Washington faces tough reform test

House of Representatives Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, collected US$854,000 from donors in the sector, almost half his 2008 campaign’s budget, said the center.

Dodd and Frank have been harsh critics of the reckless lending and risk-management practices that have plunged much of the financial system into crisis, as well as related regulatory failures. The two have steered reforms through Congress that are already cleaning up the mortgage brokerage business.

Next year’s job will be much bigger and critics wonder how effective any officials can be at making major changes to a system that pumps so much money into their campaigns.

“My guess is we’ll do something now, but we won’t do enough,” Duke University’s Cox said.

Rep. Rahm Emanuel — recently named chief of staff for Obama — took in more than US$1 million in campaign donations from finance, insurance and real estate, the center said.

That made the Illinois Democrat and former investment banker “the top House recipient in the 2008 election cycle of contributions from hedge funds, private equity firms and the larger securities/investment industry,” it said.

Political insiders tend to play down the idea that business campaign donations and lobbying buy votes from lawmakers, who, they say, frequently defy the wishes of corporate interests.

But data shows that campaign money matters when it comes to legislating on financial regulation, according to the center.

For instance, in a 1999 vote on a landmark law known as the Gramm-Leach-Bliley act — which removed 1930s restrictions on the banking business — lawmakers who backed the measure got twice as much money in campaign donations from the financial sector as did those who opposed it, the center said.

Further, the center said, members of the House of Representatives who voted earlier this year in favor of a US$700-billion bank bailout package had taken in 51 percent more finance-sector campaign money over their congressional careers, on average, than had opponents of the emergency aid package.

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