade on it.


Baird: Now if you're a political intel guy. And you get that information. Long before it's public. Long before somebody wakes up the next morning and reads or watches the television or whatever, you've got it. And you can make real-- real-time trades before anybody else.


Baird says its taken what would be a criminal enterprise anyplace else in the country and turned it into a profitable business model.


Baird: The town is all about people saying-- what do you know that I don't know. This is the currency of Washington, D.C. And it's that kind of informational currency that translates into real currency. Maybe it's over drinks maybe somebody picks up a phone. And says you know just to let you know it's in the bill. Trades happen. Can't trace 'em. If you can trace 'em, it's not illegal. It's a pretty great system. You feel like an idiot to not take advantage of it.

                                      P.C.

136  Politics, Religion, Science, Culture and Humanities / Science, Culture, & Humanities / Re: Movies on: December 10, 2011, 11:12:48 PM
Woof,
 Oh come off it ccp, Repub's don't like crooks in business anymore than anyone else does and they go after them all the time. Bernie Madoff ripped off anyone that gave him money and there were plenty of Repub's taken in just like Dem's. Besides that, this is not a political thread.
                  P.C.
137  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Ditch the 17th Amendment! on: December 10, 2011, 09:14:24 PM
Section 3  Constitution of the United States of America
 
The Senate of the United States shall be composed of two Senators from each State, chosen by the Legislature thereof, for six Years; and each Senator shall have one Vote.
  
Each state has two senators, regardless of the size of its population.  Originally, senators were chosen by state legislatures.  In 1913 the 17th amendment provided that senators would be directly elected by the people.

Immediately after they shall be assembled in Consequence of the first Election, they shall be divided as equally as may be into three Classes. The Seats of the Senators of the first Class shall be vacated at the Expiration of the second Year, of the second Class at the Expiration of the fourth Year, and of the third Class at the Expiration of the sixth Year, so that one third may be chosen every second Year; and if Vacancies happen by Resignation, or otherwise, during the Recess of the Legislature of any State, the Executive thereof may make temporary Appointments until the next Meeting of the Legislature, which shall then fill such Vacancies

 My thought is that the 17th amendment should be repealed and the original Section 3 of the Constitution, should by default be reinstated. This would help curb the power of the Federal government over state governments, which was the intent of section 3 in the first place. Senators would be appointed by state governments ensuring their loyalty to the state they represent, not some special interest group or Party. The House of Representatives is the body of government that was intended to directly be voted into office by the people. It's because of the 17th amendment that the Federal government has been able to gain increasing power over States rights, and is a major reason for the political deadlock between Party's, constant campaigning, corruption and career politicans out of touch with their State's needs. I don't know what group of idiot's in 1913 thought they were smarter than the guy's that penned the final draft of the Constitution and the States that ratified it but they were idiot's and the cause of much of what ails us today. I could keep going but then my thought would undeniably be a rant then.

 Just a thought or a rant, whatever. smiley
                                       P.C.

 
138  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Afpakia: Afghanistan-Pakistan on: December 10, 2011, 08:10:55 PM
Woof,
 Not a friendly move on Pakistan's part.

     http://worldnews.msnbc.msn.com/_news/2011/12/10/9352886-pakistan-says-us-drones-in-its-air-space-will-be-shot-down

  Pakistan says U.S. drones in its air space will be shot downBy NBC News, msnbc.com staff and news service reports
Updated at 8 p.m. EST

ISLAMABAD -- Pakistan will shoot down any U.S. drone that intrudes its air space per new directives, a senior Pakistani official told NBC News on Saturday.

Pakistani security personnel examine a crashed US surveillance drone inside Pakistan in August.
According to the new Pakistani defense policy, "Any object entering into our air space, including U.S. drones, will be treated as hostile and be shot down," a senior Pakistani military official told NBC News.

The policy change comes just weeks after a deadly NATO attack on Pakistani military checkpoints accidentally killed 24 Pakistani soldiers, prompting Pakistani officials to order all U.S. personnel out of a remote airfield in Pakistan.

Pakistan told the U.S. to vacate Shamsi Air Base by December 11.

A senior military official from Quetta, Pakistan, confirmed to NBC News on Saturday that the evacuation of the base, used for staging classified drone flights directed against militants, will be completed tomorrow, according to NBCs Fakhar ur Rehman.

Pakistan's Frontier Corps security forces took control of the base Saturday evening after most U.S. military personnel left, Xinhua news agency reported. Civil aviation officials also moved in Saturday, Xinhua said.

Pakistani Military Chief Gen Ashfaq Pervez Kayani had issued multiple directives since the Nov. 26 NATO attack, which included orders to shoot down U.S. drones, senior military officials confirmed to NBC News on Saturday.

It was unclear Saturday whether orders to fire upon incoming U.S. drones was part of the initial orders.

Supporters of opposition political party Pakistan Tehrik-e-Insaf (Movement of Justice) carry a mock US drone as they listen to a speech by the party founder Imran Khan, during a protest rally against the United States drones attacks.
The Pakistani airbase had been used by U.S. forces, including the CIA, to stage elements of a clandestine U.S. counter-terrorism operation to attack militants linked to al-Qaida, the Taliban and Pakistan's home-grown Haqqani network, using unmanned drone aircraft armed with missiles.

President Barack Obama stepped up the drone campaign after he took office. U.S. officials say it has produced major successes in decimating the central leadership of al-Qaida and putting associated militant groups on the defensive.

Since 2004, U.S. drones have carried out more than 300 attacks inside Pakistan.

Pakistani authorities started threatening U.S. personnel with eviction from the Shamsi base in the wake of the raid last May in which U.S. commandos killed Osama bin Laden at his hide-out near Islamabad without notifying Pakistani officials in advance.

NBC News' Fakhar ur Rehman, msnbc.com's Sevil Omer and Reuters contributed to this report

                                           P.C.
139  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Velvet Elvis on: December 10, 2011, 01:04:37 AM
Woof,
 Legalizing all drugs would cause all kinds of problems, not just for the users but for employers and society at large. Problems that could have worse consequences than the prohibition. Hard drug use generally leads people to do nothing but use drugs. They can't make an honest living so they turn to crime or they become dependant on the state to take care of them. I think we should make that as rare as possible and besides our drunks don't need any competition. Legalizing Mary Jane on the other hand might not be such a bad trade off but we still shouldn't think that it won't cause any problems. It will, but as Guro Craftydog said it will take a lot of money out of cartel hands and hopefully our corrupt politicans won't spend it all on velvet paintings of Elvis and whores. I don't know, there's no doubt that the cartels would be better stewarts of the cash, undecided if we could just get them to stop killing people. Maybe if our government stopped supplying them with guns? We live in interesting times, don't we.
                                 P.C.
                                                    
140  Politics, Religion, Science, Culture and Humanities / Politics & Religion / The Mexicanization of American Law Enforcement. on: December 09, 2011, 10:24:49 PM
Woof,

Judith Miller
The Mexicanization of American Law Enforcement
The drug cartels extend their corrupting influence northward.

Customs and Border Protection agents have been bought off by drug dealers.Beheadings and amputations. Iraqi-style brutality, bribery, extortion, kidnapping, and murder. More than 7,200 deadalmost double last years tallyin shoot-outs between federales and often better-armed drug cartels. This is modern Mexico, whose president, Felipe Caldern, has been struggling since 2006 to wrest his country from the grip of four powerful cartels and their estimated 100,000 foot soldiers.

But chillingly, there are signs that one of the worst features of Mexicos war on drugslaw enforcement officials on the take from drug lordsis becoming an American problem as well. Most press accounts focus on the drug-related violence that has migrated north into the United States. Far less widely reported is the infiltration and corruption of American law enforcement, according to Robert Killebrew, a retired U.S. Army colonel and senior fellow at the Washington-based Center for a New American Security. This is a national security problem that does not yet have a name, he wrote last fall in The National Strategy Forum Review. The drug lords, he tells me, are seeking to hollow out our institutions, just as they have in Mexico.

Corruption indictments and convictions linked to drug-trafficking organizations, known in police parlance as DTOs, are popping up in FBI press releases with disturbing frequency. In April, for instance, the U.S. Attorneys office in the Southern District of Texas announced that Sergio Lopez Hernandez, a 40-year-old Customs and Border Protection inspector, had been convicted of drug trafficking, alien smuggling, and bribery. Hernandez pleaded guilty to accepting over $150,000 in bribes and to conspiring to sell cocaine and bring illegal aliens into the country.

Or consider the case of border inspector Margarita Crispinprecisely the kind of border corruption case that alarms us, says William Abbott, an assistant special agent in charge of the FBIs criminal branch in El Paso, Texas. In 2005, he says, a federal informant tipped off the Bureau that Crispin was deliberately ignoring traffickers who moved drugs and other contraband through her border post. Then, in the spring of 2006, a van that had just gone through Crispins lane sputtered out of gas. The driver abandoned the vehicle and fled back across the border into Mexicoand when other inspectors opened the vans doors, they found nearly 6,000 pounds of marijuana in plain sight. Crispin couldnt explain why she hadnt noticed the stash when she had examined the vehicle, according to an FBI press release on the case and an official who worked on it.

Another year of surveillance uncovered evidence of Crispins drug-cartel connections. Though she lived simply in El Paso, she socialized with known drug traffickers in Mexico and had bought two expensive homes and several luxury vehicles there through straw purchasers. Crispin was then arrested. After pleading guilty in 2008 to conspiring to import drugs and abusing the public trust, she was sentenced to 20 years in prison and ordered to forfeit $5 million in assets she was estimated to have stolen.

Government investigators believe that Crispin had been working for the cartels for at least a year before she applied to become an inspector. In other words, federal screening failed to detect that, at the time she applied for her job, the cartels had already recruited her to facilitate their cross-border trafficking. At one point, federal investigators say, Crispin claimed to have wanted out of her arrangement with the cartels. But we think she was kidnapped and forcibly taken back to Mexico to remind her of whom she was working for, Abbott says. Having family in both Jurez and El Paso, cities within sight of each other across the border, Crispin found herself trapped.

Abbott says that the Crispin case is atypical. But the potential damage, he stresses, is huge. You have the mule: an illegal immigrant who carries five pounds of marijuana in his backpack across the border through the desert. Compare that with the border inspector who waves through five completely loaded vans, as she did.

Experts disagree about how deep this rot runs. Some try to downplay the phenomenon, dismissing the law enforcement officials who have succumbed to bribes or intimidation from the drug cartels as a few bad apples. Peter Nuez, a former U.S. attorney who lectures at the University of San Diego, says he does not believe that there has been a noticeable surge of cartel-related corruption along the border, partly because the FBI, which has been historically less corrupt than its state and local counterparts, has significantly ratcheted up its presence there. Its harder to be as corrupt today as locals were in the 1970s, when there wasnt a federal agent around for hundreds of miles, he says.

But Jason Ackleson, an associate professor of government at New Mexico State University, disagrees. U.S. Customs and Border Protection is very alert to the problem, he tells me. Their internal investigations caseload is going up, and there are other cases that are not being publicized. While corruption is not widespread, if you increase the overall number of law enforcement officers as dramatically as we havefrom 9,000 border agents and inspectors prior to 9/11 to a planned 20,000 by the end of 2009you increase the possibility of corruption due to the larger number of people exposed to it and tempted by it. Note, too, that Drug Enforcement Agency data suggest that Mexican cartels are operating in at least 230 American cities.

Washington is taking no chances. In recent months, the FBIs Criminal Division has created seven multiagency task forces and assigned 120 agents to investigate public corruption, drug-related and otherwise, in the Southwest border region, says Debbie Weierman of the FBIs public-affairs office in Washington. Meanwhile, Customs and Border Protection, the largest U.S. law enforcement agency, has increased the number of its internal investigators over three years from five to 220.

And David Shirk, director of the San Diegobased Trans-Border Institute and a political scientist at the University of San Diego, says that recent years have seen an alarming increase in the number of Department of Homeland Security personnel being investigated for possible corruption. The number of cases filed against DHS agents in recent years is in the hundreds, says Shirk. And that, obviously, is a potentially huge problem. An August 2009 investigation by the Associated Press supports his assessment. Based on records obtained under the Freedom of Information Act, court records, and interviews with sentenced agents, the AP concluded that more than 80 federal, state, and local border-control officials had been convicted of corruption-related crimes since 2007, soon after President Caldern launched his war on the cartels. Over the previous ten months, the AP data showed, 20 Customs and Border Protection agents alone had been charged with a corruption-related crime. If that pace continued, the reporters concluded, the organization will set a new record for in-house corruption.

While the FBI task forces focus mainly on corruption along the border, cartel-related vice has spread much deeper into the American heartland. Consider New Mexicos San Juan County, some 450 miles north of the border, where the U.S. Attorneys office has recently prosecuted a startling corruption case that may be a portent of things to come.

Back in 1994, Ken Christesen was a detective in the Four Corners, the region where the borders of Colorado, Arizona, Utah, and New Mexico meet. That was the year that one Miguel Tarango was convicted of murdering a member of a rival drug gang in a territorial dispute. The conviction made Christesen realize that the Tarango family was far more significant than we had initially thought in the local drug trade, he tells me over coffee at Donna Kays, a popular caf in Bloomfield, New Mexico.

Even in a county where 80 to 90 percent of all serious crimes are linked to drugsan area where you cant swing a dead cat without hitting a drug dealerthe Tarangos stood out. The family was locally based but had ties to Mexicos Sinaloa and Jurez cartels, and it had big ideas about controlling the lucrative trade in methamphetamine and other illicit drugs in San Juan County. The clans rising star was Daniel Tarango, Jr., a short, slim, American-born hipster with a pencil-thin mustache, a fondness for black T-shirts, and no visible means of support. After his father and uncle were convicted of heavy-duty meth trafficking, sent to federal prison, and deported, Danny, known to local cops as the Runt, took charge of the family business.

By 2002, Christesen had become a lieutenant in the San Juan County sheriffs office, where he participated in Operation Farmland, an effort run by a federal, state, and local alliance called the Region II Narcotics Task Force. The operation, which targeted meth sales in the Four Corners, ended in 2003 with 250 people charged, among them Mike Marshall, a former sheriffs deputy sentenced to five years in federal prison for distributing drugs. Christesen happened to know that Marshall and Danny Tarango had often been seen together. If Tarango had befriended Marshall, Christesen reasoned, might he also be trying to get inside information from active cops about the task force itself?

The hero of Operation Farmland was Levi Countryman, then a San Juan County sheriffs deputy who had gotten many of the tips and intelligence that led to the massive arrests. Despite Countrymans ostensibly heroic role in Farmland, Christesen was suspicious. Farmland hadnt fingered a single member of the Tarango clan, despite its growing prominence in the county drug trade. And despite Farmlands apparent success, methamphetamine still flowed freely into Farmington, Bloomfield, Shiprock, Aztec, and other forlorn, trailer-strewn desert towns in the Four Corners.

Christesen concluded that Danny Tarango and Levi Countryman were working togetherthat we made the arrests, Levi became a hero, and Danny got rich by eliminating his competition, Christesen recalls. But he had no proof. Nevertheless, when he took over the Narcotics Task Force in October 2004, he quietly put Levi Countryman at the top of his target list.

Christesens suspicions about Countryman had been reinforced in the spring of 2004, when officers searching one of Danny Tarangos many houses found an all-terrain vehicle registered in Countrymans name. What was Countrymans ATV doing in the Runts garage? Under intense scrutiny, Countryman resigned as deputy sheriff and told friends that he would enter the private sector as a stock trader.

But sensitive task-force information kept leaking out to the Tarangos, much to Christesens frustration. Every time Christesen got close to persuading someone to talk or testify in a drug-related case, the inquiry would fall apart. A parade of witnesses who had agreed to testify would suddenly change their minds. One potential witness in a drug case against Josh Tarango, Dannys younger brother, refused to testify in 2006 after her daughters car was burned on her front lawn. Every time we got close to tying Tarango to Countryman, Christesen recalls, an informant would be burnedintimidated, that is. I began to think that our own building was bugged. I even asked the FBI to do a sweep. Tired of waiting for federal help, we finally bought old equipment and did it ourselves. The sweep turned up nothing. Meanwhile, violence in San Juan County kept escalating, much of it apparently tied to Danny Tarango.

In January 2007, the FBI finally responded to Christesens repeated appeals and quietly opened an investigation into whether the task forces operations were being compromised from within. Because everyone on the task force was potentially a suspect, the FBI agents told no one in local law enforcementnot even Christesenprecisely what they were doing and whom they were targeting. But after wiretapping Danny Tarangos cell-phone calls, they discovered that information about the task force was still being provided by Countryman. Christesens suspicions were all too true: Countryman was getting his information from a state police officer named Keith Salazar, one of the units most trusted, experienced members. Countryman and Tarango even referred to Salazar by the code name Candy because the information he provided was so sweet.

In court, Salazar later argued that he had been forced to betray his fellow officersthat Countryman had threatened, if Salazar refused to cooperate, not only to expose the fact that he had skimmed funds from the task forces kitty, but also to harm him and his family. But the cell-phone conversations that prosecutor Reeve Swainston played in court made a mockery of that claim. Calling each other several times a day, referring to each other as bro, joking and swearing like fraternity brothers staging college pranks, Salazar and Countryman were obviously close friends who enjoyed their dirty work. Salazar eagerly provided Countryman with the names of his fellow officers, even those serving undercover. He gave Countryman pictures he had taken of them, their home addresses, their birth dates and Social Security numbers, and detailed descriptions of their cars and license-plate numbers. He also disclosed the identity of confidential informants; the dates, times, and locations of impending search warrants; the nature of ongoing antidrug investigations in New Mexico and Colorado; and other material that Countryman requested. And he did all this for just $1,000 a month from Tarango.

For his part, Countryman was the perfect middleman. As soon as he got sensitive information from Candy, he would call Tarango and pass it along. As a result, Salazar never had to talk to Tarango or meet with him, insulating him from scrutiny. All three men used cell phones specifically dedicated to their double-dealing, creating what Swainston called in his indictment a compartmentalized line of communication. But Countryman was more than a go-between; he also distributed some of the methamphetamine he received from Tarango, street profits from which supplemented the $8,000 a month that Tarango routinely paid him.

Christesen suspected that Tarango had turned other law enforcement officers and local and state officials, and he hoped that the FBIs investigation would uncover them. But the FBI had to cut short its investigation and move against the three men in December 2007, after agents overheard Tarango and Countryman discussing ways to intimidate and possibly harm a deputy sheriff. Among the tactics they discussed were following the deputys wife around town, taking photos of her and her children, leaving a photo of her on her car, throwing hypodermic needles on her lawn, delivering a box filled with dying rats to the familys home, and leaving a pigs head on the front porch. They agreed that this might send her a message that her husband needs to back off, a court document states, quoting part of an intercepted conversation between Tarango and Countryman. Further, the FBI overheard Tarango telling Countryman that he had watched the familys home at various hours, and Countryman telling Tarango that this deputys ass needed to be whacked.

Tarango vetoed the proposal, but the FBI had heard enough. Arrest warrants for all three men were promptly issued. But before Tarango could be served, he escaped to Mexico. When the police arrested Countryman at a Dennys restaurant in Farmington, the county seat, they found a handgun in his truck. In a safe at his home were 13 more firearms, $18,000 in cash, and almost eight pounds of marijuana.

In a sentencing memorandum, Countryman said that his heavy drinking had clouded his judgment and asked to be enrolled in a substance-abuse program. Countryman and Salazar pleaded guilty to conspiring to distribute drugs and were each sentenced to six years in prison. Their attorneys argued successfully in court for lighter sentences because of their post-arrest cooperation with law enforcement. And this past June, for reasons that remain murky, Danny Tarango returned from Mexico. His trial is expected to begin soon.

Christesen, who is now running for sheriff in San Juan County, still fears that Danny Tarangos web of corruption may have been far broader than the public has been told. In the wake of the Countryman and Salazar arrests, the New Mexico state polices narcotics division was quietly disbanded and reorganized. The fact that the state said so little about its actions leads Christesen and others to believe that the conspiracy may have involved other, still-unnamed, corrupt cops, border patrol agents, and public officials.

But law enforcement and the communities they serve have been irreversibly damaged merely by the information that Salazar and Countryman gave Tarango and his Mexican associates, Christesen wrote in a statement that he gave to prosecutor Swainston. In his own statement, Swainston asserted that nine separate law enforcement agencies in New Mexico and six in Colorado had been damaged by Salazars betrayal. It is hard to imagine anything more frightening for a law enforcement officer than to find out after the fact that those upon whom you just executed a . . . search warrant knew you were coming because one of your own told them so, Swainston wrote in an impassioned 47-page sentencing memorandum.

Cops hate these cases, hate to investigate and prosecute them, because it shows were not perfect, that were vulnerable to corruption like other human beings, Christesen says. A Salazar looks bad for all of us. But how many other counties like ours are there in the Southwest? How can we be sure that our law enforcement system isnt being Mexicanized? Im worried that theyll start with bribes, and end as they have in Mexico, with intimidation and murder.

Michael Hayden, director of the Central Intelligence Agency under President George W. Bush, called the prospect of a narco-state in Mexico one of the gravest threats to American national security, second only to al-Qaida and on par with a nuclear-armed Iran. But the threat to American law enforcement is still often underestimated, say Christesen and other law enforcement officials.

Last year, FBI officials tell me, the Bureau worked on nearly 2,500 public corruption cases and convicted more than 700 dishonest public servants throughout the nation. Most of them were unrelated to the cartels, and Special Agent Abbott, of the FBIs criminal branch in El Paso, says that only 15 to 30 of his regions cases so far have involved drug-related corruption among law enforcement officials. But given the damage that can be done by just one corrupt officer or inspector, he adds, this is an important vulnerability. We know it.

Judith Miller is a contributing editor of City Journal, an adjunct fellow at the Manhattan Institute.

                                       P.C.

141  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Grenade Walking on: December 09, 2011, 10:17:48 PM
Woof,

October 14, 2011 8:19 AM PrintText "Grenade-walking" part of "Gunwalker" scandal

(CBS News)  There's a new twist in the government's "gunwalking" scandal involving an even more dangerous weapon: grenades.


"Gunwalking" subpoena for AG Holder imminent

CBS News investigative correspondent Sharyl Attkisson, who has reported on this story from the beginning, said on "The Early Show" that the investigation into the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)'s so-called "Fast and Furious" operation branches out to a case involving grenades. Sources tell her a suspect was left to traffic and manufacture them for Mexican drug cartels.

Police say Jean Baptiste Kingery, a U.S. citizen, was a veritable grenade machine. He's accused of smuggling parts for as many as 2,000 grenades into Mexico for killer drug cartels -- sometimes under the direct watch of U.S. law enforcement.


For more on this investigation, visit CBS Investigates.

Law enforcement sources say Kingery could have been prosecuted in the U.S. twice for violating export control laws, but that, each time, prosecutors in Arizona refused to make a case.

Grenades are weapons-of-choice for the cartels. An attack on Aug. 25 in a Monterrey, Mexico casino killed 53 people.

Sources tell CBS News that, in January 2010, ATF had Kingery under surveillance after he bought about 50 grenade bodies and headed to Mexico. But they say prosecutors wouldn't agree to make a case. So, as ATF agents looked on, Kingery and the grenade parts crossed the border -- and simply disappeared.

Six months later, Kingery allegedly got caught leaving the U.S. for Mexico with 114 disassembled grenades in a tire. One ATF agent told investigators he literally begged prosecutors to keep Kingery in custody this time, fearing he was supplying narco-terrorists, but was again ordered to let Kingery go.

The prosecutors -- already the target of controversy for overseeing "Fast and Furious," wouldn't comment on the grenades case. U.S. Attorney Dennis Burke recently resigned and his assistant, Emory Hurley, has been transferred. Sources say Hurley is the one who let Kingery go, saying grenade parts are "novelty items" and the case "lacked jury appeal."

Attkisson added on "The Early Show" that, in August, Mexican authorities raided Kingery's stash house and factory, finding materials for 1,000 grenades. He was charged with trafficking and allegedly admitted not only to making grenades, but also to teaching cartels how to make them, as well as helping cartel members convert semi-automatic rifles to fully-automatic. As one source put it: There's no telling how much damage Kingery did in the year-and-a-half since he was first let go. The Justice Department inspector general is now investigating this, along with "Fast and Furious."

                                                  P.C.
142  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: We the Well-armed People (Gun rights stuff ) on: December 09, 2011, 07:24:13 PM
Woof,
 Upon futher reflection on the hearings I think there needs to be a new law. Since it is a felony to lie to Congress, shouldn't it be a felony for a setting member of Congress to lie to the American public? When someone tells a big fat lie such as referring to 'unregulated' gunshows during one of these hearings, shouldn't they go to jail? Gun shows are subject to and are regulated by all U.S. gun laws. If you are a gun dealer at your store or a gun show, you are required to have a Federal Firearms license and you must run a background check on any buyer through the F.B.I. system. If you are an individual making a private sale to another individual all Federal gun laws apply to that sale, regardless of whether you are in your livingroom at home or at a gun show. If you sell a firearm to someone you know is a felon, then you have broken the law. If a felon buys a firearm from an individual but lies and tells them that they can legally own a gun, then the felon is breaking the law. It's up to law enforcement to investigate and prosecute these crimes, no matter where they take place.These anti gun Congress members are deceiving the public on two counts. One is that gun shows are unregulated and the other is hiding their true agenda which is to make it illegal for a private citizen to sell a gun to another private citizen or hand down a weapon from one family member to the next generation.
 Actually there is a third reason they brought this up during the hearing, they don't want to address the real issue of a dead Border Patrol Agent murdered by a gun not sold at a gun show, but instead by one that was allowed to 'walk'. They don't want to talk about that at all.
                                                    P.C.
143  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: We the Well-armed People (Gun rights stuff ) on: December 09, 2011, 04:25:33 PM
Woof,
 And they huff and they puff. tongue Oh and did you miss the first installment of Mexico's payoff? All those new guns they are getting. evil
                        P.C.
144  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: We the Well-armed People (Gun rights stuff ) on: December 09, 2011, 05:03:35 AM
Ouch?   huh

The subject is guns; a subject near and dear to many on this site.

Guns are legal here; I, including most on this site support the right to own arms. We even "suggest" that people buy guns.
Never do we blame the manufacturer or gun store/salesperson if someone dies.  We blame the shooter.

Explosive devices?  Hmmm bombs, WMD, rockets, missiles, tanks, etc. are illegal here; the analogy is irrelevant on many levels. Guns are a legal product.

If Mexico manufactured and shipped guns to LA; then thereafter, let's assume that these guns were then purchased by bad guys at gun shops.  Would we blame Mexico?  Of course not.  Austria and Germany make some good guns; they ship thousands here every year.  We don't blame them for our homicides.  Or the store owner.

FnF was a stupid idea; probably not the last time stupid ideas are tried out.  The coverup, if there is one, is inexcusable.  But the only "blood" is on the hands of the shooter.  Not the manufacturer or distributor of the gun.


Woof JDN,
 You are using a false analogy here or rather an inaccurate comparison. True, someone that lawfully transfers a gun to someone else in a business transaction, and has no knowledge of or reason to suspect that the person will use it for wrong doing, can't be held accountable or even thought of as being responsible for the illegal acts of others. This situation is nothing like that. First, any law enforcement agency conducting a sting operation must ensure that their own officers and the public aren't put at undue risk. Secondly, they cannot commit illegal acts and break international laws in the process. Yes, they can lie and deceive but they can't aid and abet the smuggling of illegal arms into another country without the full cooperation and knowledge of the other nation. On top of that there is no evidence that these weapons where being tracked after they came into the hands of the cartels and many don't seem to have been tracked even after they left the gun store. Thirdly they knew without a doubt that these weapons were going to be put into the hands of violent cartels that had been murdering people by the thousands. Then finally, where are the arrests? At what point were they going to recover the guns and get the bad guys? You know, what was the end game, what was the point of the operation in the first place? If it wasn't to make arrests and put the people who were running guns in jail, then what the F was it for?

 There is more to this than just covering up a little mistake, because none of this was a mistake. You don't accidentally put together an operation like this. They did this intentionally and it's not fully clear what their intent was or who all was involved in it's planning and execution. The American public, Mexico and the family of Brian Terry deserve to know every little detail. Our government agencies and the people put in charge of overseeing them have got to be held accountable for any wrongdoing or negligence of leadership on their watch. We entrust them with a great deal of power (our power), and it's up to us to make sure it's not used for their own corrupt purposes or mismanaged. This was not a business transaction, nor was it even a legitimate law enforcement sting operation. This was something else, and whatever it was, negligence or abuse of power, the people that put it together and their bosses are responsible for the consequences of the operation, even the unintended ones, so yes the blood is on their hands. However, as I have said before, I think there is little chance of justice actually being served because our Federal government has never been so corrupt and the powerful on both the Left and Right are going to protect eachother. They will fuss and fume and make a great noise while posturing in front of the cameras, then soon as something else grabs the publics attention they'll superficially investigate and come to prefabricated deadends, then payoff Mexico. There might be a head to roll, someone that will take the fall, but the real culprit's will skate as usual.

                                                                           P.C.
145  DBMA Martial Arts Forum / Martial Arts Topics / Granny's go bang bang! on: December 08, 2011, 07:40:10 AM
Woof,
 Uh, bad guys, be aware that the cops might not get there in time to save your sorry ass.

http://abcnews.go.com/US/video/california-woman-shoots-intruder-911-call-15108694

http://www.cbsnews.com/2100-500202_162-5949873.html

 Oh, and a note to all those anti gun idiots out there that pretend that they are experts on self defense and who say that regular people, especially little old ladies with guns, will just be killed with their own weapon, well you're idiot's! cheesy

                                           P.C.
146  DBMA Martial Arts Forum / Martial Arts Topics / Re: Citizens defend themselves/others. on: December 08, 2011, 07:14:03 AM
Woof,
 Don't get me wrong, 911 is great and it's good to know that help is on the way. However, I would like to still be alive when they arrive.

            <iframe width="1280" height="720" src="http://www.youtube.com/embed/oTVX1b568cU?rel=0&amp;hd=1" frameborder="0" allowfullscreen></iframe>

                                                P.C.
147  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: We the Well-armed People (Gun rights stuff ) on: December 06, 2011, 12:24:53 AM
Woof,
 Holy sh#t balls! If only we didn't have such a thoroughly corrupt government; someone might be held accountable.
                                                                 P.C.
148  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: 2012 Presidential on: December 03, 2011, 08:11:54 PM
Woof,
 Santorum, is starting to look a lot better to me here lately.
                   P.C.
149  DBMA Martial Arts Forum / Martial Arts Topics / Handgun Laws of all 50 States on: December 03, 2011, 04:56:52 AM
Woof,
 Here is another very useful site for gun laws of the 50 states and conceal carry reg's that may vary from state to state. Remember that you have to comply with the other state's laws even if they have a reciprocal agreement to honor you state's conceal carry permit. Some states allow you to enter a bar or restaurant that serves alcohol if you have a permit and others will charge you with a felony for doing that. So you can see why it's important to know the other states law before you hit the road. Not only that, you should print out those laws and take them with you on your trip. There are a lot of laws out there, and a lot of cops out there that don't know what their laws are on conceal weapons, and they change fairly often. Tennessee for example just changed their law in 2010 to you can't drink and carry but now you can enter a bar with your weapon. If a cop missed that little update it might help if you could hand him the statute, it could save you a trip to jail and working things out through a lawyer. tongue

  www.handgunlaw.us

                              P.C.
150  DBMA Martial Arts Forum / Martial Arts Topics / Re: Self-Defense Law on: December 03, 2011, 01:19:04 AM
Woof,
 This site offers valuable info on legal matters related to self defense. Good to keep as a reference.

    www.armedcitizensnetwork.org

           P.C.
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