Should Dodd-Frank be overturned, the financial industry stands to make (with government backing, of course) a ton of money. It’s unsurprising that its repeal has become a centerpiece of the 2012 campaign, with Wall Street donating far more to candidates who want to overturn or weaken the law. What is surprising is how brazen they’ve gotten.
Yesterday, the board of directors of the American Bankers Association, a lobbying group representing over 5,000 banks, voted to create a nonprofit to advance its political lobbying.
Since the passage of financial reform, the ABA, which spent over 8 million dollars lobbying in 2011 and represents banks that hold 95% of the assets in the industry, has donated far more to Republicans than Democrats. Their biggest contributor? J.P. Morgan. They’re already the second largest banking contributor, but this decision could amplify their influence.
The ABA will create a 501(c)4 organization, which won't have to disclose its donors and can give unlimited amounts of cash to Super PACs. Although 501(c)4s legally can’t be primarily political, most skirt the rules by donating large amounts of cash to friendly organization and therefore claiming that the majority of their spending is "educational." With no clear standards for how to gauge political speech, most 501(c)4s have so far avoided fines or a challenge to their tax exempt status.
The bankers hope to raise big money and use it strategically. Bloomberg News reports that, if every member contributes the minimum that the ABA is asking for, "the fund would have a war chest of about $6 million." That's just the beginning. Being a nonprofit will also magnify the ABA’s influence because 501(c)4s don't have to disclose their donors, a huge draw for the press averse big banks and wealthy bankers that make up the association. They’ll also be smartly focusing their cash on 12 competitive Senate races, likely against politicians who supported financial reform. Should they succeed in flipping control of the Senate, Dodd-Frank will be on the chopping block. A lot of money to be spent in a few Senate races.
What will the banks get for their cash? Ostensibly, the association doesn’t want to kill Dodd-Frank. But they might as well. Instead, they plan on diluting the Volcker rule and eliminating derivatives legislation, the two central components of the bill. Effectively, they want to gut Dodd-Frank, and keep an empty husk to point to as bloated government bureaucracy. How magnanimous.
In the end, this is yet another in a long line of signs that the unholy alliance of business and politics is escalating. And it matters. With the help of the ABA, the next financial crisis may be just around the corner.