The financial sector invested more than $5 billion in gaining political influence in Washington DC in the past decade, with as many as 3,000 lobbyists pushing deregulation and other policy decisions that led directly to the current financial collapse, according to a recent report issued by Essential Information and the Consumer Education Foundation.
The report, Sold Out: How Wall Street and Washington Betrayed America, shows how information on financial industry lobbying can play a role in the public debates about how to address the financial crisis. But a survey of levels of transparency on financial services industry lobbying in Brussels indicates that the voluntary and flawed EU lobbying register does not provide anywhere near the same level of detail or accountability. The register does not show which companies and lobby groups are the main players, who are the actual lobbyists and how much money the financial industry is spending on influencing EU decisions. In the US, regulators may be in a position to identify their role in the fincancial crisis. In the EU, we appear to be operating in the dark.
Sold Out: How Wall Street and Washington Betrayed America is based on data from the mandatory US lobbying disclosure system. It concludes that between 1998-2008, Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates made $1.725 billion in political contributions and spent another $3.4 billion on lobbyists, creating a financial juggernaut aimed at undercutting federal regulation.
Rob Weissman, main author of the report told IPS News:
“It’s very important to identify the causes of the crisis if we are to fix it and prevent it from occurring again.”Has financial market regulation in the European Union suffered from a similar degree of corporate capture? In a recent speech at the Institute of International & European Affairs in Dublin, Internal Market Commissioner Charlie McCreevy suggested that this has indeed been the case:
“What we do not need is to become captive of those with the biggest lobby budgets or the most persuasive lobbyists: We need to remember that it was many of those same lobbyists who in the past managed to convince legislators to insert clauses and provisions that contributed so much to the lax standards and mass excesses that have created the systemic risks. The taxpayer is now forced to pick up the bill.”McCreevy himself has a record of granting industry lobbyists privileged access, but his statement underlines the need to assess the role of lobbying in contributing to the financial meltdown in Europe.
The European Commission’s voluntary lobbying register, unlike the US system, does not include details of how much the financial services industry has spent on lobbying the EU institutions or of who has spent the most money. Due to the voluntary nature of the register, firms can simply decide not to register, and in fact only a few of the larger European financial services companies have joined the register till now. The same goes for insurers.
Barclays, Citibank, Deutsche Bank, Dexia, Dresdner Bank, Fortis, KBC, Mastercard, Royal Bank of Scotland, Visa and many other banks with Brussels’ lobbying offices have not registered and remain invisible.
Quite a few of the large financial services players are mentioned in the entries made by lobby consultancy firms, which means that – in addition to their own lobbying efforts – they have bought in the assistance of hired-gun lobbyists. The undisputed specialist in EU lobbying for banking clients is Houston Consulting, which lists Euroclear, MasterCard, JPMorgan, Omgeo, Citi, HBOS, Western Union, Prudential, Moody’s and Morgan Stanley among its clients. Houston Consulting recently merged with KREAB, which represents Investor AB and Handelsbanken. Interel Cabinet Stewart lobbies for Barclays, Hill & Knowlton for American Express, Merrill Lynch, Hume Brophy for the hedgefund industry lobby group AIMA and GPlus represents the European Private Equity & Venture Capital Association (EVCA) and Visa Europe. Typically, clients are listed as representing “less than 10% of total lobbying turnover”, which means the amounts involved can vary between zero and hundreds of thousands of euros.
Financial services companies currently listed on the EU lobbying register (9 March 2009).
For lobby groups representing the financial services sector, the picture is also far from complete:
- The European Banking Federation (EBF-FBE) reports expenditure of over € 1,000,000 on lobbying last year, while the International Swaps and Derivatives Association puts its expenses as € 650,000 - € 700,000. The European Banking Federation does not specify its lobbying expenditure, thanks to a loophole which allows them to clasify it as over 1 million euro. This means there is no way to know whether they spent 1,1 million, 5 million or more on lobbying the EU.
- It is hard to believe that the European Services Forum and the London Investment Banking Association, both of which actively lobby EU decision-makers, have spent less than € 50,000 each on lobbying in 2008.
- The European Banking Industry Committee (EBIC) reports its lobby budget as zero, arguing that it “does not have a physical structure or a budget of its own” and that “the costs of the work of EBIC are borne by its members.” It is unacceptable that one of the most powerful banking lobbying coalitions is reporting in this way. EBIC should at least provide an estimate of its lobbying costs and indicate how these costs are shared by its members.
- The European Financial Services Roundtable, the European Venture Capital Association, the European Parliamentary Financial Services Forum (EPFSF), the European Mortgage Federation, the European Covered Bond Council, the Society of Trust and Estate Practitioners (STEP) and the European Securitisation Forum, are just a few of the financial services lobbying vehicles that have failed to register so far.