Campaign cash cows are put out to pasture

By DENNIS CONRAD - Associated Press Writer - Sept. 19, 2008

WASHINGTON - This fall, many members of Congress will see a major source of campaign contributions disappear, possibly never to return.

Political action committees affiliated with mortgage giants Freddie Mac and Fannie Mae are now banned from engaging in lobbying activities, including making donations. They were ordered to cease when the Bush administration engineered a government takeover of the quasi-governmental companies and put them under a conservatorship in an effort to help reverse a housing and credit crisis.

Whether the PACS come back in some form is likely to depend on the next Congress, says Rep. Barney Frank, D-Mass., who, as chairman of the House Financial Services Committee, says he will be open minded about it.

PACS, committees formed by business, labor, or other special-interest groups, raise money from their members or employees and make contributions to the campaigns of political candidates whom they support.

Both men seeking the presidency, Sen. Barack Obama, D-Ill., and Sen. John McCain, R-Ariz., agree on the need to monitor the federal takeover of the two mortgage concerns, but hold different views on what the PACS' ultimate fate should be.

Obama would make it more difficult for Freddie and Fannie to have PACS, saying he wants to reduce the influence of money over the political process. Obama's presidential campaign has raised more private money than any in history, but he doesn't accept PAC dollars. He opposes allowing Fannie and Freddie to be returned as profit-making enterprises whose possible losses are guaranteed by the government.

McCain favors taking both companies fully private and letting them determine whether they want PACS.

Ultimately, it may not matter what the next president thinks about the PACS. Neither McCain nor Obama is likely to veto a bill over whether it allows for PACS. And Congress will likely be under pressure to keep the campaign contribution spigot from those PACS turned off.

That pressure is likely to come from other parts of the finance industry, says Jonathan Koppell, a professor of political science at Yale University's School of Management. He noted that Fannie and Freddie's competitors have long believed the two had an unfair advantage that stemmed from cozy relations with Capitol Hill.

A spokesman for the American Bankers Association declined comment.

Since 2003, Democrats and Republicans have collected $2.3 million from the two PACs. That could sway some lawmakers to insist that Fannie Mae and Freddie Mac be reshaped as purely private businesses, which would allow them to revive their PACs.

The contributions are part of a lobbying arsenal that has invested $80 million over the past five years to win hearts and minds in the capital. Fannie and Freddie have spent big on hiring former White House officials and lawmakers. Some members of Congress have received tens of thousands of dollars from the PACS, especially those on committees with jurisdiction over the companies, including Frank.

"They had huge armies of lobbyists that were tripping over each other, so they developed friends on both sides of the aisle over the years," said Peter Fitzgerald, a Virginia banker and former Republican senator from Illinois. "Republicans got very tight with them over the years and they got very powerful."

Stephen Ellis, vice president of Taxpayers for Common Sense, a Washington-based watchdog group, said the PACs' campaign cash to Congress has helped insulate Fannie and Freddie from oversight.

"The fundamental lack of rigorous accounting and adult supervision is one of the major reasons that taxpayers have had to take over these companies that are drowning in red ink," Ellis said.

The companies hold or guarantee some $5 trillion in outstanding mortgages, more than half the nation's total. It is unclear, experts say, what the taxpayers' responsibility will become. The future of the PACs may depend on how Fannie and Freddie are changed and whether they continue the affordable housing component that Congress has been required.

"If taxpayers continue to have any degree of involvement with these companies they should not be allowed to lavish campaign cash on their elected representatives," Ellis said. "Fannie and Freddie benefited from their close association with the federal government. They can't have it both ways again."

Fully privatized, the companies could have PACS, because corporations have the right to have them as a matter of free speech. On the other hand, the creation of fully governmental replacements would eliminate the possibility of PACS, as government agencies cannot lobby.

"I hope next year we will have a long and serious set of very inclusive discussions" on the issue," said Frank. "I don't want to prejudge that."

Comparative look at two ethics bills

By The Associated Press - Mon Jul 2, 2007
Similarities and differences in House and Senate lobbying bills that have to be merged into one before becoming law.

Both bills would:

_Require lobbyists to report when they "bundle" campaign contributions for one candidate from multiple donors.

_Forbid lawmakers from pressuring lobbying firms to hire employees based on political affiliations.

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The Senate bill, but not the House bill, would:

_Require former lawmakers to wait two years, rather than one, before becoming lobbyists.

_Prohibit lobbyists from throwing parties for specific lawmakers at national conventions.

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The House bill, but not the Senate bill, would:

_Require lobbyists who try to place "earmarks" — special home-state projects — in spending bills to identify their efforts.

_Require lobbyists to report bundled donations given to political action committees — or PACs — set up by unions, corporations or special interest groups, as well as to candidates.

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The Senate bill is S 1.

The House bill is HR 2316

See Article

Ethics reform bogged down in Congress
By CHARLES BABINGTON, Associated Press Writer - Jul 2, 2007
WASHINGTON - Toughening ethics laws, once a priority of Democrats, has bogged down in Congress as party leaders find their campaign promises colliding with lawmakers' re-election concerns.

Two months have passed since a task force was supposed to have recommended how an independent panel might look into ethics complaints before they go to the House ethics committee. A key sticking point is opposition in both parties to letting outsiders file complaints against members of Congress.

Currently, only House members can initiate an ethics probe. Public watchdog groups call the restriction self-serving and unreasonable.

Some of the same groups, however, are balking at a second proposal floated by task force members. It would require any group that lodges an ethics complaint against a House member to reveal its donors.

Rep. Chris Van Hollen, D-Md., said the demand for donor lists from groups that file complaints "is what has tied this thing up for now."

The nonprofit groups call it intimidation. Lawmakers say it's a way to ascertain whether such groups are backed by right- or left-leaning forces with partisan motives.

Meanwhile, a Senate spat over rules governing senators' requests for special projects in their home states is blocking efforts to merge into one bill separate House- and Senate-passed measures to restrict lawmakers' dealings with lobbyists. The Senate passed its version in January, and the House passed its bill in May.

"I find it distressing that they haven't dealt with these issues," Craig Holman of Public Citizen said, referring particularly to the House task force.

For years, self-described government-reform groups have denounced the House ethics committee, which is evenly divided between Democrats and Republicans, as listless and largely toothless. Unlike the Senate ethics committee, the House panel no longer accepts complaints from nonmembers. And it sometimes says little or nothing about its inquiries, leaving the public unsure whether serious investigations took place.

On Jan. 31, Speaker Nancy Pelosi, D-Calif., appointed a bipartisan task force to recommend whether an independent panel of nonmembers should investigate ethics complaints and play a role in enforcing rules of conduct. That report was due May 1.

Long past the deadline, task force members privately briefed colleagues on a plan in which the speaker and minority leader would each appoint three members to a panel that would look at complaints — from members or nonmembers — and recommend whether the House ethics committee should pursue them. The independent panel's findings, in most cases, would eventually become public.

The proposal immediately drew fire from seemingly every direction. "They have problems inside and outside," said Meredith McGehee, policy director of the nonpartisan Campaign Legal Center.

Several House members said political adversaries could use an open-complaint system to file dozens of frivolous allegations and then cite them in campaign attack ads. The concern is understandable, McGehee said, but senators have long allowed nonmembers to file ethics allegations "and they're not in peril."

Watchdog groups called the plan weak, especially because the new panel would lack subpoena powers to compel testimony and demand documents. The panel "would have a free hand to recommend the dismissal of a complaint and would be greatly restricted in recommending anything else," lawmakers were told in a letter last week from groups including Democracy 21, the League of Women Voters, Public Citizen and the Campaign Legal Center.

They also objected to the donor-disclosure proposal, which they called unprecedented for the House, Senate, Justice Department, Federal Election Commission and other agencies that receive public allegations of official wrongdoing.

"Now they want your donor base," if a group tries to file an ethics complaint, said Sarah Dufendach, chief of legislative affairs for Common Cause, which on balance supports the House proposals. "It may chill some groups from actually filing," she said.

Many lawmakers are insisting on such disclosures, saying the public should know as much as possible about people behind allegations that could hurt a politician's career. Some Republicans particularly like the disclosure proposal because they believe groups such as Common Cause are heavily financed by Democrats and liberals.

Dufendach shrugged off the concern. "Whatever kind of information you give is going to be spun," she said.

Rep. Michael Capuano, D-Mass., the chairman of the House task force, said its tentative recommendation to consider ethics complaints from outside groups remains a sticking point.

"We've had some push-back" from House members and outsiders, he said in an interview last week. "We're plugging ahead. The goal is to get something meaningful that can pass."

Capuano added, however, that could not predict whether the task force can settle on a plan that would win House approval.

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The Senate lobbying bill is S 1.

The House lobbying bill is HR 2316.
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