The 113th Congress must complete the unfinished business of financial reform if they hope to place our nation on a strong footing for future prosperity. Unfortunately, the banking industry will continue to use every tool at its disposal -- including overblown claims about its philanthropic giving -- to stave off further regulation. Lawmakers should not be fooled.
The biggest U.S. banks are especially unpopular these days thanks to the central role they played in causing the financial meltdown of 2008 and ensuing Great Recession. And while they may not care whether the general public loves them, they do need to be popular with lawmakers, whom they lobby nonstop to nix financial reforms that safeguard the public against fraud, abuse and overly risky investments that could lead to another economic collapse. In addition to enormous campaign contributions and direct lobbying efforts, boasts of generous corporate philanthropy constitute a big part of the banks' massive PR campaigns to rehabilitate their respective public images.
To help the new Congress evaluate these claims, the organization I lead just published an analysis of the philanthropic giving of four of the biggest U.S. banks: Bank of America, Goldman Sachs, JPMorgan Chase and Wells Fargo.
Our report finds that their grantmaking lacks transparency, and the amount and quality of their verifiable giving is mediocre. As such, it comes nowhere close to making amends for the central role these banks played in melting down the global economy or for their rampant criminality. (Violations of law for these banks are documented in an appendix of the report.)
Here are a few examples of the hypocrisy and mediocrity we uncovered:
- Goldman Sachs' CEO Lloyd Blankfein is waging a high profile "charm offensive," appearing on talk shows and traveling the country touting his bank's philanthropy as corporate America's most generous. But in fact Goldman donates a miserly 0.03 percent of annual company revenue to charity -- a shockingly low percentage even by the mediocre standards of the other big banks.
- This summer, Wells Fargo paid $175 million to settle federal accusations that it steered black and Latino borrowers into high-cost loans and charged them excessive fees. Is Wells trying to make amends for its racism by increasing investment in communities of color? No. There is no evidence that the bank has any serious interest in augmenting its philanthropic initiatives that benefit non-white Americans.
- JPMorgan Chase played a big role in fomenting the Great Recession of 2009-2010 by helping to swell the subprime mortgage bubble. Did a guilty conscience prompt America's biggest bank to become especially generous during the recession? Certainly not. JPMorgan Chase failed to exceed the financial industry median for philanthropic generosity during those years, while increasing its already massive political expenditures on lobbying and campaign contributions to promote its special-interest agenda.
- This June, Bank of America unveiled what it says is a 10-year, $50 billion environmental initiative. But, in fact, cash grants to environmental nonprofits comprise less than 5 percent of the initiative, with the vast bulk taking the form of for-profit loans to for-profit companies. One environmental group noted that the initiative pales in comparison to the environmental destruction Bank of America wreaks as a leading financier of the coal industry.
Lawmakers should not be bamboozled by the megabanks' false boasts of good corporate citizenship. Instead, they should finally complete the work of financial reform. That means:
- Enact the comprehensive agenda of Americans for Financial Reform.
- Implement the regulations stipulated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as advocated by Better Markets, Demos and others.
- Modernize the Community Reinvestment Act, as advocated by the National Community Reinvestment Coalition and others.
- Oblige lawbreaking banks to provide large-scale principal reduction for millions of underwater U.S. homeowners, as advocated by Campaign for a Fair Settlement and others.
- Make big banks pay their fair share of taxes by closing loopholes and instituting a transaction tax on financial speculation, as advocated by National People's Action and others.
The megabanks showered the president and new members of Congress with campaign contributions during the election. And now they are hoping those big chits plus claims of generous corporate largesse will facilitate their nonstop lobbying against completion of financial reform.
I hope that newly sworn-in lawmakers will not be hoodwinked by the charm offensive and will instead ensure that completion of financial reform remains an urgent national priority.
Aaron Dorfman is executive director of the National Committee for Responsive Philanthropy (NCRP), the nation's only independent watchdog organization for institutional grantmakers. He frequently blogs about the role of philanthropy in society.