Posted on Fri, Jun. 18, 2010
last updated: June 18, 2010 07:50:23 PM
WASHINGTON — Members of the powerful New Democrat Coalition in the House of Representatives are among the top Democratic recipients of Wall Street campaign money this election cycle — and also among the most vocal advocates for weakening a plan to regulate complex financial instruments called "derivatives" that helped fuel the near-collapse of the economy in 2008.
A McClatchy review of campaign donations listed by the Center for Responsive Politics found that eight of the top 13 Democratic House recipients of Wall Street campaign cash are New Democrat Coalition members.
The McClatchy review of campaign finance didn't look at Republicans because their opposition to new regulation is well known. The Center for Responsive Politics found that securities and investment interests have been more generous to Democrats.
A plan to regulate derivatives — contracts between two private parties betting on the chance of bonds' default, or price movements of oil, or shifts in the value of the dollar or interest rates_ is mired in controversy. Lots of money is at stake, so lots is also flowing to campaigns.
A House-Senate negotiating committee narrowing differences between competing financial regulation bills will debate the issue next week. The Senate's version would impose tougher restraints on derivatives and force banks to spin off their divisions that trade in them. The version the House passed last year is weaker on derivatives, and wouldn't force banks to spin off their trading business.
On Wednesday, 43 members of the New Democrat Coalition — a group of 69 business-friendly House Democrats — sent a letter to the top House-Senate negotiators arguing against the Senate provisions and in favor of the weaker House version.
The House version, they said, would provide "clear protections for end users who pose no risk to the stability of the financial system so they may continue to use derivatives to prudently manage their risks."
That point distinguishes between "end user" investors in derivatives, who actually use the commodity they're hedging their investment in, and purely speculative financial players.
To make their point, the New Democrats cite as an innocent end user "an airline trying to protect itself from rising fuel costs."
Problem is, the airline industry supports the tougher Senate language.
So do the presidents of the three Federal Reserve District Banks — in Dallas, St. Louis and Kansas City. However, the Obama administration and the Federal Reserve Board have warned that the Senate language could put these trades further from the reach of regulators.
Wall Street opposes the Senate provisions.
"The New Dems have been saying that they are working on behalf of the end-users at the same time that Wall Street has been stuffing their back pockets with cash," alleged Adam White, the director of research for White Knight Research and Trading in Atlanta, an independent research firm.
"This is what Wall Street money is all about," said Craig Holman, a legislative representative for Public Citizen, a consumer group. "The New Democrat Coalition is a powerful group, and Wall Street believes this is a way of influencing legislation."
Ten of the top 15 New Democrats receiving Wall Street money hail from states with huge ties to the financial sector. New York is home to Wall Street, and Illinois is home to the Chicago Mercantile Exchange, where commodities are traded.
Leading the pack for New Democrats is Rep. Scott Murphy, D-N.Y., who's received $405,471 from financial interests so far in the 2009-2010 election cycle, followed by Rep. Jim Himes, D-Conn., with $371,316. Murphy's unusually high figure is partly the result of his having to face election twice in the cycle. He won his seat in a special election in March 2009.
"Scott Murphy has established a strong independent voting record, and people support his campaign because they appreciate the way he approaches his job," said Josh Schwerin, his spokesman, pointing to support for the House-passed bill that was "opposed by special interests on Wall Street."
Third on the list is Rep. Melissa Bean, D-Ill., the coalition's vice chair, with $211,600, followed by Rep. Bill Foster, D-Ill., at $164,959. The New Democrats chairman, Rep. Joseph Crowley of New York, has raised $141,741 from financial interests.
"Congresswoman Bean has been one of the leading advocates for tough new rules and regulators to vigilantly oversee Wall Street, to stop the type of excessive risk and leverage that brought our financial system to the brink of collapse," said spokesman Jonathan Lipman.
The offices of Himes, Foster and Crowley didn't respond to requests for comment.
Natalie Thorpe, the coalition press secretary, defended the members. "The New Dems took the lead calling for reforms of the financial system to institute tougher regulations and stronger consumer protections to ensure American taxpayers are no longer on the hook for mistakes made on Wall Street."
Other top New Democrat recipients of Wall Street money include Rep. John Adler, D-N.J., with $130,000; Rep. Michael McMahon, D-N.Y., with $147,000; and Rep. Rob Klein, D-Fla., with $112,900. A spokesman said Adler didn't sign the letter in support of the weaker derivatives provisions.
McMahon's office had no comment. Klein's press secretary, Melissa Silverman, said his support of the weaker House language reflects support for "South Florida small businesses," not Wall Street.
"He has worked closely with consumer groups, economists and business leaders throughout this process and is committed to reform that will truly fix the system," she said.
(Tish Wells contributed to this article.)
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