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September 24, 2017

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Washington faces tough reform test

WASHINGTON -- President-elect Barack Obama and congressional Democrats face a tough test proving they want to fix the U.S. financial system after taking millions of dollars in campaign donations from banks and Wall Street.

Big decisions loom on reining in the exotic securities markets, shoddy lending practices and regulatory failures behind the worst U.S. economic crisis in decades, with financial industry lobbyists already preparing for battle.

The coming fight raises questions about whether Washington is capable of overhauling an industry more deeply insinuated into the halls of political power than possibly any other.

Politics in the U.S. capital is heavily influenced by money donated to Democrats and Republicans alike by business interests that often play both sides of the partisan fence to win access and influence no matter who is in power.

"We've created this situation where ... the only way to get elected or re-elected is to take large sums of money from special interests who want something from government," said Daniel Newman, executive director of, a nonpartisan, nonprofit campaign finance watchdog group.

If large donations buy the same clout today that they have in years past, average citizens should be worried about the scope and shape of next year's reform agenda, said experts in campaign finance and financial market regulation.

"The financial services industry over the last 10 years has been the largest industry that donates to members of Congress ... Both President-elect Obama and (presidential rival) Senator McCain received more than US$20 million from this industry," Newman said.

Obama's campaign took in more money from donors in the finance, insurance and real estate sector than any other 2008 candidate, according to the Center for Responsive Politics, citing Federal Election Commission records as of mid-October.

Yet, that was a comparatively small proportion — about five percent — of the total US$639 million he raised, much of it from small donors, raising the possibility that Obama will not feel beholden to entrenched banks and Wall Street groups.

"A lot of this will depend on how Obama feels," said James Cox, a professor at Duke University's law school and an expert on financial oversight. "I think he's smart enough to realize that he's got to play a different game. He came in with the five-letter word 'change' and he's got to reflect that."

No sector of corporate America pours more cash into politics than the nation's powerful financial houses, said the Center for Responsive Politics, a nonprofit, nonpartisan watchdog group.

Five of the 10 biggest donor groups in the 2008 national election campaigns were executives, and their family members, and political action committees of Goldman Sachs, Citigroup, JPMorgan Chase, Morgan Stanley and Swiss-based UBS AG, the center said.

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