The financial crisis of 2008 exposed the flaws and failures of the US financial system and prompted calls for reform and regulation. However, the process of enacting such changes was not easy or straightforward. It was met with fierce opposition and resistance from the very industry that caused the crisis in the first place.
In this article, we tell the story of a little known “cramdown provision," which could have helped millions of homeowners facing foreclosure. Unfortunately, the financial industry used its lobbying power and influence to not only shape and obstruct the legislative response to the crisis, but effectively block this provision. What is the cramdown provision? The cramdown provision was a proposal that would have given bankruptcy judges the authority to modify mortgages on primary residences. This means that they could reduce the principal balance, lower the interest rate, or extend the term of the loan to make it more affordable for the borrower. The provision was seen as a way to prevent foreclosures, which were skyrocketing in the aftermath of the housing bubble burst. Foreclosures not only harmed individual homeowners but also had negative spillover effects on neighborhoods, communities, and the broader economy. The provision was also seen as a way to correct the imbalance of power between lenders and borrowers. Many borrowers had been lured into predatory or subprime loans that they could not afford or understand. Many lenders had engaged in fraudulent or abusive practices that violated consumer protection laws. The provision would have given borrowers a chance to renegotiate their loans on more favorable terms, while holding lenders accountable for their actions. How did the financial industry lobby against it? The financial industry was strongly opposed to the cramdown provision. They argued that it would violate the sanctity of contracts, create moral hazard, increase uncertainty, and raise borrowing costs for everyone. They claimed that it would undermine the stability and recovery of the mortgage market, which was already in turmoil. To advance their arguments, they deployed a massive lobbying campaign that involved over 125 former members of Congress and congressional staff who had switched sides to work for the sector. These lobbyists used their insider knowledge and access to influence legislators' choices in favor of their clients, the banks, hedge funds, and credit card firms. They also used various tactics to sway public opinion against the provision. They funded media campaigns that portrayed the provision as a bailout for irresponsible borrowers at the expense of responsible ones. They mobilized grassroots supporters to contact their representatives and voice their opposition. They created a perception that the provision was more harmful than helpful, despite evidence to the contrary. What was the outcome? The outcome of this lobbying effort was that the cramdown provision was defeated in Congress. It faced opposition not only from Republicans but also from some Democrats who were influenced by the industry's arguments or donations. The provision was dropped from the final version of the Dodd-Frank Act, which was signed into law in 2010 as the main legislative response to the financial crisis. The defeat of the cramdown provision was a major setback for homeowners and consumer advocates. It meant that millions of homeowners who were underwater on their mortgages had no recourse to avoid foreclosure. It also meant that lenders who had contributed to the crisis faced no consequences for their actions. The provision could have saved up to 1.7 million homes from foreclosure, according to one estimate, and reduced mortgage payments by up to $50 billion per year, according to another. The defeat of the cramdown provision also revealed how powerful and influential the financial industry was in shaping policy outcomes. It showed how they could use their lobbying resources and strategies to distort and derail reform efforts that threatened their interests. It also showed how they could manipulate public opinion and discourse to create a false narrative that served their agenda. The defeat of the cramdown provision also eroded public trust in government's ability to regulate industries and protect consumers effectively. It reinforced the perception that government was captured by special interests and corrupted by money. It undermined the legitimacy and credibility of democratic institutions and processes. Why does it matter? The story of the cramdown provision matters because it illustrates how lobbying can affect policy outcomes in ways that are detrimental to public interest and welfare. It shows how lobbying can create an uneven playing field where some actors have more voice and influence than others. It shows how lobbying can distort information and evidence and generate misinformation and propaganda. It shows how lobbying can undermine democratic values and principles, such as accountability, transparency, participation, and representation. The story of the cramdown provision also matters because it raises questions about how to reform and regulate lobbying itself. How can we ensure that lobbying is conducted in an ethical and responsible manner? How can we increase disclosure and oversight of lobbying activities and expenditures? How can we reduce conflicts of interest and revolving doors between public and private sectors? How can we diversify and balance the sources and perspectives that inform policy decisions? How can we enhance public awareness and education about lobbying and its impacts? These are some of the questions that we need to address if we want to improve our policymaking system and restore our public trust in it. Lobbying is not inherently bad or evil, but it can be abused and misused for private gain at public expense. We need to find ways to make lobbying more transparent, accountable, and democratic, and to ensure that it serves the public good, not just the private good.
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The educational landscape is vast and varied. From public to private institutions, and from nonprofit to for-profit colleges, choices abound. However, with the rising spotlight on for-profit institutions and their controversial tactics, the pressing question becomes: Are we paying the hidden price of profit-driven education?
So, What's The Fuss All About? For-profit universities might seem like just another educational choice. However, they represent only 11% of all student enrollments but are alarmingly responsible for 44% of all federal student loan defaults. This discrepancy is startling, especially when we dig deeper. High Tuitions, Low Returns: For-profit institutions often have exorbitant tuition fees. Despite these fees, many graduates find that their investment doesn't translate to better job opportunities or higher wages. Aggressive Recruiting Tactics: A Senate report found that the recruiting process at many for-profit educational institutions is less about the student's welfare and more about the numbers. The aggressive sales approach, driven by incentives, places students in programs that might not serve their best interests. Targeting the Vulnerable: It's troubling to note that some for-profit colleges specifically target servicemembers, veterans, and even patients in veterans' hospitals, luring them with promises of grants and benefits. Politics, Profit, and Education The ties between for-profit education and politics have been thrust into the limelight, particularly during the 2016 presidential campaign. From Donald Trump's Trump University, accused of fraudulent practices, to Bill Clinton's association with Laureate International Universities, these ties raise questions about the integrity and influence of money in the sector. However, what might be more concerning than individual connections is the scale and reach of the lobbying efforts by for-profit institutions. The Deep Pockets of Lobbying From 2007 to mid-2016, affiliates of the for-profit education industry contributed a staggering $12.7 million to federal candidates and their campaign committees. This financial influence permeates the very structures meant to regulate and oversee the sector. Lobbying is not inherently bad. It can serve as a bridge between industries and policymakers. But when an industry like for-profit education, with documented questionable practices, funnels millions into lobbying efforts, it threatens the integrity of our democratic processes. The Way Forward While President Obama's administration made significant strides in regulating for-profit institutions with rules like the "gainful employment" rule of 2015, the lobbying power of the industry remains influential. Reforms are Critical: Advocates argue that for-profit education can play a valuable role in widening access to education. But for this to happen without compromising student welfare, reforms are essential. There needs to be greater transparency in tuition costs, genuine post-graduation support, and more stringent checks on aggressive recruiting practices. Awareness is Power: The more students and their families understand the workings of for-profit institutions and their lobbying efforts, the more informed their choices will be. This can mitigate potential financial and educational pitfalls. Your Role: The strength of democracy lies in the collective voice of its people. Advocacy, voting, and civic engagement can counterbalance the influence of money in politics and ensure that the educational sector remains student centric. In conclusion, while the for-profit model of education has its merits, the current practices and overarching influence of lobbying dollars pose significant challenges. Only through collective awareness and action can we safeguard the integrity of our educational institutions and, by extension, our democracy. Saudi Arabia, a wealthy and influential Middle Eastern country, has been accused of having ties to terrorism, human rights violations, and the murder of journalist Jamal Khashoggi. Despite these allegations, the kingdom has maintained a strong relationship with the United States, thanks in part to its powerful lobbying efforts in Washington, D.C.
One of the most controversial examples of Saudi lobbying was revealed by The Washington Post in 2018. The report showed that Saudi-funded lobbying firm Qorvis/MSL Group, booked 500 rooms at Trump's hotel in Washington, D.C., shortly after the 2016 presidential election. The lobbyists spent more than $270,000 to house U.S. military veterans who were invited to lobby Congress against a law that allowed victims of the 9/11 attacks to sue Saudi Arabia. The law, known as the Justice Against Sponsors of Terrorism Act (JASTA), was passed by Congress in September 2016, overriding a veto by President Barack Obama. The law gave U.S. courts jurisdiction over foreign governments that are accused of aiding or abetting terrorist acts on U.S. soil. Saudi Arabia, which has denied any involvement in the 9/11 attacks, feared that the law would expose it to lawsuits from thousands of families who lost their loved ones on that tragic day. To counter this threat, Saudi Arabia hired Qorvis/MSL Group, a subsidiary of French media giant Publicis Groupe, to launch a massive campaign to persuade lawmakers to amend or repeal JASTA. Qorvis/MSL Group is one of several lobbying firms that have represented Saudi Arabia in the U.S. for decades, receiving millions of dollars in fees every year. According to The Washington Post, Qorvis/MSL Group recruited veterans from across the country and offered them free trips to Washington, D.C., where they were instructed to meet with members of Congress and their staffs and urge them to reconsider JASTA. The veterans were told that JASTA would endanger U.S. troops abroad by exposing them to retaliatory lawsuits from foreign governments. They were also given talking points that emphasized Saudi Arabia's role as a key ally in the fight against terrorism and Iran. However, many of the veterans were unaware that their trips were funded by the Saudi government and that they were being used as part of a lobbying scheme. Some of them later expressed anger and regret when they learned the truth from The Washington Post's investigation. Others defended their participation and said they genuinely believed in the cause. The report raised serious concerns about possible influence-peddling and violation of the emoluments clause, which prohibits federal officials from accepting benefits from foreign governments without congressional approval. It also highlighted the extent to which Saudi Arabia has used its money and connections to shape U.S. policy and public opinion on issues ranging from its war in Yemen, its human rights record, its nuclear ambitions, and its rivalry with Iran. The effectiveness of Saudi lobbying is hard to measure, but some observers have noted that it has helped the kingdom avoid harsh consequences for its actions and maintain a favorable image among some segments of the U.S. population. For instance, despite widespread condemnation of the killing of Khashoggi, a critic of the Saudi regime who was brutally murdered inside the Saudi consulate in Istanbul in October 2018, President Donald Trump continued to support Saudi Crown Prince Mohammed bin Salman, who is widely suspected of ordering the assassination. Moreover, despite bipartisan efforts in Congress to end U.S. military support for the Saudi-led coalition in Yemen, which has been accused of committing war crimes and causing a humanitarian catastrophe in the impoverished country, Trump vetoed several bills that aimed to limit U.S. involvement in the conflict. On the other hand, some critics have argued that Saudi lobbying has backfired and damaged the kingdom's reputation and credibility in the U.S. They have pointed out that JASTA remains intact and that several lawsuits against Saudi Arabia have been filed under its provisions. They have also noted that public opinion polls have shown a decline in favorable views of Saudi Arabia among Americans, especially among younger generations. In conclusion, Saudi Arabia's lobbying efforts in Washington, D.C., have been extensive and sophisticated, involving multiple firms, strategies, and targets. They have sought to influence U.S. policy and perception on various issues that affect the kingdom's interests and security. However, they have also faced challenges and controversies that have exposed their motives and methods. As the U.S.-Saudi relationship continues to evolve under changing political and geopolitical circumstances, it remains to be seen how Saudi lobbyists will adapt and respond. The Tax Cuts and Jobs Act of 2017, a significant reform of the U.S. tax code, was a legislative achievement notably influenced by lobbying efforts from large business groups. Key among them were the U.S. Chamber of Commerce and the Business Roundtable. They pushed for provisions that would materially benefit their members, notably the dramatic reduction in the corporate tax rate from 35% to 21%. The lobbying wasn't merely focused on tax reduction; it also targeted the creation of tax loopholes beneficial for multinational corporations. The resultant law included provisions such as allowing profits made overseas by these corporations to be taxed at either a reduced rate or not at all if the profits were “reinvested” in certain ways. While the law was presented as a boost to the economy, the benefits appeared to be disproportionately skewed towards the entities that lobbied for it, resulting in substantial tax savings for corporations and wealthy individuals. This has sparked debates about tax fairness, wealth inequality, and the influence of lobbying on legislative outcomes in the U.S.
The 2008 financial crisis exposed the dangers of unregulated and reckless banking practices. Millions of people lost their homes, jobs, and savings, while the government had to bail out the banks with taxpayers' money. To prevent such a catastrophe from happening again, Congress passed the Dodd-Frank Act in 2010, which introduced a series of reforms to increase the transparency, accountability, and safety of the banking sector. One of the key components of the Dodd-Frank Act was the Volcker Rule, which prohibited banks from engaging in proprietary trading, or using their own funds to speculate on the market. The rule also restricted banks from investing in hedge funds and private equity funds, which are often risky and opaque. The Volcker Rule aimed to protect depositors' money from being used for gambling by banks, and to reduce the conflicts of interest between banks and their clients. However, not everyone was happy with the new regulations. Wall Street Banks, who had enjoyed enormous profits from proprietary trading and other speculative activities, saw their revenues decline under the Volcker Rule. They argued that the rule was too complex, costly, and restrictive, and that it hampered their ability to compete and innovate. They also claimed that the rule did not prevent risk-taking, but merely pushed it to other parts of the financial system, such as shadow banking. These banks used their immense lobbying power and influence to pressure the Trump administration to weaken and repeal the Volcker Rule. They found a sympathetic ear in Treasury Secretary Steven Mnuchin, a former Goldman Sachs executive, who agreed that the rule was "too complicated" and "hurt market liquidity". In 2019, the Trump administration issued a final rule that significantly relaxed the Volcker Rule's restrictions on proprietary trading and fund investments by banks. The rule also gave more discretion to banks to define what constitutes proprietary trading and what does not. The rollback of the Volcker Rule was a huge victory for Wall Street Banks, who celebrated by ramping up their risk-taking and speculation. Some banks, such as SVB, First Republic, and others, saw an opportunity to make huge profits in the turbulent market conditions caused by the Covid-19 pandemic and its aftermath. They increased their exposure to high-risk assets, such as cryptocurrencies, derivatives, junk bonds, and leveraged loans. They also engaged in complex and opaque transactions, such as total return swaps and collateralized loan obligations, that were difficult to monitor and regulate. These banks hoped to cash in on the market volatility and earn high returns for their shareholders. However, their gamble did not pay off. In 2023, a series of events triggered a sharp market correction that wiped out billions of dollars of value from these risky assets. A global cyberattack disrupted major online platforms and services, causing widespread panic and uncertainty. A new variant of Covid-19 emerged that was resistant to existing vaccines and treatments, sparking a new wave of lockdowns and travel bans. A geopolitical conflict between China and Taiwan escalated into a military confrontation that threatened global stability and trade. These shocks caused a massive sell-off in the market, as investors fled from risky assets to safer ones. The banks that had invested heavily in these assets found themselves in deep trouble. They faced huge losses that exceeded their capital reserves. They also faced margin calls from their creditors and counterparties, who demanded more collateral or repayment of their loans. Unable to meet these obligations, these banks became insolvent and collapsed. The failure of these banks had a domino effect on the rest of the financial system. Other banks that had lent money or traded with these banks also suffered losses and liquidity problems. The interbank lending market froze up, as banks became wary of lending to each other. The credit market tightened up, as banks reduced their lending to businesses and consumers. The collapse of these banks exposed how Wall Street Banks had used their lobbying power to undermine the regulations that were meant to protect the public from their excessive risk-taking and speculation. They had put their own interests above those of their customers, shareholders, and society at large. They had endangered the stability of the financial system and the economy for short-term gains. They had shown once again that they were too big to fail, but also too big to regulate. The prison-industrial complex (PIC) is a term that describes the network of companies that profit from the mass incarceration and detention of human beings in the United States. These companies include private prison operators, such as GEO Group and CoreCivic (formerly Corrections Corporation of America), as well as providers of various services and products to prisons and detention centers, such as food, health care, transportation, surveillance, ankle monitors, re-entry programs and more.
The PIC has a vested interest in maintaining and expanding the carceral system, which relies on harsh sentencing policies, punitive drug laws, racial profiling, and immigration enforcement. To achieve this goal, the PIC has used its political influence to lobby for legislation and candidates that support its agenda, as well as to counter the efforts of reformers and activists who seek to end mass incarceration and detention. However, in recent years, the PIC has faced growing public scrutiny and criticism for its role in perpetuating human rights violations, racial disparities, and social and economic harms caused by the carceral system. Moreover, the PIC has encountered some challenges and setbacks in its traditional lobbying strategy, such as: The decline of private prison contracts at the federal level under the Obama administration, which announced in 2016 its intention to phase out the use of private prisons by the Bureau of Prisons and the Department of Homeland Security. Although this decision was reversed by the Trump administration, it signaled a shift in public opinion and policy direction regarding private prisons. - The emergence of a bipartisan coalition of lawmakers and advocates who support criminal justice reform and seek to reduce prison populations and costs. Some examples of this trend include the First Step Act, which was signed into law in 2018 and aimed to improve prison conditions and expand early release programs for federal inmates, and the Justice Reinvestment Initiative, which provides grants to states that implement policies to reduce recidivism and incarceration rates. The divestment movement led by activists, investors, and philanthropists who pressure financial institutions, pension funds, universities, and foundations to withdraw their investments from companies that are part of the PIC. This movement has gained momentum in recent years and has resulted in some notable victories, such as JPMorgan Chase's announcement in 2019 that it would stop financing private prison companies. In response to these challenges, the PIC has adapted its lobbying strategy to reposition itself as a partner rather than an opponent of criminal justice reform. Some of the ways that the PIC has done this include: Shifting its focus from advocating for policies that increase incarceration rates, such as mandatory minimum sentences and private prison contracts, to investing in alternatives to incarceration that still generate revenue for the PIC, such as electronic monitoring devices, probation services, re-entry programs, and immigration detention centers. Emphasizing its role in providing quality services and programs that benefit inmates, detainees, and communities, such as education, health care, rehabilitation, and job training. For example, GEO Group's website states that it is "the world's leading provider of evidence-based rehabilitation programs" and that it "provides high-quality services in safe environments that meet or exceed industry standards." Building relationships and networks with influential stakeholders and organizations that support criminal justice reform, such as lawmakers, think tanks, advocacy groups, faith leaders, and media outlets. For example, CoreCivic's website features testimonials from various partners and collaborators who praise its work and impact. These tactics are intended to create a positive image for the PIC and to obscure its underlying profit motive and harmful effects on society. However, they also present an opportunity for reformers and activists to expose the contradictions and conflicts of interest that lie behind the PIC's lobbying strategy. By doing so, they can challenge the legitimacy and credibility of the PIC's claims and arguments and reveal its true agenda: to maintain and expand a system that exploits human suffering for profit. |
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