Washington Slept with Wall Street: Was it Consensual?

As the Bush Administration and Congress open up the money spigots to bail out Wall Street, we are beginning to see a tsunami of taxpayer dollars being spent to bail out the financial services industry. While we will be arguing the pros and cons of this bailout of the industry, an equally pressing question is, how did we get here in the first place?

We have heard about the greed of the mortgage bankers lending to anything with a heart beat, selling off mortgages to the complacent Fannies and Freddies. In turn, the creative derivatives brokers crafted exotic financial instruments in pretty packages for willing traders who brought the trash because it was packaged so nicely.

How did this happen and why was nobody paying attention?

There is no single answer to this question but one factor that shouldn’t be overlooked is the investments made by Wall Street in Washington. From a return on investment, money spent in Washington – direct contributions, soft money, lobbying – brought huge returns. Unfortunately what is one man’s trash is another man’s treasure. So far, a $583 million investment over an eight year period by Wall Street in all of its permutations has shown a return of $800 billion so far.

Not bad.

Let’s break it down, shall we?

According to the Center for Responsive Politics (CRP), sInce the 2000 election cycle the securities and investment sector has spent approximately $583,272,069 on political contributions. This includes $400,174,176 from individuals in the industry, $64,669,895 from political action committees, and $118,427,998 in soft money. It was distributed relatively equally between democrats and republicans, receiving 49% and 50% respectively.

According to the CRP, “[s]tockbrokers, brokerage houses and bond dealers give the bulk of campaign dollars in this politically influential industry, which also includes commodities dealers and exchanges, investment banking houses, stock exchanges and venture capital firms. Between 1996 and 2004, the majority of donations from the securities and investment industry to federal candidates and parties went to the GOP, but the industry changed its tune in 2006, giving 53 percent of donations to Democratic candidates and parties. The shift may reflect the industry’s efforts to maintain political clout with the new Democratic Congress.”

In addition to the largess directly lavished on Congress, lobbying added a whole other layer of massive spending to influence the political process in Washington. In 2007 alone, the tab for lobbying by the financial services, insurance and real estate industries topped $415,259,323. Multiply that by an additional seven years and the spending by the industry makes Halliburton’s foray into Iraq look like a Girl Scout cookie sale.

Was Washington an innocent victim?

You be the judge.

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