It all relates back to the aftermath of 2004, when 527 groups like Swift Boat Veterans for Truth had spent like mad during the election but hadn’t registered with the FEC as political action committees (and therefore hadn’t submitted themselves to the restrictions and disclosure requirements entailed in the designation). The Campaign Legal Center and other campaign finance and elections groups filed complaints with the FEC arguing these organizations were effectively skirting the law, and in response, the FEC made some new rules.

In an “Explanation and Justification” of its rules governing electioneering communication (or EC — essentially, political TV or radio ads run just before an election), the FEC determined that they could require disclosure about two kinds of donations — “funds received in response to solicitations specifically requesting funds to pay for ECs” and “funds specifically designated for ECs by the donor.” In other words, if a group received money in response to a solicitation that advertised their spending on electioneering communications, that money would be regarded as a “contribution” — an important designation that meant it would most likely have to be disclosed.

When the Supreme Court ruled in Citizens United earlier this year, it freed up limits on independent expenditures by corporations* but it didn’t necessarily change present disclosure laws. That was accomplished, instead, by a different ruling late last year, in which a federal appeals court decided in a case brought by EMILY’s List to strike down the “solicitation” regulation the FEC had drawn up.

In response to that court’s decision, the FEC got rid of the first requirement for disclosure (“solicitations specifically requesting funds to pay for ECs”) and keeping only the second (“funds specifically designated for ECs by the donor”). As a result, the conventional wisdom is that if a 527 group or 501(c)(4) group wants to keep their political spending in the dark, all they have to do is direct the donor to not specify what specific purpose their donation should be used.*

Some argue the FEC still has some legal leeway to compel these groups to disclose more about its EC spending — it’s just being timid about doing so. Others, however, maintain that it’s bound by the current law and, unless the courts or congress change things, there’s not much more the FEC can do — nor it there much more organizations should feel like they have to do.

*Update: An earlier version of this post said Citizens United vs. FEC freed limits on corporate campaign contributions. Instead, it freed independent expenditures on campaigns by corporations. An earlier version also said groups can avoid disclosing their expenditures through the use of separate funds. Instead, it can do so by directing their funders to not specify the purpose of their donations.

As an additional side note, legal scholars point out that the FEC could easily make a new rule, without the help of congress, to counteract the current avalanche of undisclosed electioneering communications. Partisan gridlock on the commission, however, makes the chances of such a scenario quite unlikely.

The lobbyists have successfully scaled back various iterations of the plan. One would make the regulator part of the Treasury Department, and force it to consult with existing watchdogs before imposing restrictions. Republican alternatives are even weaker, alternately housing a consumer unit either in the Federal Deposit Insurance Corp or the Federal Reserve. Expect a diluted compromise between diluted compromises — just as seems the case for the “Volcker Rule” to limit proprietary trading by banks.

But perhaps the most dangerous effect all this lobbying has had is on banks’ own behavior.

From the beginning, economists warned about the potential for a bank bailout to create moral hazard. Moral hazard is a market failure in which companies, like banks, take bigger risks than they would with their own money because they know they have a backup plan — like a government bailout. For decades, the same voices had warned that Fannie Mae and Freddie Mac, though technically private enterprises, carried a moral hazard because their management and their investors expected that the government would bail them out if their risks turned out poorly and, in fact, when their risky investments tanked, the government did exactly that instead of allowing them to fail.

Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program — the banking bailout — has said for months that the bailout has inculcated the same moral hazard in regular banks that government involvement in Fannie Mae and Freddie Mac did for them. In his most recent report, he identified the moral hazard as one of the largest costs of the TARP program, and one against which the government needed to better guard.

To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.

Barofsky refers to the fact that many companies exited the TARP program by the end of 2009 in order to avoid caps on executive compensation, and yet some banks continue to operate at a loss — the very thing their participation in TARP was intended to avoid. Since the banks that exited the TARP program have another 20 months to fail and re-enter the program, they can engage in overly risky behavior knowing that they continue to have a government safety net.

Pethokoukis notes that a recent IMF report shows that lobbying also produces behavior in line with banks operating under a moral hazard.

The International Monetary Fund recently found that banks that invested more to influence policy over the past decade were more likely to take more securitization risks, have larger loan defaults and sharper stock falls during key points of the crisis.

In other words, banks that spent millions of dollars to change policies, reduce or eliminate regulation and lobby for bailouts engaged in riskier behaviors — including many of those behaviors that led to the financial crisis — than those banks that didn’t feel they needed to invest in changing the structure of the market in which they operated. Spending money on lobbyists to change the rules of the game, so to speak, seemingly leads companies to behave as though they can mitigate or eliminate market risks by convincing government officials to change the regulatory environment or simply front the cash to avoid failure. Thus, lobbying and bailouts become a constant cycle of moral hazard, reinforcing perceptions in the market that a bank’s risk isn’t really of failure or financial loss, but of having to spend more money to lobby the government to fix things.

Last year, commercial banks alone spent $50 million lobbying Congress, not to mention the money they donated, through PACs and individual donations, to candidates. Some of the money they spent lobbying to change the rules and eliminate regulation came straight from taxpayers’ pockets in the form of TARP funds. So Americans’ hard-earned money didn’t just go to pay executives multi-million salaries; it also went to lobby the government to maintain conditions that will allow the banks to reap huge profits and take great risks, and then rely on the government to bail them out if they fail again.

In an interview with MSNBC today, the senior Republican on the Senate Budget Committee was asked to react to last night’s National Republican Congressional Committee speech from Louisiana Gov. Bobby Jindal (R), who said it’s OK for Republicans to want Obama to fail — in certain endeavors. Gregg’s response:

It’s an issue-oriented event. And clearly, this budget needs to be rewritten and it needs to be re- done, and we’re willing to do it in a bipartisan way. We’re willing to sit down on issues like entitlement reform and get something done that’s going to be constructive.

I really don’t want the president to fail. If the president fails, the country fails.

Now someone make this story go away.

He stood athwart mounting global warming hysteria and yelled, “Stop!” He slowed the movement toward a policy blunder of worldwide impact, providing time for facts to catch up with the dubious claims of alarmists. Thanks in part to Bush, the supposed consensus of scientists on global warming has now collapsed. The skeptics, who point to global cooling over the past decade, are now heard loud and clear. And a rational approach to the theory of manmade global warming is possible.

Collapsed! Pay no attention to the 54 percent of Americans who thought global warming had “already begun to happen” in 2001 or the 61 percent who think that now. Policy blunder! Think of the disasters that might have ensued had Democrats tough-loved the auto industry into building more fuel efficient cars in 2001 or 2002, instead of waiting eight years to watch them collapse.

Again, it’s a more useful column than the umpteen coming “how Bush failed” pieces by liberals. But I don’t think Barnes meant it to be.

Hurricane Katrina victims take note. Michael Brown is safe.

A series of wind-whipped wildfires north of Boulder, Colo., have forced the evacuation of more than 11,500 residents — including Brown, the vilified ex-Federal Emergency Management Agency head.

Brown was lauded by President Bush for doing a “heckuva job” in the botched response to Hurricane Katrina, which took the lives of 1,836 people and caused more than $81 billion in damage. Brown resigned in disgrace and the event looms as a national turning point against the Bush administration.

This week, PBS’s “Frontline” broadcast a heart-wrenching investigative report, “The Old Man and the Storm,” about struggling post-Katrina rebuilding efforts more than three years after the massive hurricane destroyed much of New Orleans and the Gulf Coast.

FEMA has promised to pay up to 75 percent of firefighting costs, according to a Daily Camera story.

The latest images and ground reports via Twitter can be found at twemes.com/boulderfire.

h/t Westword

Wendy Norris is a reporter for TWI’s sister site, The Colorado Independent. ]]> http://washingtonindependent.com/24440/ex-fema-head-michael-brown-evacuated-from-colorado-wildfire/feed 0