WASHINGTON -- The financial services industry, which has spent billions on lobbying and campaign contributions over the last decade, is scrambling to make its case for a proposed $700 billion bailout plan amid deep public skepticism.
Wall Street firms, commercial banks and insurers are lobbying on an array of issues — from beating back proposals to make it easier to reduce mortgage debts in bankruptcy courts to fighting, unsuccessfully so far, to retain control over executive pay.
"You have a feeding frenzy going on," said Ellen Miller, executive director of the Sunlight Foundation, a non-partisan watchdog group.
Camden Fine, head of the Independent Community Bankers of America, said he worked through the weekend to successfully extend the bailout plan to commercial banks. He hasn't stopped working the phones since. "If cellphones cause cancer, I'm in trouble," he said.
The financial services industry has left its mark in other ways.
An early draft of the proposal had restricted the bailout to firms headquartered in the United States. Scott Talbott, the top lobbyist for the Financial Services Roundtable, said his group was among those that helped to expand that definition to firms with "a significant presence" here. The trade group's members include London-based Barclays.
The association was working to defeat a proposal to allow bankruptcy judges to reduce mortgage debts. Talbott said that would increase banks' risks and drive up mortgage costs. "It could price some people out of the (housing) market," he said.
Consumer groups say the bankruptcy measure would help reduce the number of foreclosures and ease the financial crisis. "Why is anyone listening to the people who brought us this problem?" asked Kathleen Day, a spokeswoman for the Center for Responsible Lending, which supports the bankruptcy change.
Government watchdogs and consumer groups say the political muscle of the industry helped it persuade Congress to change banking and bankruptcy laws in ways that contributed to the crisis.
Political action committees and individual employees of the financial services industry — which includes finance, insurance and real estate companies — have contributed $2 billion to federal campaigns since 1989, according to the non-partisan Center for Responsive Politics (CRP).
The industry, for example, has contributed nearly a third of all the campaign money that has flowed to the chairmen of the House and Senate committees overseeing the bailout, according to the Sunlight Foundation, which analyzed CRP's campaign finance data.
"What is most troubling about this historic episode is that the problems were identified years ago," Common Cause, a watchdog group, said in a report on the influence of the industry's campaign contributions and lobbying. "Yet, thanks in part to the political power of the financial institutions … the government refused to step in."
The report cited a 2005 amendment defeated in the Senate, 40-58, that would have curbed predatory lending. No Republicans supported it, Senate records show, and four Democrats voted against it, including Joe Biden, the Democratic vice presidential nominee. His running mate, Barack Obama, voted for it. Republican nominee John McCain voted against it.
In an interview, Sen. Dick Durbin, D-Ill., who sponsored the amendment, noted that opponents warned that the measure would have driven Fannie Mae and Freddie Mac out of the business of subprime lending, which "could have averted this crisis."
Durbin said the bill didn't pass because "there was a lot of money being made — and the people who were making money in this subprime mortgage mess, many of them were major contributors. That, unfortunately, is a major factor in the decision-making process in Washington."
But the financial meltdown has dented the industry's credibility in Congress, says John O'Neill, a lobbyist for the law firm Venable and former staffer for the Senate Finance Committee. That may explain its failure Wednesday to stop Congress from imposing limits on the salaries of executives whose firms seek assistance from the government.
"They're going to be viewed, parts of the financial industry, as a little bit radioactive by some folks up there," O'Neill says.
The Price of Power is an ongoing series tracking the role of money in politics
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