SPEAK SOFTLY, CARRY A BIG CHECKBOOK

Money may not buy votes, but it sure can talk. Nothing demonstrates this more clearly than the money business.

From brokers to banks, from insurers to investors, financial services donated $86.1 million to politicians in the last federal election, making them by far the leader in campaign contributions.

And the securities business, which makes up only about 1% of gross domestic product, has influence well beyond its size. Consider that two major securities bills have been enacted over the past three years one of them the only successful override of a presidential veto in the Clinton administration.

Few other industries can boast such a record. And Congress is set to take up yet another contentious bill this year that would close loopholes in the law enacted over President Clinton’s veto. Industry lobbyists want to stop the rise of securities class actions against nationally traded companies in state courts by requiring allsuch lawsuits to be filed in federal courts. The long-delayed financial modernization bill, which has pitted banks, insurance and securities companies against each other, is likely to fuel political giving further.

“Even in a slow year, which 1997 was, there is significant money going into the process good, bad or indifferent,” says Neal Sullivan, executive director of the North American Securities Administrators Association in Washington, which represents state securities regulators.

The financial sector, including banking, securities, accounting, insurance and real estate, “stands out as far and away the biggest donor to candidates,” the Washington-based Center for Responsive Politics reports in a study of the 1996 federal election. The second-largest group lawyers and hired-gun lobbyists contributed $51.7 million in 1996, 62% of which went to Democrats.

Republicans clean up

Republican candidates received nearly two-thirds of the financial services industry’s $86.1 million that year

a change from the usual practice of evenly splitting donations bet
ween the parties. (This could reflect the GOP’s control of Capitol Hill as well as the industry’s philosophical leaning.)

Expect more of the same this year. The Investment Company Institute, the mutual fund industry’s lobbying machine, already has contributed about $260,000 to 1998 campaigns, according to Julie Domenick, the group’s vice president for public affairs.

She bristles at suggestions that the organization is trying to buy votes: “We don’t expect it to provide any influence. They incur campaign expenses and we’re a part of that process and we support it as good Democrats and good Republicans.”

Her group looks for politicians who are “pro-investor” and who “understand that a sound economy is a good thing,” she says. “We probably contribute to 300 members of Congress. There aren’t that many votes on mutual fund issues that one can even keep track of.”

High on the industry’s agenda: making individual retirement accounts and 401(k)s more attractive, increasing the portability of pensions, and expanding coverage to small companies

Not surprisingly, banking committee members top the list of those receiving donations from financial services companies, according to the center’s study.

Leading the way in 1996 was Sen. Phil Gramm, R-Tex., with $2.5 million for his presidential and Senate campaigns. Senate Banking Committee Chairman Alfonse D’Amato was next with $1.8 million

even though the New York Republican wasn’t running. Connecticut Democrat Christopher Doddwhose term also isn’t up until this year received $780,000.

In the House, New York City Democrat Charles Schumer, a member of the Banking Committee, ruled with $1.1 million from financial services sources. Speaker Newt Gingrich of Georgia was next, with $638,000, followed by Banking Committee members Tom Campbell, R-Calif., Rick Lazio, R-N.Y., and Joseph P. Kennedy II, D-Mass., and Appropriations Committee member Vic Fazio, D-Calif. Each received between $360,000 and $470,000.

The securities indust
ry makes many contributions through individuals, rather than company political action committees. PACs cannot give candidates more than $10,000, while individuals each can give $2,000. The 1996 campaign review notes that Goldman Sachs & Co. used this method to donate $43,900 that cycle to Sen. D’Amato.

Of the 50 organizations amassing the largest individual contributions in the 1996 election, 27 were financial companies. Merrill Lynch & Co. was No. 2, with $600,000 in individual donations and $1.6 million total contributed, while Goldman Sachs was No. 4 with $100,000 and $1.6 million, respectively. PaineWebber Inc. was seventh ($350,000 and $1.1 million) and Bear Stearns & Co. was eighth ($320,000 and $850,000).

DEMOCRATS, TOO

Sen. Gramm, chairman of a key securities subcommittee, hopes to bring his securities litigation bill to a vote early this year. He has the support of the subcommittee’s ranking Democrat, Sen. Dodd, who had raised some $2 million from financial services contributors through last June, according to the latest Federal Election Commission figures.

Sen. Dodd “was really instrumental in terms of rallying Democrats,” says Jennifer Schecter, a researcher with the Center for Responsive Politics, of the debate over the 1995 securities litigation bill. “Wall Street has traditionally been a big base for him in terms of financial support for his election.”

A spokesman denies his positions are connected to contributions: “Sen. Dodd works for the people of Connecticut. The idea that there’s some kind of payoff or quid pro quo is absolutely ridiculous.”

Ms. Schecter believes it’s more subtle than that.

Money does play a role in policy-making,” she explains.

If I’m an unhappy investor and I think this bill stinks, am I going to get access to a lawmaker? You get a lot further with a check than just with an opinion.”

At least some of the sector’s lobbying success stems from the diverse businesses’ common goals, especially on securities litigation and
regulatory reform. After compromises, litigation legislation was passed over opposition from lawyers who have made class actions big business. Likewise, deregulation measures passed despite early objections from regulators.

Clout counted in other ways, too.

The securities industry gave $17.8 million to candidates in the 1996 election, ranking behind only real estate ($18.5 million) in financial-services giving, although realty, banking and insurance are all larger economic sectors. Interestingly, securities lobbyists won one of the few exceptions in the 1997 tax bill to the Internal Revenue Service’s strict classification system for independent contractors.

The only major bill that hasn’t made much headway is the effort to enable banks, insurers and securities firms to compete on each other’s turf. Hardly surprising, since a bill often goes nowhere in Washington if lawmakers get donations from groups with conflicting opinions.

“It has been a joke that you can raise money being on the Banking Committee because you have so many conflicting sides,” says lobbyist Wright Andrews, a partner in law firm Butera & Andrews.

The industry has checkmated one another.”