Crony Capitalism: Financial Firms Spent Millions Lobbying Washington to Change the Mark-to-Market Rule

The WSJ had a very interesting piece today. It discusses how the financial industry spent nearly $28 million in the first quarter lobbying Washington to have the mark-to-market accounting rules changed.

From The WSJ: Not long after the bottom fell out of the market for mortgage securities last fall, a group of financial firms took aim at an accounting rule that forced them to report billions of dollars of losses on those assets.

Marshalling a multimillion-dollar lobbying campaign, these firms persuaded key members of Congress to pressure the accounting industry to change the rule in April. The payoff is likely to be fatter bottom lines in the second quarter.
…
The rule change angered some investor advocates. “This is political interference on a major issue, and it raises questions about whether accounting standards going forward will have the quality and integrity that the market needs,” says Patrick Finnegan, director of financial-reporting policy for CFA Institute Centre for Financial Market Integrity, an investor trade group.
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Earlier this year, financial-services organizations put their lobbyists on the case. Thirty-one financial firms and trade groups formed a coalition and spent $27.6 million in the first quarter lobbying Washington about the rule [mark-to-market] and other issues, according to a Wall Street Journal analysis of public filings. They also directed campaign contributions totaling $286,000 to legislators on a key committee, many of whom pushed for the rule change, the filings indicate.

Rep. Paul Kanjorski, a Pennsylvania Democrat who heads the House Financial Services subcommittee that pressed for the accounting change, received $18,500…A spokeswoman says …. campaign contributions didn’t factor into the congressman’s thinking.

Now, nobody is suggesting our Congressmen can be bought. But sure as hell you can rent them.

While these facts may strike you as unethical, the reality is that this is a daily occurrence in Capitol Hill. After all, Wall Street’s success in business heavily depends on close Washington relationships.

This is another example, unfortunately, of a system in which insiders provide lucrative opportunities for their friends. It’s been going on for years.

See which PACs contributed to which representatives on the Financial Services Committee during the first quarter of 2009. Click for interactive graph: