The Bailout: Business Lobbyists Bear Down
As the Treasury Dept.'s on-again, off-again $700 billion rescue package headed for passage in the Senate (BusinessWeek.com, 10/1/08) on Wednesday night, corporate lobbyists were taking no chances. Over the past several days, as the bill appeared to falter amid intense public opposition, they have launched a massive, coordinated lobbying effort to help keep it on track. Trade associations, corporate executives, and small business groups all targeted naysaying members of Congress directly. And, to put pressure on the politicians, in more recent days they went all-out to convince John and Jane Q. Public back home that the rescue plan is a good idea for the economy as a whole, not just Wall Street.
Now, with the bill headed back to the House for a much tougher test, corporations and business groups will see if their full-court press paid off.
"Hundreds of thousands, if not millions, of jobs would be in jeopardy" and investors will continue to see values decline if the bill is not passed, warns John Castellani, the president of the Business Roundtable, a group representing large-company CEOs. While many first dismissed the package as simply benefitting the banks, he added in a conference call with reporters on Wednesday morning, the impact of the credit squeeze is now spreading. More businesses and individuals are seeing "that they can't get a car loan or a loan to finance their payroll or their student loans."
Leading the Charge: Financial Services
The financial-services industry, which stands to benefit hugely from the bill, led the charge. In the first few days after Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke proposed the plan, most of the industry's efforts were focused on ensuring the package was shaped in ways that helped its interests.
Lobbyists from such groups as the Financial Services Roundtable and the American Bankers Assn. worked nearly nonstop buttonholing Congressional staffers, talking with Treasury officials, and tracking each new iteration of the bill. They successfully fended off a measure, which consumer groups fought equally hard to get, that would have allowed judges in bankruptcy court to reduce a homeowner's mortgage obligation. They also won support for moves to loosen the application of "mark-to-market" accounting rules that many financial institutions say were forcing them to write down illiquid mortgage-backed securities to unreasonably low values.
But in some sense the industry may have been too successful for its own good. The bill quickly became perceived as little more than a bailout (BusinessWeek, 9/24/08) for Wall Street. That sparked a public fury and helped lead to its stunning defeat on Monday. The House rejection caught many business lobbyists off guard and has since sent its business supporters, collectively, into overdrive to try to assure the bill's passage. "We're using the entire arsenal," says Scott Talbott, senior vice-president for the Financial Services Roundtable. "This is the time to pull all out the stops."
Indeed, in the wake of that drubbing, the financial-services players have leaned more heavily on allies across the business spectrum for support, as well as some consumer groups.
Small Business Lobby Mobilized
The U.S. Chamber of Commerce has begun airing radio ads in Washington and is planning more in the next couple of days. It also lined up 56 groups to sign an open letter to Congress on Tuesday, from the Air Conditioning Contractors of America to the Software & Information Industry Assn.
The Business Roundtable organized a conference call with 90 CEOs on Tuesday to coordinate the appeals their members are making to Congress, as well as to their employees, customers, and others they can tap.
And a host of organizations, from the National Association of Manufacturers to the National Federation of Independent Businesses (NFIB), the small-business lobby, have jumped into the action.
The clear message in all those efforts: The package is needed to stanch the bleeding (BusinessWeek.com, 9/28/09) throughout the American economy, not just in the financial sector. With credit conditions tightening all over, warns Todd Stottlemyer, the president and CEO of the NFIB, "We must ensure that Wall Street's problems don't become Main Street's problem."
Conference Call with Paulson
Stottlemyer, talking to reporters on Wednesday morning, added that the national leadership of the NFIB would be speaking on a conference call with Paulson later that afternoon. And to make sure Congress hears its message loud and clear, the NFIB has sent e-mails and held telephone briefings with its small business owners, encouraging them to contact their local members of Congress directly. It also placed a full-page ad backing the bill in USA Today.
As a result, the small business lobby has seen its members shift from largely opposing the legislation to generally supporting it, adds Dan Danner, the NFIB's executive vice-president for public policy. "It doesn't change the fact that they're mad and they're frustrated and they'd probably like to see a public hanging. They want somebody to be accountable," Danner said. "But they're coming to the realization that this does affect me: I need credit, my customers need credit, my suppliers need credit."
Those members, meantime, have become a potent lobby. That's where people like Rich Gallo fit in. A city councilman and owner of Office Outlet, an office-supply store in Indiana, Pa.—actor Jimmy Stewart's hometown—Gallo is seeking a $400,000 loan from a midsize bank to expand the strip mall housing his business. He is concerned he might not get the credit he needs. He's active in the NFIB, and he dialed in to some of its conference calls this week, including the one with Paulson.
Spreading the Word in Pennsylvania
Those calls, he says, along with what he has been hearing on the news, have convinced Gallo that the bill is necessary and "more serious than bailing out the CEOs and the big businesses."
Gallo called his own lawmakers but he is also spreading the word, talking to fellow Republicans, customers, and acquaintances. "I've been talking to a lot of people throughout the day here," he said. He started his day on Wednesday at a 7 a.m. prayer breakfast with membership ranging from businessmen and retirees to college professors and doctors. "Of course, we always get talking politics," he said. "I explained how it trickles down to impacting local economies," Gallo added. "As much as we don't want to see government intervention, there are times where it's the country at stake."
Much the same is happening at the other end of the business spectrum. The Business Roundtable's Castellani says the group has "activated" its members as well.
CEOs Charge Up Workers, Suppliers
"We've had CEOs calling members of Congress from where they're headquartered, as well as where their plants and factories are located," he says. But the efforts hardly stop there: The Roundtable is also trying to spur a "grassroots" communications effort by getting its members to reach out to customers, suppliers, and employees to encourage them, too, to contact their representatives. "It's a very active effort," Castellani added. "We'll do as many [things] as it will take to get this passed."
That message seems to be getting through. A lobbyist for one of Detroit's Big Three automakers said that following Monday's defeat, the company began calling lawmakers from the states where it has plants, as well as those who voted against the bill.
The Detroit Regional Chamber of Commerce has sent an e-mail to local business people urging them to call their representatives in both the House and the Senate to encourage them to back the proposal. Detroit's overall message is that until the financial sector stabilizes, other sectors of the economy will not turn around. "We're talking to everyone," says the lobbyist. "We've been very vocal."
But it's not just the business sector. Coordination is also under way with allies in the consumer sector such as the AARP, which lobbies for retirees and older Americans. It has fielded thousands of phone calls and armed its staff at functions across the country with talking points explaining how the bill would benefit ordinary Americans. Over the weekend, AARP sent an e-mail message to members that it says generated 110,000 e-mails to congressional offices over the past four days. Another message went out to its 6 million members on Wednesday.
Stock Rout Drives Shift
David Sloane, senior vice-president for government relations and advocacy, says AARP initially didn't get involved when business groups approached it about helping. But that changed as economic signals worsened last week and particularly after the stock market plunged on Monday.
The group says it isn't backing any particular element of the bill but believes quick action is needed. Yet it wondered "how is Congress going to pass something when all the constituent communication it's getting is saying 'Don't pass this,' " Sloane said. "We wanted to try to influence public opinion, or at least our member opinion, and encourage Congress to move along."
Will those efforts be enough? They have definitely had an impact. Congressional aides say that following Monday's huge stock market loss (BusinessWeek.com, 9/29/07), they began to receive many more phone calls backing the bill. Prior to that, the calls had been almost uniformly negative. The coordinated lobbying efforts undoubtedly helped change a few minds, along with the fears caused by the market rout. Or, as Tom Gallagher, a Washington policy analyst for institutional broker ISI Group puts it, "It looks as though the most effective lobbyist for the bailout bill was Dow Jones."
Passage No Sure Bet
Still, passage is not guaranteed. While most observers expected the bill to make it through the Senate Wednesday night, the House remains close. The additional tax breaks that were added to the bill in order to draw in more Republican backers could anger some fiscally conservative Democrats who backed the package the first time around.
And as the measure has accumulated more sweeteners for conservative lawmakers, discontent among consumer and homeowner advocates has grown. "There's no question that corporate and financial interests have laid across the tracks to prevent any hopes of bankruptcy reform being part of the solution," says John Taylor, president of the National Community Reinvestment Coalition, a housing rights advocacy group. "Now they're pushing for as much relief for Wall Street as possible, with as few strings attached as they can get." His group and others continue to press Democrats in the House to boost unemployment insurance, or do more for struggling homeowners, or support a boost in unemployment insurance before signing off on the final bill.
For now, no one truly knows where the balance stands. Jaret Seiberg, a financial-services policy analyst for the Stanford Group investment firm, believes the chances of passage have gone up. But, he says, "there is much political chicanery to come and there remains a risk of another derailment," Count on at least a couple more days of heavy lobbying ahead.