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Behind The Curtain: How Tom Donohue Says One Thing About Regulations but the Chamber Does Another

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By David King, Intern at U.S. Chamber Watch

 On June 22, 2016, U.S. Chamber of Commerce President Thomas J. Donohue gave a speech entitled “Financing America’s Economic Growth: How Robust Capital Markets Can Help Revitalize Our Economy” at the Nasdaq MarketSite in New York City. He began this speech by recalling that he previously spoke at Nasdaq in 2007, in the months before the Financial Crisis. He claimed that his advice then went unheeded. One is left to wonder exactly to what advice he is referring, as the Chamber has been a longstanding advocate of the type of deregulation that helped lead to the 2008 financial crisis. However, despite his dubious claims of prescience, Donohue offered us a second chance to dissect his well-worn platitudes that mask the Chamber’s aggressive deregulatory agenda.

Claim #1: “We want smart regulation.”

While Donohue may claim to seek “smart” regulations, the reality is that the Chamber almost never supports any new regulations. The Chamber does, however, spend its vast resources fighting against regulations intended to safeguard the American public. Most recently, the Chamber has opposed the Department of Labor’s fiduciary rule requiring money managers to act in their clients’ best interests as well as the Overtime Rule requiring that more salaried workers be paid for any overtime hours they work. Not to mention the Chamber’s epic fight against implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act, including the Volcker rule banning commercial banks from engaging in proprietary trading activity with depositors’ money and rules proposed by the Consumer Financial Protection Bureau (CFPB), like limiting the use of forced arbitration clauses. Claiming that you’re for “smart” regulation when you almost never propose any is nothing more than a smoke screen to hide the Chamber’s reactionary, anti-regulatory agenda.

Claim #2: “If we take away the right to fail, we take away the right to succeed.”

Donohue’s defense of Wall Street ignores the fact that the new regulations born of the financial crisis do not take away the right for banks to fail; they merely attempt to eliminate the right to be too big to fail and therefore require taxpayer dollars for bailouts. While Donohue claims that these newly enacted regulations harm Main Street, the reality is that they shield Main Street from the enormous collateral damage that occurs when Wall Street’s casino games blow up as they did during the financial crisis. Credit for Main Street dries up when banks’ speculative activities run amok, something Donohue tries to gloss over in his speech.

Claim #3: “Too often rules are decided in the backrooms of Washington”

Talk about chutzpah. The Chamber is the nation’s largest lobbyist and is a habitué of Washington backroom deals. What’s more, Donohue has the audacity to demand greater transparency at various regulatory agencies despite the fact that the Chamber itself is quite opaque, refusing to disclose where its own money comes from. The Chamber received nearly $170 million in 2012 from just 1,500 donors. Not a single donor was disclosed. The Chamber’s very own head lobbyist, Bruce Josten, has stated “We never disclose funding or what we’re going to do.” If Donohue is serious about bringing transparency to Washington, then he should start with his own organization.

Claim #4: “I know a thing or two about the Post Office… Having it launch a banking operation is as dumb an idea as I have heard in Washington, a town full of dumb ideas.”

Postal banks are a fixture in many industrialized nations. The U.S. also historically had postal banking. Allowing the Post Office to expand its product line would provide much needed financial services to those who would normally go unbanked. This would be a great thing for consumers, particularly poor consumers who would benefit immensely from being able to avoid payday lenders and their astronomical interest rates. Of course, a Post Office bank would be a terrible thing for payday lenders, so naturally, the Chamber is against it.

Claim #5: “We’re not looking to pick winners and losers.”

Au contraire! Donohue and the Chamber’s agenda is very much looking to pick winners, and the winners in this speech, delivered in the heart of Wall Street are, not surprisingly, Wall Street banks as well as the rest of the financial services industry– the payday lenders, insurance companies, credit card issuers, and student loan issuers. Donohue’s agenda also creates losers, starting with small businesses and consumers who are harmed when the financial services sector is deregulated as Donohue wishes it to be.

Donohue famously stated that he wanted to turn the Chamber into “the biggest gorilla in this town.” When it comes to the Chamber’s anti-regulatory agenda, Donohue is not so candid. While he may claim to support transparency and regulations and to act in the best interests of Main Street, that could not be further from the truth. Donohue and the Chamber’s M.O. should by now be clear: say one thing, do another.

The Chamber’s Capital Markets Summit: The Height of Mischaracterization

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When the U.S. Chamber of Commerce hosts Securities and Exchange Commission Chair Mary Jo White and other Washington regulators at its Capital Markets Summit today, you’ll have to excuse our skepticism that it’s speaking to the concerns of any businesses other than those on Wall Street.

We suspect the Chamber leaders are more concerned about the Dodd-Frank Wall Street Reform Act’s impact on the mega-banks that fund the Chamber and sit on its board, such as Charles Schwab, JP Morgan, Wells Fargo, Capital One and others that remain mostly undisclosed. These mega-banks caused the financial crash that savaged Main Street – and then they demanded bailouts and paid the Chamber to lobby against meaningful reforms.

The Chamber’s claims to represent Main Street are misleading and inaccurate. At last year’s Capital Markets Summit, for example, the Chamber presented a survey called “How Main Street Businesses Use Financial Services” – but its polling of “Main Street businesses” explicitly excluded any businesses making less than $75 million per year in revenue. Meanwhile, the U.S. Small Business Administration defines a small business for many industries as making no more than $7 million to $35.5 million per year in revenue (sidebar—we feel even those numbers are too high, as no ”mom and pop” shop we know pulls in $7 million a year.)

The Chamber has been the leading opponent of an effort at the Securities and Exchange Commission to require publicly traded companies to disclose information on political spending to shareholders, and that is likely to be an issue raised today. This is a logical corollary to the fact that the Chamber has been one of the largest spenders of aggregated corporate money in politics over the last decade. In 2012, it was the biggest or second-biggest non-disclosed outside spender in 29 of the 35 congressional races Public Citizen’s Chamber Watch Project studied. And its business model is to spend to influence races without ever disclosing its donors.

In January 2013, the Chamber and two other business associations submitted a comment to the SEC opposing political spending disclosure. The new rule would make it impossible for public corporations that give money to the Chamber to remain hidden as they oppose policies widely supported by many of their shareholders and most Americans—on issues ranging from climate change to banking policy.

The Chamber vs. small banks on Dodd-Frank

At today’s event the Chamber will also likely oppose many of the still-uncompleted Dodd-Frank rules. Since the law’s passage, the Chamber has ranged from vehemently opposed to the bill to presenting “fixes” that would completely disable it. Meanwhile, many of the small businesses the Chamber purports to speak for have been more nuanced and supportive of the reforms. Groups like the Independent Community Bankers of America have said that Dodd-Frank, while complex and introducing new compliance costs, has done good things for them. If anything, they want further modifications in the law distinguishing them from big banks – not to be spoken for by those who are skewed toward Wall Street. The Main Street Alliance has testified in explicit support of Dodd-Frank, saying, “The efforts to repeal all or part of Dodd-Frank are doing more to create uncertain circumstances than any other factor related to the Act.”

The Chamber has pulled out all the stops to delay and kill Dodd-Frank, and then had the audacity to criticize it for being “only one-third implemented.” While calling the bill “byzantine,” it proposes “fixes” that would add steps making the Consumer Financial Protection Bureau and other Dodd-Frank innovations unworkable.

And in what’s become a routine exercise in chutzpah, agents from the Chamber of Commerce show up at congressional hearings and in the media claiming the reform act stifles small business. Invariably, the Chamber’s agent claims to represent 3 million small businesses across the nation, even though more than half of its donations came from 64 donors. Invariably, they launch into examples only relevant to the mega-banks.

A case in point: On February 26, Chamber representative Tom Quaadman claimed that new Dodd-Frank restrictions on bank investments in collateralized loan obligations (CLOs) would harm small businesses.

CLOs are packages of loan, and each loan in the package is likely to be for more than $20 million. As one of the Chamber’s own fact sheets explains, they are “portfolios” of “large commercial loans.” They are not standard small business loans for the corner grocery, and they are generally purchased by large banks. Of the $300 billion CLO market, banks hold $70 billion. Of this, the largest three banks hold about 70 percent.

Protecting bloated CEO pay

More evidence that the Chamber represents big banks rather than small ones is its longstanding defense of outsized, taxpayer-subsidized CEO compensation.  Chamber speakers may reference a simple rule to require disclosure of CEO pay today. The rule would require companies to publish the ratio of the CEO’s pay to that of the median paid employee. On May 23, 2013, Chamber envoy Quaadman criticized this reform in congressional testimony. The rule only applies to firms traded on the stock market—hardly small companies. Quaadman nevertheless dared to cite a company that claimed it would cost $7.6 million to figure the ratio. The company isn’t named, possibly because of the embarrassment that it doesn’t know what its employees are paid, or can’t figure a median. Or more likely, the number is fabricated hyperbole.

Again, is the Chamber truly focused on small business concerns or on the protection of the wealthy elite? In a mom-and-pop shop, presumably mom and pop know what each other makes.

Wall Street crashed the economy where Main Street lives. If the Chamber truly represented Main Street, it would champion stronger rules to make Wall Street small and stable enough to avoid crashing the economy again.

This post was written by Sam Jewler, communications officer for Public Citizen’s U.S. Chamber Watch program, and Bartlett Naylor, financial policy advocate for Public Citizen’s Congress Watch division.