Corporate Power Decried By Former Lawmaker
WASHINGTON -- Lawmakers rarely speak candidly about the relationship between large corporations and government, avoiding the ugly realities surrounding campaign contributions and legalized corruption. But occasionally when lawmakers leave office, they're more frank about the intersection of business and politics. In an interview with The Huffington Post, former Rep. Paul Kanjorski (D-Pa.) issued a stark warning about the government's inability to rein in the growing power of multinational corporations.
"Because [corporations] have become so international and global in nature, it's highly questionable whether governments can actually control corporations to a sufficient degree to prevent them from controlling governments," said Kanjorski, who served for 26 years in the House of Representatives until he was ousted last year amid a swarm of Republican congressional victories.
Two of the most worrying examples of the increasing ungovernability of corporations, Kanjorksi argued, are the current push to bestow tax breaks on American firms for stashing capital overseas and the failure to implement a new rule breaking up too-big-to-fail banks.
A coalition of tech firms, drug companies, energy conglomerates and lobbying front-groups have been pushing for a tax holiday on corporate cash that companies hide overseas. American companies hold money in nations that have very low tax rates, such as Panama, in order to avoid paying into the government's coffers.
Current laws allow that money to remain untaxed until companies bring it back to the U.S, and naturally, some of the firms who are most active in this kind of tax avoidance are now lobbying to be allowed to bring the money back at a rate as low as 5 percent.
"I'm not saying we shouldn't adjust our tax code otherwise -- there are thing we need to do there -- but to give them a free ride, what are you encouraging? The next guy who doesn't like the law will just do the same thing," Kanjorski said of the proposed tax holiday. "The reality is, why should we be bargaining with super-national corporations who are actually acting against our interest in avoidance of what our law is? We are impotent to get them to respond."
Kanjorski was speaking from experience. The district he represented has long been neglected by corporate America. Home to the small cities of Scranton and Wilkes-Barre, the 11th District of Pennsylvania was a significant manufacturing hub for much of the 20th century, but firms shipped most of those jobs elsewhere decades ago, leaving the region struggling economically well before the financial crash of 2008 devastated the national labor market.
The recent turmoil in stock markets suggests the fiscal fallout from 2008 is not over. The European Union continues to be shaken by financial difficulties, with major banks in several countries still holding onto a variety of problematic debts, including loans to nations like Greece that appear unlikely to be able to repay in full. The E.U.'s failure to quell concerns of further financial troubles has unsettled investors in U.S. financial giants, with Bank of America hit particularly hard, falling 45 percent in the past three months, including a 7.9 percent plunge on Monday.
As Congress cobbled together its reform bill in response to the crisis, Kanjorski wrote an amendment that gave regulators the authority to break up big banks if they were deemed a risk to the financial system. A stronger amendment that would have required the six largest banks to be dismantled failed in the Senate.
But Kanjorski said he's concerned that his plan only made it through Congress because top regulatory officials and top financiers had reached an understanding that it would never actually be used.
"There may have been a tacit agreement between the regulatory people and the financial institutions that they were not going to implement this provision -- they were just going to let it float," Kanjorski said. "I think that would be unfortunate."
Kanjorksi refused to specify which regulators he believed may be unenthusiastic about the proposal, but said many of the "outgoing" regulators, particularly FDIC Chairman Sheila Bair, have done a "terrific" job. Treasury Secretary Timothy Geithner recently announced that he will be continuing in his post for some time and has frequently been criticized for too closely associating with big banks. The Treasury Department declined to comment for this story.
"Hey, these are very powerful people controlling huge amounts of money and influence," Kanjorksi said, referring to big bank executives. "What we need is a very strong prudential regulator. We need a philosopher king, and I nominate Paul Volcker. Somebody like Paul Volcker could take this thing and run with it."
Kanjorski is now running Kanjorski & Associates, which dubs itself a public policy consulting firm, allowing it to conduct quasi-lobbying activities without formally registering as lobbyists. But Kanjorski said his consulting business does not work with Wall Street firms -- he's focused instead, he says, on businesses in Pennsylvania.
While many big U.S. banks are generally on stronger footing than many of their European brethren, financial giants here also continue to face lingering concerns surrounding predatory and exotic mortgages from the peak years of the housing bubble, along with legal risks from more recent improper foreclosure proceedings. But U.S. banks' exposure to European banks has also become a significant concern for investors, which Kanjorski said his amendment was designed to combat.
"Our banks are so intertwined now between Europe and the U.S. that if you take the situation with the bonds, they could either bring down our banks, or force the U.S. to bail out the European banks," Kanjorksi said.
Bank of America spokesman Jerry Dubrowski said that his company has "more than enough" capital to run its business, noting that its official capital ratios are more than double regulatory minimums. Those ratios, however, are calculated based on asset valuations that investors currently view as overly optimistic. The bank's $65 billion stock market value is far below the $222 billion value that the company lists in its most recent SEC filing.
Kanjorski said his proposal did not imply that the U.S. government needs to micromanage corporate affairs. There's a difference, he said, between limiting corporate power in order to preserve a viable economic architecture and dictating how every aspect of a business ought to operate.
"I'm not saying we should get involved in capital in all things, but where it's abusive, you damn well should."