Posted by: Jane Sasseen on October 01
By Jane Sasseen and Theo Francis
Is the Treasury Dept.’s on-again, off-again $700 billion rescue package for the financial markets really on-again, this time around? Throughout Wednesday, optimism was growing around Washington that the revived bill, which will now include expanded insurance for bank deposits as well as some long stalled business tax breaks, would readily pass the Senate when it goes up for a vote tonight. Indeed, by late afternoon, lobbyists and legislators alike were already looking past the Senate vote to assess the chances that the revived bill can garner enough support when it is sent back to the House for a second vote expected to come on Friday.
Corporate lobbyists, who have thrown their collective weight behind the bill, were taking no chances. Over the last several days, as the bill appeared to falter amidst intense public opposition, they have launched a massive, coordinated lobbying effort to help keep it on track. Trade associations, corporate executives and small business groups have all targeted nay-saying members of Congress directly. And, to put pressure on the politicians, in more recent days they have gone all out to convince John and Jane Q. Public back home that the rescue plan is a good idea for the economy as a whole, not just Wall Street. “Hundreds of thousands, if not millions of jobs would be in jeopardy” and investors will continue to see values decline if the bill is not passed, warns John Castellani, the president of the Business Roundtable, a group representing large company CEOs. While many people first dismissed the package as simply benefitting the banks, he added in a conference call with reporters Wednesday morning, the impact of the credit squeeze is now spreading. More businesses and individuals are seeing “that they can’t get a car loan, or a loan to finance their payroll or their student loans.”
The financial services industry, which stands to benefit hugely from the bill, has led the charge. In the first few days after Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke proposed the plan, most of those efforts were focused on ensuring that the package was shaped in ways that helped their interests. Lobbyists from such groups as the Financial Services Roundtable and the American Bankers Association have been working nearly non-stop, button-holing Congressional staffers, talking with Treasury officials and tracking each new iteration of the bill. They successfully fended off a measure – which consumer groups fought equally hard to get -- that would have allowed judges in bankruptcy court to reduce a homeowner’s mortgage obligation, and won support for moves to loosen the application of “mark-to-market” accounting rules that many financial institutions say were forcing them to write down illiquid mortgage-backed securities to unreasonably low values.
But in some sense, the industry may have been too successful for its own good, as the bill quickly became perceived as little more than a bailout for Wall Street. That sparked a public fury and helped lead its stunning defeat on Monday. The House rejection caught many business lobbyists off guard – and has since sent its business supporters, collectively, into overdrive to try to assure the bill’s passage. “We’re using the entire arsenal,” says one lobbyist closely involved in the fight. ”This is the time to pull all out the stops.”
Indeed, in the wake of that drubbing, the financial services players have leaned more heavily on allies across the business spectrum for support, as well as some consumer groups. The U.S. Chamber of Commerce has begun airing radio ads in Washington, D.C. and is planning more in the next couple of days. It also lined up 56 groups to sign an open letter to Congress on Tuesday, from the Air Conditioning Contractors of America to the Software & Information Industry Association. The Business Roundtable organized a conference call with 90 CEOs on Tuesday to coordinate the appeals their members are making to Congress, as well as to their employees, customers and others they can tap. And a host of organizations, from the National Manufacturers Association to the National Federation of Independent Businesses, the small business lobby, have jumped into the action.
The clear message in all those efforts: the package is needed to stanch the bleeding throughout the American economy, not just in the financial sector. With credit conditions tightening all over the economy, warns Todd Stottlemyer, the president and CEO of the NFIB, “We must ensure that Wall Street’s problems don’t become Main Street’s problem.”
Stottlemyer, told reporters on Wednesday morning that the national leadership of the NFIB would be speaking on a conference call with Paulson during the afternoon. And to make sure Congress hears its message loud and clear, the NFIB has sent emails and held telephone briefings with its small-business owners, encouraging them to contact their local members of Congress directly. It also placed a full-page ad backing the bill in USA Today.
As a result, the small business lobby has seen its members shift from largely opposing the legislation to generally supporting it, adds Dan Danner, the NFIB’s executive vice-president for public policy. “It doesn’t change the fact that they’re mad and they’re frustrated and they’d probably like to see a public hanging – they want somebody to be accountable,” Danner said. “But they’re coming to the realization that this does affect me – I need credit, my customers need credit, my suppliers need credit.”
Those members, meantime, have become a potent lobby. That’s where people like Rich Gallo fit in. A city councilman and owner of Office Outlet, an office-supply store in Indiana, Pa., actor Jimmy Stewart’s hometown, he is seeking a $400,000 loan from a mid-sized bank to expand the strip-mall housing his business, and he is concerned he might not get the credit he needs. He dialed in to NFIB conference calls this week, including one with Paulson.
Those calls, along with what he has been hearing on the news, have convinced him that the bill is necessary, and “more serious than bailing out the CEOs and the big businesses.”
He called his own lawmakers, but he is also spreading the word, talking to fellow Republicans, customers and acquaintances. “I’ve been talking to a lot of people throughout the day here,” he said. He started his day Wednesday at a 7 a.m. prayer breakfast, with membership ranging from businessmen and retirees to college professors and doctors. “Of course, we always get talking politics,” he said. “I explained how it trickles down to impacting local economies,” Gallo added. “As much as we don’t want to see government intervention, there are times where it’s the country at stake.”
Much the same is happening at the other end of the business spectrum. John Castellani, the president of The Business Roundtable, a group uniting the CEOs of many of the country’s largest companies, says they have “activated” their members as well. “We’ve had CEOs calling members of Congress from where they’re headquartered, as well as where there plants and factories are located,” says Castellani. But the efforts hardly stop there: the Roundtable is also trying to spur a “grass-roots” communication effort by getting its members to reach out to customers, suppliers and employees to encourage them, too, to contact their local Congressperson. “It’s a very active effort,” Castellani told reporters Wednesday morning. “We’ll do as many (things) as it will take to get this passed.”
That message seems to be getting through.. A lobbyist for one of Detroit’s Big Three auto makers said that following Monday’s defeat, the company began calling lawmakers from the states in which it has plants, as well as those who voted against the bill. The Detroit Regional Chamber of Commerce has sent an email to local business people urging them to call their representatives in both the House and the Senate to push them to back the proposal. Detroit’s overall message is that, until the financial sector stabilizes, other sectors of the economy will not turn around. “We’re talking to everyone,” says the lobbyist. “We’ve been very vocal.”
But it’s not just the business sector: coordination is also under way with allies in the consumer sector, such as the AARP, which lobbies for retirees and older Americans. It has fielded thousands of phone calls and armed its staff at functions across the country with talking-points explaining how the bill would benefit ordinary Americans. Over the weekend, AARP sent out an email message to members that it says generated 110,000 emails to congressional offices over the last four days. Another message went out to its 6 million members on Wednesday.
David Sloane, senior vice-president for government relations and advocacy, says AARP initially didn’t get involved when business groups approached it about helping out. But that changed as economic signals worsened last week, and particularly after the stock-market plunged on Monday.
The group says it isn't backing any particular element of the bill, but believes quick action is needed. Yet it wondered “how is Congress going to pass something when all the constituent communication it’s getting is saying ‘Don’t pass this,’” Sloane said. “We wanted to try to influence public opinion, or at least our member opinion, and encourage Congress to move along.”
Will those efforts be enough? They have definitely had an impact. Congressional aides say that following Monday’s huge stock market loss, they started to receive many more phone calls backing the bill. Prior to that, the calls had been almost uniformly negative. Some of those calls were clearly spontaneous, and the fear caused by the market rout likely would have caused some Congress members to reconsider their votes in any case. Or, as Tom Gallagher, the Washington D.C. policy analyst for institutional broker ISI Group puts it, “it looks as though the most effective lobbyist for the bailout bill was Dow Jones.” Yet there’s little doubt the coordinated business effort has played a role as well in turning the popular tide as well.
Still, passage is not yet guaranteed. While most figure the bill will make it fairly smoothly through the Senate tonight, the House remains close. The additional tax breaks that were added to the bill in order to draw in more Republican backers could anger some fiscally conservative Democrats who backed the package the first time around.
And as the measure has accumulated more sweeteners for conservative lawmakers, discontent among consumer and homeowner advocates has grown. "There's no question that corporate and financial interests have laid across the tracks to prevent any hopes of bankruptcy reform being part of the solution," says John Taylor, president of the National Community Reinvestment Coalition, a housing rights advocacy group. "Now they're pushing for as much relief for Wall Street as possible with as few strings attached as they can get." His group and others continue to press Democrats in the House to boost unemployment insurance or do more for struggling homeowners or support a boost in unemployment insurance before signing off on the final bill.
For now, no one truly knows where the balance of votes now stands. Jaret Seiberg, the financial services policy analyst for the Stanford Group investment firm believes the chances of passage have gone up, “but there is much political chicanery to come and there remains a risk of another derailment.” So count on at least a couple more days of heavy lobbying ahead.
Washington Bureau Chief Jane Sasseen and other BusinessWeek writers cover the run-up to the Nov. 4 presidential election, paying close attention to how the candidates will handle issues such as housing, the economy, unemployment, and immigration.