A matter of trust broken: The revolving door into the financial services industry

Holman

Of the many tools available to special interests for influence peddling on Capitol Hill, few are as powerful and expensive as the increasingly pernicious problem of the “revolving door” – defined as the spinning of government officials between public service and the industries they are charged with regulating.

The exorbitantly wealthy financial services industry fully realizes that the best way to buy influence over government regulations is to employ – at very lucrative salaries – those government officials intimately involved in the regulatory process.

Public Citizen today has released a report documenting that more than 900 former federal employees, including 70 former members of Congress, have gone to work as lobbyists for the banks and financial services industry this year. It is no coincidence that the revolving door to the financial services is spinning wildly out of control exactly at the same time that Congress and the White House are grappling with the most comprehensive regulatory proposals for that industry seen since the New Deal.

This financial services revolving door threatens the integrity of government in at least three ways:

  • Public officials may be influenced in official actions by the implicit or explicit promise of a lucrative job in the private sector with a bank or investment firm seeking to shape financial services regulations.
  • Public officials-turned-lobbyists will have access to lawmakers that is not available to others, access that can be sold to deep-pocketed banks and financial firms.
  • At a time when the nation is losing confidence that the bailout is in the public’s best interest, the appearance of undue influence that these arrangements create casts an even darker cloud on whether our government is up to the task of properly regulating the financial services industry.

Judging from anecdotal evidence, former members of Congress are usually worth about $1 million to $2 million in annual salaries as lobbyists for the industry; former senior staff who are well-connected to the right people in government can pull in $300,000 to $600,000.

So when you are stunned to read how much the financial services industry is paying to lobby government every single day, you now know where much of that money is going – into the pockets of those we had originally trusted to regulate the industry in the public’s interest.

Craig Holman, Ph.D, is Public Citizen’s expert on lobbying and ethics.