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Wall Street Cash Rules Everything Around The House Financial Services Committee, Apparently

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UNITED STATES -July 17: Federal Reserve Chairman Ben Bernanke at what is most likely his last Capitol Hill appearance during the House Financial Services Committee hearing on the monetary policy and the state of the economy on July 17, 2013. (Photo By Douglas Graham/CQ Roll Call) | Getty
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Back in early June, former North Carolina Democratic Rep. Brad Miller took to our pages to lament the way the House Financial Services Committee had rubber-stamped a whole passel of bills that were drawn up by Wall Street lobbyists, bills that created "gaping loopholes in the Dodd-Frank Act's regulation of derivatives, including credit default swaps that figured so prominently in the financial crisis."

On that occasion, Miller was especially disillusioned by the behavior of his own party's members of the committee. Despite the fact that the Democratic base strongly supports financial reform, "the great majority of junior Democrats, including all seven freshmen" -- the group who arrived in Washington while the memory of Wall Street's economy-cratering cock-up still loomed large -- fell in with Wall Street's K Street masters, and helped to weaken reform.

At the time, Miller offered this diagnosis:

Washington Republicans live in fear of the Republican base. Washington Democrats, on the other hand, use the Democratic base as a foil. Washington Democrats -- not grassroots Democrats -- pick Democratic congressional candidates in swing districts. Washington Democrats recruit candidates who "don't have particularly strong views" on important issues so they will not strike swing voters as unduly partisan.

Democrats from swing districts get priority in committee assignments, and the Financial Services Committee is a plum assignment. The committee is known in Congress as a "money committee." Members of the committee have a much easier time raising money from the financial interests affected by the committee's decisions.

Democratic members still have to call and ask for money. And call. And call. And call.

And the amount of time those members spend on the phones, begging, is far from insignificant. Back in January, The Huffington Post obtained a PowerPoint presentation that was shown to incoming freshmen by the Democratic Congressional Campaign Committee. That PowerPoint revealed that the "daily schedule prescribed by the Democratic leadership contemplates a nine or 10-hour day while in Washington" which includes four hours of "call time" (read: hustling for ca$h) and "another hour is blocked off for 'strategic outreach'" (read: more hustling).

Well, according to Politico's MJ Lee, those calls that went out did not go unreturned -- and the replies came with enough lucre to lube up the dealmaking process.

The big winners were apparently Arkansas Republican Rep. Tom Cotton and Florida Democratic Rep. Patrick Murphy, who used their perches on the the House Financial Services Committee to take home "$611,341 and $530,963, respectively." But the freshmen did really well across the board -- Lee's dive into the committee members' FEC filings found that the "11 freshman lawmakers who serve on the House panel raised an average of $322,012 during the second quarter -- $100,000 more than the $221,633 average hauled in by all House freshmen."

As you might expect, GOP freshmen on the committee outpaced their Democratic counterparts in the race to suck down Wall Street boodle. But the Democrats didn't do too shabby!

Rep. Denny Heck (D-Wash.), for example, raised $251,687 during the filing period thanks, in part, to donations from the PACs of Credit Suisse Securities, JPMorgan Chase and Goldman Sachs. Rep. Kyrsten Sinema (D-Ariz.) pulled in $395,593, including thousands of dollars in donations from the PACs of Morgan Stanley, the American Bankers Association, Mastercard International and Goldman.

Both Rep. Joyce Beatty (D-Ohio) and Murphy received cash from the PACs of the ABA, Bank of America and Citigroup, while Democratic Reps. Dan Kildee of Michigan and John Delaney of Maryland raised funds from PACs of industry groups, like the Mortgage Bankers Association and the Securities Industry and Financial Markets Association.

Kildee, who raised $131,435 last quarter, said, “There’s always some correlation between the work that a person does on a committee and the organizations that find some reason to support them.”

Ha, ha, yes, there always seems to be some correlation, for some reason. The phenomenon even has a name, given to us by Rep. Luis Gutierrez (D-Ill.): "the unreliable bottom row." Gutierrez coined the term after a similar incident took place in the House Committee on Financial Services back in October of 2009, when the panel met to determine whether the lending practices of auto dealers would be subject to the oversight of the Consumer Financial Protection Bureau.

On that occasion, Rep. John Campbell (R-Calif.), a former Saab dealer who was still stacking cheddar from his friends in the industry, proposed a bill that would exempt the industry from CFPB scrutiny. As Ryan Grim and Arthur Delaney reported:

As usual, the members filed into the high-ceilinged first-floor hearing room in the Rayburn House Office Building. Committee Chairman Barney Frank oversaw the vote atop four tiered rows of seats, a full story above the witnesses and the audience. The longest-serving Democratic members of the panel -- informally known as the banking committee -- sat to the right or just below the chairman; it can take years, if not decades, for a freshman representative to ascend up the risers.

The clerk called the roll, starting from the top. Senior Democrats roundly rejected Campbell's amendment. It appeared as if the Democrats would beat back the effort and apply the same standard to car dealers that was applied to everyone else.

Then came the bottom two rows, the place where reform goes to die. Despite the disapproval of the powerful chairman and nearly every consumer group in the country, the Campbell amendment passed by a 47-21 margin.

As Grim and Delaney bottom-lined it, this phenomenon was essentially created by party bosses pursuing perverse incentives. Their purple-district freshmen were among the most vulnerable members of their caucus. Vulnerable members need large war chests to fend off pesky challenges. Wall Street interests have lots of cash with which to pad war chests. And so those freshmen found themselves on the front lines of the committee dedicated to financial reform -- but deployed there to rake in campaign cash, not to pursue reforms.

"In short, by setting up the committee as a place for shaky Democrats from red districts to pad their campaign coffers, leadership made a choice to prioritize fundraising over the passage of strong legislation," write Grim and Delaney.

And that's just one more way that the system is broken and things don't get better. For you, anyway! Things are going great for these freshmen, because even if they lose their seats to the vagaries of purple-district politics, chances are good that their benefactors will remember their hard work, and guide them toward the gilded revolving door.

[Would you like to follow me on Twitter? Because why not?]

This story appears in Issue 59 of our weekly iPad magazine, Huffington, in the iTunes App store, available Friday, July 26.

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