In the often-confusing debate on financial regulatory reform, there are many assertions and accusations but few facts. Yet here are two: Washington is awash in Wall Street money, and both Republicans and Democrats are recipients.
Democrats have an edge when it comes to raising funds in lower Manhattan, and particularly from Goldman Sachs, the investment bank being sued by the Securities and Exchange Commission.
The financial sector has given $11.1 million to the Democratic National Committee and its two congressional campaign committees so far this election cycle, compared to $7.3 million for Republicans, according to OpenSecrets.org. Goldman has given about 70 percent of its donations to Democrats this cycle and gave 75 percent of its $6 million in donations to Democrats in the 2008 election.
Republicans get their share, too, especially in the Senate where financial reform will be decided. Out of the $7.3 million given to the Republican campaign arms, the National Republican Senatorial Committee got $4.3 million.
The result is that both parties have flung accusations back and forth, some of them having merit and some of them not, even as they both have factions that are genuinely trying to pass a reform bill. But if Wall Street’s largesse to both of them is any indication, neither side will want to be too tough with the final regulatory reform proposal.
Republicans have labeled the bill written by Sen. Chris Dodd, chairman of the Senate Banking Committee from Connecticut, as a permanent bailout for big banks. And Rep. Brad Sherman, a Democrat on the House Financial Services Committee agreed with them Monday, saying that “the Dodd bill has unlimited executive bailout authority.”
Democrats have pointed to Wall Street lobbying against the Dodd bill as evidence that Republicans are trying to protect the wealthy and block reform. But Republicans and Wall Street, at least publicly, are opposed to different things.
Wall Street firms are up in arms over proposals to regulate the complicated but lucrative derivatives market, and they also dislike the “Volcker rule,” which would bar banks from proprietary trading to limit speculative practices.
Those are completely separate issues from the problems that the GOP is raising over a $50 billion fund to unwind failed firms and powers that would be awarded to the Treasury Department to give loan guarantees to institutions that are deemed to be “systemically significant.”
One Wall Street source said financial institutions are not focused on the bailout and “too big to fail” objections coming from the GOP.
“I don’t think anybody’s particularly worried about those [provisions],” the source, who is close to Goldman Sachs, told The Daily Caller.
This difference between GOP and Wall Street objections suggests that Democrats are politicizing the debate by conflating Republican opposition to one potential problem with Wall Street resistance to different parts of the reform proposal.
But Democrats told The Daily Caller Monday that the GOP is using the bailouts argument as a cover to hide their objections to derivatives regulation.
“There is a feeling that the Senate Republicans have one line of criticism they make in public, but that is only meant to create political space so they can insist on changes to other parts of the bill that are harder to turn into public causes,” said one senior Senate Democratic leadership aide.
Aides to the top Democratic leaders in the House and Senate confirmed this point of view, and the White House also lent some support to it. The president continued to talk Monday about Senate Minority Leader Mitch McConnell’s recent meeting with Wall Street executives in New York.
“I don’t know exactly what was discussed. All I can tell you is when [McConnell] came back, he promptly announced he would oppose financial regulatory reform,” Obama said at a fundraiser in Los Angeles Monday evening.
Obama will go to New York Thursday to press his case in a speech at Cooper Union, a college in lower Manhattan.
Republicans pointed late Monday at Wall Street’s generosity toward Democrats, and Obama in particular, as evidence that the party in power is the one helping the financial industry unfairly.
“Given how much money Wall Street has given to Democrats, especially President Obama, this Democrats’ argument doesn’t make sense,” said Michael Steel, spokesman for House Minority Leader John Boehner, Ohio Republican.
OpenSecrets.org reported late last year that 53 percent of the $661 million donated to political candidate committees in the current cycle has gone to Democrats. In the last election cycle, Goldman in particular gave almost $1 million to Obama as he ran for president.
“It’s Obama, congressional Dems that are in the pockets of big banks,” wrote the Republican National Committee’s Katie Wright in an e-mail to reporters.
In this charged atmosphere, Goldman and some Republicans questioned whether the SEC decision to pursue a civil suit against Goldman was politically timed to make a maximum public impact.
“The SEC has an interest in regulatory reform and they exist in this town, and have been part of the regulatory reform debate. They then went out after the biggest target,” said Tony Fratto, a former White House and Treasury Department expert on financial policy from the Bush administration.
The White House denied any involvement in the SEC decision to sue Goldman for purportedly deceiving one set of investors in a complicated financial instrument.
“The SEC is, by law, an independent agency. What it does it does not coordinate with the White House and we received no advance notice of any enforcement action,” said White House press secretary Robert Gibbs, though he also said that the case was a “prescient reminder of what’s at stake” in the administration’s attempt to pass reform.
Fratto said the SEC’s case against Goldman is “weak.”
“I think it’s becoming clear to most people who understand the business and the law that SEC is very unlikely to prevail in court,” he said.
Nonetheless, Goldman told Politico late Monday that it had hired Greg Craig, who served as White House chief of counsel to Obama for his first year in office, to represent it in the case against the SEC.
The financial services official close to Goldman told The Daily Caller Monday that most at the firm believe the SEC action was coordinated with the White House and Democrats.
“There was clearly a lot of thought put into the timing of it. That’s the general feeling,” the official said.
SEC officials did not respond to requests for comment.