Why Is It Important To Know Who Owns Your Representative? One Example: Glass-Steagall

While corporations cannot directly back a given elected official, laws have paved the way for them to shell out significant amounts of money to support their views on a campaign. This has far-reaching effects regarding how and when laws are enacted.

What Happened?

In 1933, four years after the stock market crashed, the Glass-Steagall Act was established as a way of preventing commercial banks from trading securities with their clients’ deposits – effectively gambling deposits on the stock market. The collapse of the banking system was still fresh in everyone’s mind when they created the FDIC as a guard against bank runs in the Banking Act of 1933.

Starting in the 1960s and as time went on, the Glass-Steagall Act grew less effective as it was legislated away bit by bit, until in 1999  under the Clinton Administration the act was repealed entirely. President Clinton declared that the act was “no longer appropriate” as banks pushed their way into expanded banking and securities. The repeal of the Glass-Steagall Act is believed by many to have lead to the 2008 financial crisis, when banks became “too big to fail”.

Now What?

Fast-forwarding to more recent history, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into federal law in 2010 as a means of reigning in financial regulation and to correct the downturn.  One section of the act included the Volcker Rule – a rule to restrict United States banks from making certain kinds of speculative investments – effectively a ban on proprietary trading by commercial banks.

As of fall 2013, the rule has still not been implemented and estimates are that it won’t take effect until July 2014. Lobbyists are trying to push the law back further still.

Why So Much Power?

Why is it that corporations – banks, in this case – have so much power to push back a law for four or more years while breaking deadlines and dragging their feet? Why aren’t they being held accountable?

The answer to this is as murky as it sounds, and exactly why it’s important to know where campaign contributions come from.  The Taft-Hartley Act in 1947 prohibited labor unions and corporations from spending money to influence federal elections. This lead to the formation of PACs and Super PACS.  Super PACS may not make contributions to candidate campaigns or parties, but may engage in unlimited spending independently of the campaigns – including with organizations and groups.

Meanwhile, the Citizens United vs FEC case held that the First Amendment prohibits the government from restricting independent expenditures by organizations and groups, in a 5-4 decision that the Bipartisan Campaign Reform Act violated the First Amendment.  The majority ruled that people in a group (the organization) could not be prevented from free speech any more than individuals or the press.

Free Speech, or Campaign Contributions?

This did not affect actual campaign contributions, but it permitted partisan organizations to spend unlimited amounts of money on political campaigns, often greatly affecting the outcome.

The Citizens United vs FEC case, along with the surge of Super PACs in the last bout of Federal Elections, made very apparent the influence and strength behind organizations putting forth money advocating for political campaigns. Organizations, be they corporations or Super PACs, can place considerably more money towards a cause than even wealthy individuals. This problem becomes more urgent when we consider the existence of large media organizations capable of delivering a message – positive or otherwise –  to more than a hundred million homes across America*. It becomes clear that a candidate is not only beholden to the corporations and Super PACs that helped them get elected, but also to the media machine itself. When a company or group can drag your name through the mud in front of millions, or set you up on a pedestal as a hero, the decision making process for individual voters becomes irrelevant. By the time a voter gets to see a candidate, he or she has already been bought and paid for by any number of organizations and special interests.

Back to Consumer Protection

Returning to the Volck Rule from the Consumer Protection Act, there is little wonder as to why lobbyists and outside influences have delayed a rule that may stand in the way of banks being Too Big To Fail. The money can speak, has spoken, and has a much stronger voice when made by a large corporation than by an individual citizen.

So, who owns your representative? The Who Owns My Rep project helps you find out the companies or organizations funding your representative. Does this help to explain their behavior?

* As of May 2013, Nielsen estimates that there are 115.6 million TV homes in the US, making television a staggeringly powerful tool to sway opinions – and votes – in America.