April 30 (Bloomberg) -- Tea Party favorites such as Stephen Fincher of Tennessee were swept into Congress on a wave of anger over government-funded bailouts of banks.
Now those incumbents are collecting thousands of dollars for re-election campaigns from the same Wall Street firms whose excesses they criticized. They have taken no significant steps to curb them or prevent future taxpayer-financed rescues.
Republican freshmen have made clear their disdain for expanding government, and openly opposed a financial regulatory overhaul enacted by Democrats in 2010 before the newcomers arrived in Washington. Their ranks include 10 Tea Party-backed freshmen on the House Financial Services Committee, part of a force that won election in a populist backlash to government spending that included emergency lending to major banks and bailout of firms including U.S. automakers.
Still, the lawmakers haven’t passed, considered or even introduced legislation to address concerns about “too-big-to-fail” banks voiced by members of both parties and such Federal Reserve bank presidents as Richard Fisher of Dallas and Jeffrey Lacker of Richmond, Virginia.
“I haven’t seen any of them putting forth legislation on breaking up the big banks or on other things that would genuinely prevent a bailout next time,” said Marcus Stanley, policy director of Americans for Financial Reform, a Washington-based umbrella group of organizations that supported the 2010 Dodd-Frank Act and other financial regulations.
Since arriving in Congress in January 2011, Tea Party-backed lawmakers have demonstrated their determination and muscle by forcing several rounds of government spending cuts through standoffs over raising the national debt ceiling with House Speaker John Boehner of Ohio and other Republican leaders, putting the government on the brink of a shutdown.
Yet the anti-bailout fervor that drove the messaging of Republican candidates during the campaign cycle of 2009 and 2010 has dissipated, and those same lawmakers are now collecting money from the firms bailed out by President George W. Bush’s $700 billion Troubled Asset Relief Program.
Five banks -- JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. - - held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to central bankers at the Federal Reserve. Combined those institutions took $150 billion in bailout money in 2008 and repaid it by the end of the next year.
The political action committees of those institutions have distributed $169,499 through March 31 to the campaign coffers of the 10 freshman Tea Party-backed lawmakers on the House Financial Services Committee, according to an analysis of campaign finance disclosure records.
Fincher, who is among them, promised as a candidate to “Help Main Street” and ensure there would be “no more Wall Street bailouts” in an advertisement that ran 98 times in the Nashville market in the run-up to his victory in a district previously held by a Democrat since 1988, according to New York-based Kantar Media’s CMAG, which tracks advertising.
“There was a lot of visceral reaction” to federal intervention to save Wall Street, said Mark Skoda, founder of the Memphis Tea Party and a Fincher constituent and supporter. “Stephen was very much using the language that Wall Street was problematic here and we were not going to do any more bailouts.”
Fincher, through spokeswoman Jennifer Cook, declined an interview request. Several others receiving donations from the banking firms also have declined to comment.
Some Votes Cast
Fincher did vote this month to repeal the mechanism included in Dodd-Frank to resolve the largest financial institutions -- a process House Republicans oppose and say put into law the federal government’s ability to bail out firms.
Dodd-Frank allows the Federal Deposit Insurance Corp. to use taxpayer dollars to maintain stability in the financial system as it dismantles a “too big to fail” firm. While the FDIC would then be required by law to impose assessments on the largest banks to recoup that money, Republicans argue that the authority allows the agency to make payouts with taxpayer dollars to creditors of a firm -- something that would feed risk-taking at Wall Street firms.
“Republicans on the committee, including the freshmen, stood strong against partisan attacks and voted to repeal this bailout authority,” Jeff Emerson, a spokesman for the Financial Services Committee, said in a statement. The vote sends “the message to ‘too big to fail’ firms and their creditors that they -- and not the taxpayers -- will bear the consequences of shoddy lending and undisciplined risk-taking.”
Democrats, all of whom voted against the measure in committee, said that the repeal would put the financial system in the same place it was four years ago -- and that Republicans have yet to produce an alternative proposal in the current Congress.
“What they want to do is go back to exactly where we were in 2008,” Representative Barney Frank of Massachusetts, the top Democrat on the committee, said in an interview. Frank isn’t seeking re-election. “They’ve presented no alternatives.”
Lawmakers collecting contributions from industries they oversee is a common practice in Congress, and both parties take advantage of it, according to Anthony Corrado, a political scientist at Colby College in Waterville, Maine.
“One of the reasons why financial services has become a particularly important committee in recent Congresses is that the parties know they can put individuals on that committee and they will be successful raising money,” Corrado said. “It shows how the money culture on Capitol Hill can affect even those who come to Washington hoping to fight against it.”
Fincher, a gospel musician from Frog Jump, Tennessee, has received $11,500 from the political action committees run by Bank of America, Goldman Sachs, JPMorgan Chase and Wells Fargo. Citigroup’s political action committee had not contributed to the lawmaker through the end of March.
Two other members of the committee not listed as members of the Tea Party Caucus, yet who won election to the House with Tea Party support, are Representatives Steve Stivers of Ohio and David Schweikert of Arizona. Both ran ads attacking bailouts.
One Stivers ad criticized former Representative Mary Jo Kilroy, a Democrat, for supporting “taxpayer-funded bonuses given to failed Wall Street executives.” A Schweikert ad ties the bailouts to the national debt, saying former Democratic Representative Harry Mitchell spent billions “to bail out Wall Street banks, leaving America deeply in debt.”
Stivers, a former banking lobbyist who was endorsed by the Tea Party-affiliated group FreedomWorks, has received $28,000 from the political action committees of the five largest banks; Schweikert has collected $11,500.
Courtney Whetstone, a spokeswoman for Stivers, declined to comment, as did Rachel Semmel, a spokeswoman for Schweikert.
To be sure, it’s not as if the freshmen haven’t been active on the panel.
The House newcomers took the lead on measures aimed at reducing the reach of government in financial markets, either through easing or repealing pieces of the Dodd-Frank Act or reducing the power of new government agencies.
Fincher is the lead sponsor of a law signed this month by President Barack Obama that cuts back Securities and Exchange Commission regulations for newly public companies, a measure Schweikert played a lead role in drafting. Stivers sponsored a bill to ease Dodd-Frank’s swaps rules, which passed the House with bipartisan support, and New York Representatives Michael Grimm and Nan Hayworth have sponsored their own measures to reduce the reach of the derivatives regulations, each garnering bipartisan support, as well.
Hayworth and Grimm, who had the support of Tea Party groups in 2010, collected $27,500 and $15,000, respectively, from the five financial firms through the end of March, according to disclosure records. Grimm, who faces an investigation over improper campaign contributions from followers of a New York City rabbi, moved to distance himself from the Tea Party shortly after he came to Washington in 2011.
Edward Yap, a spokesman for Hayworth, didn’t return requests seeking comment. Grimm spokesman Carol Danko also didn’t respond to interview requests.
Representative Sean Duffy of Wisconsin, who has received $19,500 from the firms, sponsored a House-passed bill to overhaul the structure of the Consumer Financial Protection Bureau, one of the cornerstones of Obama’s regulatory overhaul. Republicans opposed its creation and have pushed the change the bureau, which they say has too much power.
John Gentzel, Duffy’s spokesman, declined to comment.
Still, proposals to prevent or help manage a systemic financial crisis like that which occurred in 2008 are non-existent. Republicans on the committee voted this month to repeal the resolution process put into place in Dodd-Frank -- a process House Republicans always opposed -- yet haven’t produced an alternative proposal in the current Congress.
Lawmakers have tried to address the size of U.S. banks in recent years with little success. Senator Sherrod Brown, an Ohio Democrat, proposed an amendment to Dodd-Frank that would have capped the size of financial institutions. That amendment failed in the Senate, even with the support of Senator Richard Shelby of Alabama, the top Republican on the Banking Committee.
Representative Brad Sherman, a California Democrat, last week introduced legislation that would require the Treasury secretary and Congress to work in concert to break up financial firms that would threaten the health of the system in the event of their failure. The measure, which also was introduced during the last Congress with no success, has only one co-sponsor in the 435-member House.
While the freshmen on the committee represent an array of constituencies, they have a common need if they want to hold their places in Congress: money.
With that in mind, the group established a fundraising committee, called “Team 2012,” in March 2011. While the committee has since disbanded, it provided a single destination for political action committees representing banks, law firms and lobbyists to donate money to be split among the lawmakers.
The committee included two lawmakers re-elected after spending time away from Congress, and another freshman, Representative Robert Hurt, who did not have major Tea Party backing in his 2010 race in Virginia. Bank of America was among the groups that took advantage of the arrangement, sending the lawmakers $4,000 in April 2011.
Of the 12 Financial Services committee members sharing cash from the committee, which raised $62,900 in its 10 months of existence, nine were Tea Party-backed freshmen. Fincher, who didn’t join the House panel until May 2011, wasn’t involved with the fundraising committee, according to filings.
“Candidates who run the first time on an aggressive platform trying to protect voters against special interests then have to change their tune to pay the piper and listen to those who fund their campaigns,” said David Donnelly, executive director of the Washington-based Public Campaign Action Fund, a nonpartisan group that advocates for tighter campaign finance rules.