Some lawmakers have ties to bailout recipients

WASHINGTON -- As Congress began considering a financial industry rescue plan last fall, Rep. Jean Schmidt called the House ethics committee staff with a question: Did she have to sit out any votes on the package because her husband is a Smith Barney financial adviser?

The answer was no, said Schmidt spokesman Bruce Pfaff. "They advised her that because the legislation didn't address a particular business, that decisions were left up to the Treasury secretary, it would be permissible to vote on that bill," he said.

Citigroup, Smith Barney's parent company, eventually received $50 billion from the package that Schmidt, R-Ohio, voted to approve. Schmidt voted in January to oppose release of the program's second $350 billion.

"At no point was there ever a discussion of, 'How does that benefit us?' " between Schmidt and her husband, Pfaff said.

Schmidt is one of two dozen members of Congress with substantial financial ties to the banks and other companies getting a piece of the $700 billion financial rescue package, according to a USA TODAY analysis of disclosure reports covering 2007, the most recent available. Schmidt and three other House members have spouses who work for recipients of the money, and seven senators and 13 representatives had investments worth more than $100,000 in at least one of thecompanies that received funds, their reports show.

Those members voted two-to-one in favor of creating the program, with 16 supporting it and eight opposing. That's a slightly higher rate than Congress as a whole: 337 members voted for it and 196 against.

House and Senate ethics rules say lawmakers should abstain from voting only on legislation that specifically affects their personal financial interests. Both houses have ruled that owning stock in a publicly traded corporation does not disqualify a lawmaker from voting on bills affecting that company.

It is not known how many members held investments at the time of October's vote. Because lawmakers only report their financial holdings once a year in May, voters don't have up-to-date information about potential conflicts of interest, said Ryan Alexander, president of the non-partisan watchdog group Taxpayers for Common Sense.

"This is something people ought to know at the time of the vote," said Alexander, whose group has criticized the rescue program.

Freshman Rep. Jim Himes, D-Conn., said he sought to avoid any potential conflicts shortly after joining Congress. A former investment banker at rescue recipient Goldman Sachs, Himes said he began selling his investments in financial firms after learning in January that he would be a member of the House Financial Services Committee. His disclosure for 2007 showed between $410,000 and $950,000 in Goldman Sachs stock options, partnerships and employee benefit funds. "To my way of thinking, I shouldn't have a private stake in those companies," said Himes. "The public deserves to have confidence that the people who are making these decisions don't have conflicts of interest."

Other lawmakers with financial ties to rescue fund recipients, according to their disclosures:

• Sen. Daniel Inouye, D-Hawaii, co-founded Central Pacific Financial Corp., which received $135 million, and he owned up to $500,000 in the bank's stock in 2007. "To suggest that my support of this legislation was in any way related to Central Pacific is simply untrue," Inouye said in an e-mailed statement.

• Democratic Rep. John Dingell's wife is an executive with rescue recipient General Motors, and the couple reported owning up to $1.4 million in GM stock during 2007. Dingell spokesman Adam Benson said in an e-mail that the Michigan congressman did not know money from the program would go to GM when he voted for it. Dingell, however, sent a letter three weeks later to the Treasury Department urging it to use rescue money to help automakers to "protect this critical sector of the economy."

• Rep. Shelley Moore Capito, R-W.Va., like Schmidt, is married to a Citigroup executive. Her 2007 financial report says her husband, Charles, owned between $1 million and $5 million and she owned between $100,000 and $250,000 worth of Citigroup stock. Capito voted against the rescue package and to block release of its second half.

Capito said she has "listened as much as a wife is going to listen to her husband" during their discussions about the financial crisis. "Policy-wise, the buck stops with me," Capito said.