Rescuing the $700B Rescue Plan
12/22/2008 | David IngramStaring at the vote totals, Scott Talbott realized that what had consumed him and his staff for the last couple weeks had failed. At stake was a $700 billion proposed rescue for the nation’s financial industry—recently rocked by the collapse of storied investment firm Lehman Brothers, among others—and the House of Representatives had balked, 228-205.
“For the first 15 minutes after the House vote, there was sort of a lull,” says Talbott, senior vice president of government affairs at the Financial Services Roundtable.
“And then,” he says, “we kicked it into gear.”
What followed was one of the most intense lobbying campaigns Washington had seen in years, when measured by the amount of effort packed into only four days. It was led by the Roundtable, the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, and scores of allies in the business community, but it also drew on unlikely support from mental health advocates and the renewable energy industry. By the end, nearly every top lobby firm had gotten involved to some degree.
The campaign needed to become intense because, as the House vote demonstrated on Monday, Sept. 29, it had been a disaster to that point. The initial faces of the proposal were Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson, who had unveiled it earlier in the month but had been unable to persuade lawmakers—especially fellow Republicans—that it was more than a handout to Wall Street. It was clear that supporters weren’t as organized as they had to be.
A steep drop in the stock market provided the first boost. The S&P 500 Index fell almost 9 percent the day of the failed vote, further shaking the financial system and demonstrating the impact the crisis could have on college savings and retirement plans.
“We determined that was a bad news outcome,” says Bruce Josten, the Chamber’s executive vice president, “but a good opportunity to seize the issue and reframe the debate.”
Business organizations say they threw as many bodies as they could into the effort. For the Chamber, that meant not only bringing in all 16 of its full-time lobbyists, who usually specialize by policy area, but also its 115-member policy wing and its regional offices, which could connect lawmakers with businesses in their districts.
“As intelligence was collected on where each member stood, we funneled it back out to everyone else and we funneled it to the Hill to the whip teams,” Josten says. “If we heard from a member, ‘I haven’t heard from any retailers on Main Street’ or ‘I haven’t heard from any auto dealers on Main Street’ or ‘I haven’t heard from any small bankers on Main Street’—by the end of the day, we made sure they did.”
Some companies and trade associations used extra heft on contract. The Mortgage Insurance Companies of America hired Akin Gump Strauss Hauer & Feld. Cerberus Capital Management hired Patton Boggs. Citigroup hired Ogilvy Government Relations. The Financial Services Roundtable, which has eight lobbyists on staff, worked with two firms that specialize in lobbying for banks: Barnett Sivon & Natter and Clark Lytle & Geduldig.
There was also a public relations offensive. Advocates of the package granted television interviews, called into radio shows, and sent mass e-mails in an attempt to neutralize the earlier public backlash. Josten says he and Chamber President Thomas Donohue together gave 30 to 40 interviews a day to print reporters.
Building unity in the business community was essential, Talbott says. Early in the debate, before the House vote, the Financial Services Roundtable tried to gather signatures for a letter in support of the rescue package and came up with only 15. As the urgency grew, that number rose to 637, he says. Members of the coalition stayed updated through e-mail and conference calls in which as many as 200 people called in.
Behind the scenes, senators reworked the proposal to include three key, disparate elements: a guarantee of bank deposits by the Federal Deposit Insurance Corporation up to $250,000, an increase from the previous $100,000 limit; an extension of tax credits and other tax provisions, many of which were directed at renewable energy companies; and requirements that insurance companies provide “parity” in their coverage of mental health and substance abuse claims. The last two already enjoyed widespread support in Congress but were in danger of getting lost before adjournment.
Peter Newbould, director of congressional and political affairs for the American Psychological Association, says supporters of mental health parity didn’t coordinate with those working for Wall Street. But they did activate hundreds of organizations—and their lobbyists—in support of the bill, which Congress had debated for more than a decade.
“It was a confluence of interests that worked to everyone’s advantage,” Newbould says.
The Senate voted 74-25 for its revised package that Wednesday. The House, in a dramatic reversal, followed suit Friday, Oct. 3, with a 263-171 vote in favor. Lawmakers who switched repeatedly cited hearing from small businesses back in their districts.
“Time is of the essence, and the scope of this serious crisis is reaching regular Tennesseans from those saving for retirement to families who need loans for automobiles, homes; or college and small businesses that need loans to meet payroll or expand their operations,” said Rep. Zach Wamp (R-Tenn.), one of the swing votes, in a statement at the time.
The cost of the lobbying campaign undoubtedly ran into millions, though obtaining even a ballpark figure is difficult. More than 700 companies, trade associations, nonprofits, municipalities, medical centers, and other interests registered to lobby on at least part of the legislation. Some of the largest interests, including the Financial Services Roundtable, relied mostly on in-house staff. Lobbying disclosure reports do not detail spending per bill, and much of the spending won’t be reported until early next year.
One small example: For the third quarter of 2008, the Duberstein Group reported that it lobbied on behalf of longtime client Goldman Sachs on two issues, the financial rescue package and a major housing bill that became law in July. It reported income of $100,000.
Since its passage, the purpose of the $700 billion package has shifted from buying “troubled assets” such as subprime mortgages to buying equity in financial institutions. Loopholes have developed in provisions about executive pay, and questions have been raised about congressional oversight. Amid a crisis, speed took precedence.
“Normally, any bill requiring $700 billion takes months, years. This thing was passed and signed in about three weeks,” says Talbott, who as of last week says he still hadn’t taken a day off since July 18. “I call it a hyperdrive, blitzkrieg, no-huddle.”