For high profile companies who still wish to influence campaigns, there are other avenues available beyond independent expenditures that allow them to circumvent disclosure requirements. 527s have captured the imagination of reporters and voters alike over the past decade, but these groups will become more rare, as the groups need to file monthly reports with the FEC that reveal both their expenditures, and their sources of income.

Instead, there is a rising class of non-profits, 501(c)4s, that have taken their place. Unlike 527s, 501(c)4s are not required to provide the FEC with donor information. Conservatives have organized a network of 501(c)4s prepared to run ads before November.

Most states have held their primaries or will do so in the next few weeks, while the 60-day window does not begin until early September, creating a gap where organizations are free to air ads without reporting to the FEC as long as they do not directly advocate for candidates. This is one reason why some groups still produce issue-ads, a style of commercial that does not directly deal with upcoming elections, but instead describes a candidates’ stance in relation to specific policies, usually in a negative light.

The Chamber of Commerce, which has pledged to spend $75 million on the midterm elections, continues to produce issue ads attacking various candidates. Over the past month, the Chamber has aired ads against Democratic Senate candidates Alexi Giannoulias in Illinois and Joe Sestak in Pennsylvania that are not electioneering communications outside of the 60-day window. By ending each ad imploring the viewer to call the candidate rather than vote against him, the Chamber has skirted disclosure requirements.

But Baucus wasn’t the only Democrat on the panel to vote against the Democratic proposal. Sens. Robert Menendez (D-N.J.) and Tom Carper (D-Del.) were also vocal opponents of the amendment, and offered “no” votes to back their words.

It’s not tough to surmise the reasons.

New Jersey is one of the nation’s great pharmaceutical hubs, housing such drug giants as Johnson & Johnson, Merck, Wyeth and Schering-Plough. Earlier this year, Bausch and Lomb moved in as well.

As for Carper’s Delaware, it boasts the headquarters of AstraZeneca, a top-10 drug maker with revenues topping $31 billion last year.

And the industry has never been shy about showering local lawmakers with campaign cash. Indeed, Menendez has accepted more than $357,000 from the pharmaceutical industry over his congressional career, according to the Center for Responsive Politics. Carper, for his part, has taken in nearly $208,000 from drug makers, CRS reports.

Sen. Charles Schumer (D-N.Y.) pointed out yesterday that it was perfectly understandable that the drug makers, being publicly traded companies, would fight to preserve their profit margins for the sake of shareholders. But Congress, Schumer added, is bound to different interests. “We don’t represent their stockholders,” he said. “We represent our stockholders — the U.S. taxpayers.”

Someone please inform the Senate Finance Committee.

President Barack Obama and EPA Administrator Lisa Jackson (WDCpix)

Earlier this year, when it seemed plausible that Congress would address climate change in 2009, energy industry representatives were hyping the need for legislation to fend off regulation from the Environmental Protection Agency. When the EPA first declared carbon dioxide a threat to humankind in April – the necessary first step before they could begin regulating the greenhouse gas – industry groups were quick with the condemnations of EPA action.

“A more potent Anti-Stimulus Package would be difficult to imagine,” wrote Competitive Enterprise Institute senior fellow Marlo Lewis. The American Petroleum Institute called the motion on regulation “an endangerment to the American economy and to every American family.”

Illustration by: Matt Mahurin

But now Congress doesn’t seem likely to pass a new law regulating planet-warming emissions this year. Senate Majority Leader Harry Reid indicated to reporters this week that a climate bill could wait until 2010. And with the delay, attention is turning once again to what the EPA will do to regulated greenhouse gases in the absence of a new law.

But instead of pitching a fit, the same anti-environmental groups that once decried EPA regulation are now welcoming it. The EPA’s regulatory process is by nature slow and deliberate, with each regulation taking months to put in place. Once the regulatory process is completed, rules are often held up in years of litigation. And even if a regulation survives that, it can be reversed by a future administration. On the Clean Air Act specifically, the technologies necessary to meet the obligations of the law don’t yet exist for carbon dioxide. Meanwhile, though many did hope at one time for a climate bill this year, one that would give them more long-term certainty about carbon pricing, the House-passed Waxman-Markey climate bill is tougher than what many in the energy industry have lobbied to pass into law. Thus, the prospect of EPA regulations — once so feared by many in polluting industries — is now being welcomed as a stall tactic.

“I think most people in industry have come to the conclusion that they’d rather deal with the uncertainty of the Clean Air Act rather than the certainty of a very expensive program like you have under Waxman-Markey,” Jeffrey Holmstead, the former assistant administrator in the EPA’s Air and Radiation division during the Bush administration. Holmstead now represents a number of energy-sector clients for the prominent international law firm Bracewell & Giuliani.

“I speak to a lot of industry folks. Most all of them would prefer climate legislation, something that gave them certainty,” said Holmstead. “But they would like what they consider to be reasonable legislation … But that’s not the Waxman-Markey bill.”

In April, the EPA followed through with the Supreme Court’s 2007 directive to determine whether carbon dioxide is a threat to human health and welfare. The agency’s finding that it is indeed a threat is expected to be finalized this fall. Once it is, the EPA will be required to begin the process of regulating emissions from a a variety of sources.

Throughout the initial stages of regulation, EPA Administrator Lisa P. Jackson has maintained that she, and the rest of the administration, would prefer not to regulate, as the Clean Air Act was not designed to regulate carbon dioxide and a Congress-passed cap-and-trade bill would better address both environmental and economic concerns. But Jackson and other advocates of passing a bill this year have repeatedly used the threat of EPA regulation to push Congress toward action. “The race is clearly on and time is of the essence,” she told reporters back in April following her testimony before the House Energy and Commerce Committee in support of their climate bill.

Sen. Barbara Boxer (D-Calif.), who is authoring the Senate’s climate bill, offered similarly aggressive warnings. “If Congress does nothing … we will be watching EPA do our job, because they must under the Clean Air Act,” she said in a March press conference.

The industry flip on EPA regulation comes in reaction both to the House bill, which they see as too stringent, and to the widespread understanding that regulation from the EPA is by nature very slow. Regulation of specific emissio sources – like automobiles and power plants – would be issued separately. Each new regulation requires an advance notice of the rule, a comment period of up to 90 days, review of those comments, and then a final announcement of the new rule. And after each new rule is finalized, which generally takes months, it would likely be held up in years of litigation.

“I have heard people in my industry say, ‘You know, I know they use the EPA regulating carbon as a hammer over our heads. What’s so bad about that?’” said Jim Rogers, CEO of Duke Energy, the third largest power supplier in the country and a member of the influential environmental and business coalition United States Climate Action Partnership, at an event this week. “We might be in a much better place because it might take 5 to 6 years to litigate.”

“I’m saying this to you as a guy who doesn’t want the EPA to do it. I want Congress to do it. I want them to do it this year,” Rogers told reporters. “But if you just think through this you can see those who don’t want it to happen can take a lot of comfort in the old command and control.”

Some energy executives are also taking comfort in the fact that the Clean Air Act would only require emitters to curb their emissions using the “best available control technology” – that is, the best technology currently able to capture harmful emissions. The problem with using this to guide carbon dioxide regulations is that no such technology really exists right now. While there’s a much expectation in the industry and in Congress that carbon-capture-and-storage – often called “clean” coal technology – will be commercially available in the future, most experts agree that it’s likely 10 to 15 years away. Rogers himself cast doubt this week as to whether it will ever be commercially viable.

Environmental advocates prefer the legislative route, as it allows for more clear emissions reductions goals, can include additional policy measures with the cap, like a renewable electricity standard, and is often faster. “When [the EPA] get[s] a proposal out, we’re still years from actual implementation. That’s a long process,” said World Resources Institute President Jonathan Lash told TWI.

But with Congress seeming less and less likely to act this year, the administration is charging ahead the rulemaking process. Earlier this week, Jackson and Department of Transportation Secretary Ray LaHood announced the first rules governing emissions from automobiles and light trucks. The administration has said they expect to have those rules finalized by next March.

Jackson again emphasized that her agency is will continue the process, even though it is unlikely to influence the Senate this year. “EPA will continue to do it’s job, which is to respond to the now two-plus-year old ruling about the Clean Air Act,” said Jackson on Tuesday. “I think it is fair to say that today’s announcement is path-breaking … It is the beginning of regulation. We should expect the EPA to continue to do its job.”

Environmental advocates offered support for the EPA is moving forward, though they still expressed optimism that Congress will act before those take hold. “We haven’t given up,” Environmental Defense Fund president Fred Krupp told TWI of the Senate process. While he said they are pleased to see the EPA continue work on regulations, “For us to play a constructive role in inspiring other countries and giving other countries incentives to reduce their own emissions, we need Congressional legislation. There’s no question about that.”

Jackson also made it clear this week that the administration would prefer not to write the regulations. “I hope that doesn’t come to pass,” she said. “I believe that legislation is the preferable route.”

According to the campaign contribution-tracking watchdog Center for Responsive Politics, Lincoln, who is up for re-election in 2010, leads all members of Congress so far this year with at least $306,500 in donations from agribusiness-connected individuals and political action committees. By comparison, she received a total of just $251,500 from the agribusiness sector from 2005 to 2008. During the 2007-2008 cycle, Lincoln was not even among the top 20 Senate recipients of agribusiness contributions.

As Kate noted, Lincoln’s move could have major implications for pending climate legislation, the No. 1 item on Big Ag’s agenda this year. Lincoln has referred to cap-and-trade — a component of the already-passed House climate bill, which would limit carbon emissions and create a system in which polluters are required to purchase tradeable permits for the carbon they emit — as a “complete non-starter,” citing the interests of her constituent farmers. Harkin, on the other hand, has expressed general support for cap-and-trade legislation, though he has taken issue with specifics in the House proposal. If Lincoln does indeed take the helm of the Ag Committee, the outlook for moving meaningful climate legislation through the Senate — already an uphill battle, to say the least — will likely become a bit bleaker.

Following a phone conversation with the Center for Responsive Politics, the numbers in this post have been updated for accuracy.

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Even as Congress moves to put more curbs on Wall Street excesses, the nation’s top banks are writing fewer of the campaign checks that once won them lawmakers’ attention – a sign of uncertainty in the financial industry over how large a role it should play in politics in the near future.

The top 15 beneficiaries of the TARP bailout gave $813,540 from their political action committees (PACs) to congressional candidates and party committees during the first half of 2009, according to a Washington Independent analysis of campaign finance reports filed with the Federal Election Commission (FEC). During the same period in 2007, those 15 bank PACs donated $2.1 million.

Image by: Matt Mahurin

And despite the “stress tests” that began gauging banks’ health in the winter, those that won freedom from government control did not resume their formerly torrid pace of PAC activity in the second quarter of the year. Bank PACs still tied to TARP have given 54 percent less this year than in than in the last election cycle, while bank PACs freed from the bailout have seen a 67 percent drop.

Goldman Sachs provides a dramatic example of the trend. Just two days before giving taxpayers a 23 percent profit as it repaid government bailout aid, Goldman quietly reported its political contributions for the first half of the year: $23,000, a 90 percent drop from the same period in the last election cycle.

“The erratic pattern we’re seeing suggests that the financial industry isn’t sure what’s happening to itself,” said Craig Holman, legislative representative for Public Citizen’s Congress Watch. “Different banks and different bankers just see uncertain futures, and so they’re not sure if things are improving, not sure if they should be playing a big role in politics right now.”

That uncertainty marks a stark departure from the halcyon days of early 2007, when JP Morgan Chase was staking a claim to record revenues and pouring $361,000 in PAC donations into Capitol coffers. So far this year, the bank has repaid $25 billion to the Treasury – and given just $26,000 from its PAC.

Morgan Stanley experienced the harshest drought of all. After dishing out $250,000 in early 2007, including large checks to House Financial Services Committee Chairman Barney Frank (D-Mass.) and the pro-business Blue Dog Democrats, the bank’s only PAC activity this year has been three voided checks, totaling negative $3,000.

Citigroup and Comerica, by contrast, have increased their PAC giving in the first half of 2009 even while holding onto their bailout money. Such unpredictable campaign finance decision-making, a de facto ‘every bank for itself’ approach, made sense to Center for Responsive Politics (CRP) spokesman Dave Levinthal.

“Every entity has to make its own decisions and balance them between what it perceives to be the need to lobby and what it sees as the probable consequences,” Levinthal said.

He pointed to CRP’s top 10 PAC spenders for this year, which includes four unions – a constituency most Democrats have no qualms about courting – but also the American Bankers Association (ABA), the trade group that often speaks for many of the same bailout recipients whose PACs are presently running dry.

In fact, several Democratic lawmakers who have forsworn donations from bailed-out bank PACs, such as Frank, Rep. Ed Perlmutter (D-Colo.), and Rep. John Campbell (R-Calif.) appear to make an exception for the PAC of the ABA. Its donations have risen 19 percent between early 2007 and early 2009.

“It may be that [Democrats] don’t want [banks’] money,” said Robert Stern, president of the nonpartisan Center for Governmental Studies. “It may be that most congressmen are saying, ‘not now, guys’.”

Exhibit A in Stern’s theory may well be Senate Banking Committee Chairman Chris Dodd (D-Conn.), whose struggles to dissociate himself from the industry he regulates were renewed last week after testimony suggested that he knew benefits were in the offing from Countrywide’s “VIP” mortgage program.

Dodd’s PAC received $2,000 from Goldman Sachs in January, before the senator vowed to stop taking donations from the PACs of bailed-out banks.

And lawmakers are not alone in fearing a public and media backlash from Wall Street campaign contributions. Individual bank employees donated 97 percent less in the first quarter of this year than in the same period in the 2008 election cycle, as the Independent reported in April.

“The last thing I want to do is wake up one morning and see our PAC check being burned on C-SPAN,” one wary bank lobbyist told Newsweek in the spring.

The sharpest declines in PAC giving, however, did not occur at banks with the gravest public relations problems. Citigroup gave more in donations even as its CEO was facing accusations of lying to Congress, while JP Morgan was giving less despite its CEO’s cozy relationships with senior Democrats.

The 15 banks examined by the Independent for its analysis come from the Treasury Department’s monthly lending survey of the top 20 TARP recipients. Six banks were excluded due to lack of PAC participation or sufficient FEC data.

If these banks are retreating to their political corners, then – becoming “fiefdoms” instead of one “monolithic” industry, in the words of Campaign Legal Center policy director Meredith McGehee – what happens when the economy recovers? Will the capital once again see spendthrift banks shower lawmakers with cash?

“Come September, I think we’ll be in a more traditional pattern,” McGehee said. “If you want anything done by next year, and you don’t start working on it now, you’re behind the eight ball.”

Stern also predicted resurgence in bank PAC activity by the end of this year, while Columbia Law School professor Richard Briffault suggested that donations could remain low for the rest of the 2010 election season thanks to Democrats’ broad advantage in national polling.

“In 2006 and 2008,” Briffault said, contributions rose because “those were very dramatic years. There was a lot of fighting for control of Congress.”

Three factors likely to push bailed-out banks back into PAC giving this fall come in the form of existing legislation. Frank plans to take up the Obama administration’s proposal for a consumer financial products safety commission in September, a bill beefing up shareholders’ role in executive compensation is on track for Senate action in the fall, and overall financial regulatory changes could come to a final vote before 2010.

Indeed, McGehee observed a climate of brewing interest among Washington interest groups of all sizes. “This conversation is happening in every room around town: ‘How do we get our thing done between now and Memorial Day?’” she said.

“That’s not necessarily a good thing for the American people.”

iStockphoto

Nuclear power is courting some new friends as it pushes for government subsidies in the sweeping climate bill being debated in the Senate.

For the last decade, the biggest players in the nuclear industry lent most of their financial backing to Republican candidates and lawmakers, who have been the strongest supporters of nuclear energy. But this year, as the Senate takes up cap-and-trade legislation to reduce greenhouse gas emissions, moderate Democrats have become the industry’s prime target.

Illustration by: Matt Mahurin

“It is the so-called Blue Dogs and the moderate Democrats who are going to tip the balance one way or the other [on nuclear incentives in the climate bill],” said Mitchell Singer, a spokesman for the Nuclear Energy Institute, a nuclear lobbying group and a leading industry donor to political candidates. “Those are the ones we feel the need to educate.”

A TWI analysis of 2009 campaign contributions by nuclear advocacy groups suggests this is indeed their strategy. This week, political action committees, which raise money for candidates, filed their monthly reports to the Federal Election Commission. The numbers reveal that the two biggest industry donors to congressional candidates, the Nuclear Energy Institute and General Atomics, made most of their contributions to Democrats, and particularly moderate and conservative Democrats.

This marks a break from recent trends. Since 2000, both groups had sent a large majority of their donations to Republicans in every election cycle. In 2007-2008, for example, even with Democrats in control of Congress, the Nuclear Energy Institute gave money to 25 Republican and 15 Democratic senators and Senate candidates. In 2009, it has donated to eight Democratic senators and just five Republicans.

Most of this year’s Democratic recipients in the Senate come from the party’s moderate wing, including Sens. Ben Nelson of Nebraska and James Webb of Virginia ($1,000 each); Evan Bayh of Indiana and Byron Dorgan of North Dakota ($2,500 each); and Tom Carper of Delaware ($3,120).

The Nuclear Energy Institute has also made the maximum $5,000 donation this year to a number of political action committees that fund moderate Democrats, including the Blue Dog PAC, Bridge PAC, Moderate Democrats PAC and New Democrat Coalition PAC. Its most recent reported donation — $500 on June 23 — was to Priority PAC, the leadership PAC of the conservative Democratic Sen. Mark Pryor (D-Ark.).

Likewise, General Atomics, which in 2007-2008 gave to 19 Republican Senate candidates ($68,000) and 10 Democrats ($41,500), this year has made donations to three Democrats ($9,000) and three Republicans ($7,500), in addition to the $8,000 it gave to the recent Republican-turned-Democrat Sen. Arlen Specter of Pennsylvania. The Democrats include the moderate Dorgan ($2,000) and the more liberal chair of the Senate Environment and Public Works Committee, Barbara Boxer of California ($2,000). General Atomics also donated $15,000 to the Democratic Senatorial Campaign Committee in January.

In the legislative debate, Republicans have pushed for expanded loan guarantees for nuclear plants and the construction of up to 100 new nuclear facilities. Many liberal Democrats and environmentalists argue that nuclear energy is expensive and slow to get off the ground, and that increases in nuclear power could come at the expense of true renewables like wind and solar.

In the middle stand the moderate Democrats — and some, such as Nelson, have provided evidence that the nuclear industry’s efforts may bear fruit. On May 25, Nelson penned a column in the McCook Daily Gazette, in which he wrote, “It makes abundant sense to include expanding nuclear energy in such legislation.” According to Nelson, nuclear power provides a third of Nebraska’s electricity.

Members of Congress routinely take money from industries that hold stakes in their respective states. Likewise, industry groups frequently target lawmakers who are likely to be sympathetic to their cause.

“These organizations aren’t doing it out of the goodness of their heart,” said Dave Levinthal, a spokesman for the Center for Responsive Politics, which compiles campaign finance data, including the figures for 2007-2008 cited here. “They’re doing it for very specific reasons.”

The Nuclear Energy Institute also lobbies, spending $580,000 in the first quarter this year, according to the Center for Responsive Politics. Singer described this lobbying effort as an educational campaign to inform members of Congress and their staffs.

“It’s kind of like going to class,” he said. “We explain the value of nuclear — what it can do and why it is needed.” He declined to specify which legislators have participated in these sessions.

Singer maintains that nuclear energy is an issue that can cross party lines, citing supportive statements from President Obama and Energy Secretary Steven Chu. “We never approach nuclear as a partisan issue,” said Singer. But he acknowledged that “a lot of Republicans are very strong supporters, particularly in states with nuclear power.”

Michael Marriotte, director of the Nuclear Information and Resource Service, which opposes the expansion of nuclear power, agrees that there is nothing overtly ideological about the nuclear debate. “Nuclear’s always been a pretty bipartisan issue on both sides,” he said. “It’s actually probably more partisan now than it’s ever been.” He added that he is puzzled by the recent staunch Republican support for nuclear power. “It doesn’t make sense from a fiscally conservative standpoint to spend billions and billions on nuclear power,” he said.

With a filibuster-proof majority in the Senate, Democrats should theoretically be able to pass their energy agenda without making concessions to Republicans. But given the relatively conservative nature of a number of Democrats — and the nuclear industry’s efforts to sway this contingent — there is a real possibility that a nuclear expansion will be necessary to bring enough “yes” votes on board.

“Everyone’s trying to figure out how to get to 60 votes,” said Marriotte. “And clearly you can’t do it without moderates. The industry is trying to make nuclear power the issue that brings over some of the moderates.”

Julie Gauthier contributed research assistance for this report.

Sen. John Thune (R-S.D.) (WDCpix)

In the year’s first high-profile legislative setback for the gun lobby, the Senate on Wednesday shot down legislation to scrap state and local laws dictating who can carry concealed firearms.

The vote marks a rare victory for gun reformers, including President Obama, who have had little success battling the powerful National Rifle Association this year despite commanding Democratic majorities in both the House and Senate.

Illustration by: Matt Mahurin

The legislation, sponsored by Sen. John Thune (R-S.D.), would have forced states to honor concealed weapon permits issued by other states, even in cases when local laws would prohibit the visiting gun owner from carrying firearms in public. Hardly a partisan issue, the measure highlighted the chasm between lawmakers from the less populous rural regions, where gun rights are sacrosanct, and those representing the more urban coastal states, where higher population densities and crime rates have led local governments to enact stricter limits on concealed-carry eligibility.

The count in the Senate was 58 to 39 — two votes shy of the 60 needed to defeat the filibuster led by liberal Democrats. Twenty Democrats, including Senate Majority Leader Harry Reid (Nev.), joined almost every Republican in supporting the bill. Sens. George Voinovich (Ohio) and Richard Lugar (Ind.) were the only Republicans to oppose the measure.

Under Thune’s proposal, gun owners granted the right to carry concealed weapons publicly in their home state would retain that right when traveling across state lines, provided that they comply with the other concealed-carry laws of the host state, such as restrictions on where guns can be carried. The rule would not have applied in Illinois, Wisconsin and the District of Columbia, the only jurisdictions that prohibit concealed carry altogether. The bill, Thune said on the Senate floor before the vote, would “allow law-abiding people to protect themselves from criminals when they travel across state lines.”

But in their successful opposition push, most Democrats maintained that the proposal would deny the rights of states and municipalities to set their own concealed-carry eligibility requirements based on local conditions. New York City, for example, with a population of 8.4 million, has different concerns about who can carry guns than the state of Vermont, with a population of 621,000, opponents argued. Indeed, every gun owner in Vermont has the automatic right to carry their firearm in public, while New York statutes empower law enforcers to deny concealed-carry permits on a discretionary basis. Yet under the Thune bill, those eligible to conceal firearms in the Green Mountain State could also carry them in Manhattan.

Sen. Charles Schumer (D-N.Y.) said Thune’s bill would “impose the lowest common denominator” for concealed-carry eligibility on all states and municipalities. “This is probably the most dangerous piece of legislation to the safety of Americans when it comes to guns since the repeal of the assault weapons ban,” Schumer said just before Wednesday’s vote.

Scott Knight, chief of police in Chaska, Minn., who also chairs the Firearms Committee of the International Association of Chiefs of Police, echoed that message. Minnesota law, Knight said, bars those convicted of domestic and substance abuse from getting concealed-carry permits. Yet the Thune proposal would have allowed gun owners from states without those prohibitions to carry firearms down the streets of Minnesota with impunity.

Of importance, the Thune bill would not have overridden state laws dictating how or where gun owners could carry weapons, but only who. Arizona, for example, just passed a state law allowing concealed loaded weapons in bars. The Thune bill, however, wouldn’t allow Arizona residents to carry their guns into bars in states where the practice is prohibited.

Supporters of the Thune bill disputed the claims that the measure would empower criminals. “Of all the people we need to worry about committing gun crimes and violence unlawfully, the people with a conceal-carry permit are probably the last on the list,” said Sen. Lindsey Graham (R-S.C.).

Ironically, the Thune amendment put many state-rights defenders in the odd position of stealing the powers of local governments to regulate themselves. Republicans, generally known for insulating states from the reach of Washington, took the opposite tack in Wednesday’s vote, effectively voting to eliminate the rights of states to decide what’s best for their own residents on the issue of gun reform. “It’s an attack on states rights by people who usually support states rights,” said Daniel Vice, senior attorney with the Brady Center to Prevent Gun Violence.

The NRA did not return calls for comment. But the group shot out a statement immediately after the vote lauding the 58 lawmakers who supported the bill, even as that number fell two members shy of passing the bill. “The vote shows that a bipartisan majority agrees with the NRA,” said NRA-ILA Executive Director Chris W. Cox.

The gun-reform issue has been a tough nut to crack for the young White House. President Obama ran on a platform of controversial gun reforms, including the return of the assault weapons ban, only to discover that Washington’s political climate is hardly suitable to cultivate those proposals. Indeed, with the Democrats picking up many of their new seats in conservative-leaning districts, even House passage of tighter gun controls has been a political impossibility.

Instead, the NRA has gained ground. In May, Obama was forced to sign a bill, attached to a larger credit card reform proposal, allowing concealed weapons in national parks. And legislation scrapping most of Washington, D.C.’s strict gun control laws — attached to a bill granting D.C. a voting Congress member — has stymied House Democratic leaders, who want to pass the underlying bill but not the gun amendment. As a result, the bill has sat idle for most of the year.

On Tuesday, House Majority Leader Steny Hoyer (D-Md.) rejected a suggestion that the DC-vote bill is dead for the year. “It is still on my front burner,” Hoyer said. Still, he didn’t offer any suggestions about how the Democrats might push it through without swallowing the gun amendment.

Situations like that trouble public safety experts, who say the gun lobby’s sway at election-time forces lawmakers to vote with the NRA above the well-being of their constituents.

“It’s a pure and over-simplistic political apporach,” said Daniel Webster, co-director of the Center for Gun Policy and Research at Johns Hopkins University. “Regardless of what the policy is, [politicians feel] it’s safest not to be anti-gun … It’s hard to justify a lot of those votes.”

Flickr: entobox

For Wall Street tycoons and corporate insiders it would be a dream come true: A hole in insider-trading laws allowing investors to profit from their access to sensitive information before the rest of the world is aware of it — like knowing the winning lottery numbers an hour before the drawing. But on Capitol Hill that dream is currently the reality.

While federal laws aim to restrict insider trading in the corporate world, neither securities law nor ethics rules prevent congressional lawmakers and their staffs from benefiting financially from the non-public information they gather from their daily routines on the Hill. That loophole, studies reveal, has allowed lawmakers to reap significantly higher Wall Street returns than other investors.

Illustration by: Matt Mahurin

On Monday, some Democratic lawmakers took another small step toward ending that practice, holding the first public hearing on a three-year-old bill to close the congressional insider-trading loophole. Though mired in the complexities of securities law and the politics of a Congress that doesn’t much like policing itself, the bill at its root asks a simple question: Should members of Congress and their staffs have investing privileges that the rest of the country doesn’t?

Supporters of the proposal — called the Stop Trading on Congressional Knowledge Act — have a ready answer, arguing that the loophole creates all-too-tempting opportunities for lawmakers to exploit their positions for personal gain, thereby defying the very notion of the government official as public servant.

“Members of Congress and their staffs should not be above the law when it comes to profiting from sensitive information,” Rep. Brian Baird (D-Wash.), a sponsor of the bill, said in a statement Monday. “The American people expect their public servants to represent their interests, not fatten their stock portfolios.”

Baird’s bill, sponsored also by Rep. Louise Slaughter (D-N.Y.), who chairs the House Rules Committee, would expand the scope of the Securities Exchange Commission’s insider-trading rules to prevent congressional lawmakers, their staffs and other federal employees, many of whom routinely access sensitive information, from trading on their privileged knowledge.

The proposal would also prevent lawmakers from sharing non-public information with third-party investors, while forcing members to report all trades larger than $1,000 within 90 days of the transaction, rather than the current annual disclosure requirement. Additionally, the bill would require so-called “political-intelligence” firms — which mine information from Capitol Hill to inform clients of investment opportunities — to register with Congress in the same way that lobbyists do today.

The proposal, supporters say, is particularly apt in the middle of a financial crisis through which the federal government has taken unprecedented steps to intervene in private markets. With the billions of taxpayer dollars that Congress has funneled into the same financial institutions in which many lawmakers are personally invested, they argue, the opportunities to misuse information gathered from Capitol briefings, private committee meetings and pow-wows with White House officials are nearly endless.

“Congress and the federal government are now so enmeshed in the operations of our financial markets that the potential for abuse by members of Congress, congressional staff, and federal employees is staggering,” Slaughter testified before the House Financial Services Oversight and Investigations subpanel Monday.

Because of lax financial disclosure rules — not to mention a general inattention to the issue — it’s difficult to know how prevalent insider trading is among federal employees. Earlier this year, however, SEC Inspector General David Kotz concluded a year-long investigation into two SEC attorneys suspected of trading on non-public information they gathered from their jobs within the commission’s enforcement division. Federal law enforcement officials are currently investigating those charges.

Appearing before the House subpanel Monday, Kotz said the problem is not with the SEC’s rules, which prohibit employees from trading on sensitive information, but from a lack of internal oversight.

“The SEC had essentially no compliance system in place to ensure that its own employees, with tremendous amounts of non-public information at their disposal, did not engage in insider trading themselves,” Kotz said. “The existing disclosure requirements and compliance system were based on the honor system, and there was no way to determine if an employee failed to report a securities transaction as required.”

Congress, however, has no such guidelines, and there’s evidence that congressional lawmakers for years have been using their access to non-public information to their personal financial advantage.

A series of studies conducted by Alan Ziobrowski, business professor at Georgia State University, for example, reveals that lawmakers’ access to non-public information lends them a clear advantage over other investors playing Wall Street. After examining 6,000 common-stock trades among select senators between 1993 and 1998, Ziobrowski found that the lawmakers yielded returns 12 percent better than the market as a whole.

A separate analysis of 8,000 transactions among certain House lawmakers found that the returns beat the larger market by 6 percent — the same abnormal return found among corporate inside traders, Ziobrowski told lawmakers Monday. Correcting for the possibility of dumb luck, he testified, “we can state with a 95% confidence level that some members of Congress are trading with a substantial informational advantage.”

Whether those informed trades are occurring consciously or unconsciously, many public-interest advocates argue, is inconsequential.

“Whether members of Congress are in fact cashing in on insider information, or coincidence just makes it appear so, the damage to the integrity of the federal government is the same,” Craig Holman, government affairs lobbyist for Public Citizen, said in a statement Monday.

Not all business experts agree that congressional insider trading is a problem to be addressed by extending the SEC’s reach — or even that it’s a problem at all. V.W. Verret, associate professor at George Mason University’s School of Law, told lawmakers Monday that leaks and data mining surrounding government activities can eliminate market-crippling uncertainties. Verret urged lawmakers that, if they must tackle the issue, they should approach by way of internal ethics rules rather than SEC regulations.

“Don’t ruin the securities laws to try to deal with this,” Verret said.

But Peter Henning, law professor at Wayne State University and former SEC attorney, said that empowering the securities commission with clear oversight of congressional insider trading will go a long way to keep lawmakers honest. The House proposal, Henning testified, “recognizes [that] information with the potential for significant market impact can come from a variety of sources beyond just the company whose securities are  traded.”

Shuster: Why shouldn’t people believe that your decision to say a public option as backup plan — why shouldn’t people believe that it’s been influenced by the money you’ve gotten from the insurance companies and from pharmaceuticals who don’t want a backup plan, who want it as — who don’t want a public option, at all, or a backup plan as a worst-case scenario?

Carper: Well, at the end of the day, I want us to pass a bill. I want us to pass a good bill … At the end of the day, there are more important things in the bill than whether or not we have a public plan or a public option. I think the idea of what we did in the Medicare Part D plan, where we have a fallback plan on the shelf, ready to pull out if we need it, in order to make sure market forces are working, that seems to me to be a perfectly good option.

Shuster: But, Senator, you’re under a lot of pressure, wouldn’t you acknowledge, from the insurance companies, with all the money they’ve given you?

Carper: I don’t feel a lot of pressure at all. The most effective lobbyist for me — I’ve been governor; I’ve been congressman; I’ve been state treasurer; now I’m the senator — the most effective lobbyist, for me, in everything I have ever done, are actually people from Delaware that I know that I trust who talk to me, in all kinds of parades all over my state this last Fourth of July weekend, and people that call my office, mostly from Delaware, that have a view, some for public plans, some against it.

“The best way to do it,” Carper concluded, “is to develop a bipartisan plan.”

Reps. Brian Baird (D-Wash.) and Louise Slaughter (D-N.Y.) sponsored a bill to prevent members of Congress from trading on information gleaned from working on the Hill. (house.gov)

In November of 2005, then-Senate Majority Leader Bill Frist (R-Tenn.) took to the upper-chamber floor with a major announcement. The Senate, he revealed, would soon put its full weight behind legislation creating a multi-billion dollar fund to settle lawsuits from victims of asbestos exposure — lawsuits that had already bankrupted several building supply companies.

“I am pleased to inform my colleagues that asbestos reform will be the first major legislation that we consider in late January when we return,” Frist said at the time.

Illustration by: Matt Mahurin

For most of the country, Frist’s speech was the first notice of that strategy. But for some Wall Street investors, his plan was old news that translated into big money. Indeed, shares of the world’s largest sheet-rock company, Chicago-based USG Corp., jumped more than $2 — and trading volume nearly tripled — the day before Frist delivered his announcement.

Somehow, someway, the message that Congress was moving to help companies like USG had dribbled onto Wall Street before the rest of the world knew a thing about it. And trading on such leaks, it turns out, is perfectly legal.

Now, a small group of Democrats, backed by a host of public-interest groups, wants to prevent the use of similar non-public information to guide investment decisions. Under the bill, sponsored by Reps. Brian Baird (D-Wash.) and Louise Slaughter (D-N.Y.), lawmakers and their staffs would be prohibited from trading in stocks, bonds and commodities markets based on insider knowledge gleaned from their everyday duties on Capitol Hill. The proposal would also prohibit the transfer of such information to other parties — a spouse; a brother-in-law; a political intelligence firm — who then use the information for trading purposes.

In a telephone interview last month, Baird said there’s no clean evidence that such insider trading is endemic in Washington. “But in a town that trades on information,” he added, the likelihood that it’s happening is “almost a certainty.”

“There’s no question that we get access to information,” Baird said. “There need to be bright-light firewalls between public and non-public [information].”

With most lawmakers dabbling to some extent in stocks and other publicly traded commodities, watchdog groups warn that the opportunities for members to use or convey non-public information — even if it’s done 100 percent unconsciously — are frequent. This has particularly been the case during the long string of government-funded bailouts of the finance industry that’s marked the last 18 months.

Last September, for example, as Wall Street was crumbling but before the extent of the troubles were clear, the heads of the Federal Reserve and the Treasury Department called congressional leaders to an emergency, closed-door meeting to announce their plan for an unprecedented, multi-billion dollar rescue of the nation’s financial sector.

One day later, at least 10 senators traded stock or mutual funds related to the finance industry, according to personal financial disclosure forms submitted by lawmakers last month.

At least one of those lawmakers, Sen. Richard Durbin (D-Ill.), had attended the meeting the evening before, an episode first reported by Bloomberg last month. A Durbin spokesman told Bloomberg that the senator didn’t use any information from that closed-door gathering to counsel his trades the following day.

While there’s no evidence to refute that claim, public-interest advocates argue that the mere appearance of lawmakers’ abusing their powers can lead to a dangerous erosion of public trust in all government officials.

“If it appears to be the case, then everyone’s under suspicion,” said Laura MacCleery, deputy director of campaign finance at New York University’s Brennan Center for Justice. “You want politicians to be beyond reproach. You want a system that protects the innocent and makes it impossible for the guilty to operate.”

While current law prevents insider trading on non-public information gotten through corporate channels, the Securities and Exchange Commission does not have similar powers to regulate trades made on non-public information obtained through government channels.

That loophole could allow lawmakers and other federal employees to make millions of dollars on insider investments, Baird said. If they’re later accused of getting insider information, he added, they’ve got a simple defense: “Not from the company, I didn’t.”

In March, a coalition of public interest groups, including the League of Women Voters, Common Cause and Public Citizen, endorsed the House bill in a letter to Baird and Slaughter that explained the loophole further. “Under current law, ‘insider trading’ is defined as the buying or selling of securities or commodities based on non-public information in violation of confidentiality — either to the issuing company or the source of information,” the groups wrote. “Most federal officials and employees do not owe a duty of confidentiality to the federal government and thus are not liable for insider trading.”

There is some evidence that, consciously or not, federal lawmakers tend to use their informational advantage to reap better Wall Street returns than other investors find. A 2004 study conducted by researchers at Georgia State University, for example, found that trades made by selected senators between 1993 and 1998 produced returns more than 12 percent higher than the rest of the market.

“These results,” the researchers concluded, “suggest that Senators knew appropriate times to both buy and sell their common stocks.”

Such findings might make a strong case for adoption of safeguards like the Baird-Slaughter bill. But it’s not easy to get Congress to police itself. Indeed, despite having both control of the White House and comfortable majorities in Congress, Democrats this year seem poised to ignore proposals reforming campaign finance laws and eliminating automatic congressional pay raises.

Melanie Sloan, executive director of the Center for Responsibility and Ethics in Washington, said the Baird-Slaughter bill fits into the same category. “There’s rarely support,” she said, “for things that limit lawmakers’ behavior.”

Robert M. Stern, president of the Center for Governmental Studies, a Los Angeles-based non-profit research group, agreed, maintaining that the Baird-Slaughter proposal has little chance of getting anywhere anytime soon.

“I don’t think I would hold my breath for that one,” Stern said, adding, “It’s so typical of legislators holding everyone up to standards except themselves.”