Government for Sale: How Lobbyists Shaped the Financial Reform Bill

Two weeks ago, along a marble corridor in the Rayburn House Office Building in Washington, I watched about 40 well-dressed men (and two women) delivering huge value for their employers. Except that we, the taxpayers, weren't employing them

By Steven Brill Thursday, July 01, 2010
    • Illustration by John Ritter for TIME

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    But that's Wenhold's point: these mom-and-pop answering services need a lobbyist who can spot an arcane issue like this and explain it to regulators and the legislators who oversee them. Wenhold should not be embarrassed to tell his kids what he does all day. Nor should Hooper of Capitol Tax Partners, a soft-spoken tax lawyer and accountant who spent five years as a senior staffer on the Senate Finance Committee, perhaps the most professional committee on Capitol Hill. He is, he says, a "nuts-and-bolts substantive lobbyist, not a door opener."

    The Constitution is squarely on Wenhold's and Hooper's side. The First Amendment explicitly protects our right to "petition the government" — more explicitly, in fact, than it protects many of the rights the courts have given me as I report and publish this article. Why shouldn't that answering-service operator, or the CEO of Goldman Sachs, be able to hire someone to help do that, especially when what they are petitioning about is so complex?

    With that in mind, the President should be the last to complain about lobbyists, and lobbyists should be the last to complain about him, whatever his rhetoric. For the age of Obama has brought an explosion of complexity to Capitol Hill. In addition to the 2,319 pages of financial reform, the Administration's health care bill was 906 pages, and the economic-stimulus measure weighed in at 407 pages. The 1914 law establishing the Federal Trade Commission — with its sweeping commerce and antitrust regulations — was eight pages. The 1935 Social Security Act, which also included unemployment compensation, child-welfare services and a complex allotment to states for aid to dependent children, was 28 pages.

    It's no surprise then that the $3.49 billion spent on lobbyists in 2009 was a record, more than twice the figure for 2001. There was a lot of mystery to unravel.

    In preparing a story, a reporter is best served by listening to those on all sides so that he can weigh their best arguments. A good legislator does the same thing with lobbyists, says Congressman Frank. "I feel better about a position when I can hear both sides ... You use them to inform you," he adds, "as long as they know that if they lie, they lose. They will never be allowed to come back to this office." In fact, lawmakers turn to lobbyists to stage the debates. "I help my boss the most when I can play the good lobbyists off each other, just the way a judge or a jury hears all the evidence and the lawyers' arguments and then decides," says a Senate-committee lawyer who played a key role in drafting some of the most arcane but big-money provisions of the reform bill.

    Lobbyists describe their role in stronger terms. "If you banned all lobbying tomorrow, the legislative process would grind to a halt," says Wenhold. "You can call us special interests, but the ones who are especially interested are the ones who can explain the consequences of writing a bill this way or that way. We make the system work." A financial-services trade-association executive, who says lobbyists provide not only crucial policy input but also what he calls critical "technical assistance" (which more cynical observers would call drafting the legislation), puts it more bluntly: "Most members [of Congress] may know one or two issues well, if that. Then you have a 26-year-old kid, maybe he's even 30 and went to a good law school, who's on the staff working 10 hours a day and is supposed to tell his boss how to do derivatives regulation or credit-card reform. Are you kidding?"

    What adds weight to that argument is that lately those kid staffers are working shorter stints before departing for jobs at double or triple their government salaries at, yes, lobbying firms, where the top people can earn $1 million to $4 million a year. There are important exceptions — senior staffers, especially on important committees like those dealing with taxes, who seem to have caught the public-service bug long-term and are able to weigh the lobbyists' arguments knowledgeably and independently. But according to Jock Friedly of LegiStorm, which tracks congressional-staff assignments and salaries, the average tenure for congressional staffers is now about two years. "Over the past 20 years, people have moved much more quickly into the lobbying world," he explains. Of the approximately 2,000 lobbyists working on financial reform last month, more than 1,400 had been congressional staffers or worked in the Executive Branch, and 73 had been members of Congress, according to a report issued jointly by the CRP and the Congress Watch unit of Public Citizen, a self-styled public-interest group.

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