By Mike Colpitts
The dirty money trail left in the wake of the financial crisis leads from Wall Street to Washington, D.C. all the way to Main Street. No other single factor has had as much of an impact on the collapse of the U.S. housing market as members of Congress lining their pockets with campaign contributions from the real estate and financial sectors.
Leading U.S. Congressmen are collecting huge sums of money from the same banks, real estate related industries and financial companies that sent the housing market into a tailspin, and millions of homeowners into foreclosure and eventually out on to the street.
The massive deluge of multi-million dollar contributions flowing from the real estate and financial industries weighs heavily on lawmakers decision making. The sheer size of donations is a stark reminder of a capitalistic system that has run amuck, with few regulations restricting commercial banks and mortgage lenders.
Banks and mortgage companies developed new mortgage products to sell loans to anyone who could sign their name, while Wall Street executives developed new avenues to sell securities in mass to back up the huge volume of mortgages that were being sold. Billions of dollars in funds were also lost by investors in securities, many of whom later sued to recoup their massive losses.
The resulting foreclosure crisis has developed a destabilized U.S. economy, falling home values and unemployment levels that haven’t been seen since the Great Depression. Despite new reforms passed by Congress, few meaningful measures have been implemented to aid the market as home values in the majority of the nation continue to plummet.
For a while the U.S. Senate and House of Representatives appeared as though they might take action to insure less fallout from the crisis, but since time is the markets’ worst enemy and Congress acts slowly when it does take action at all, it seems inevitable that millions of additional homeowners are going to suffer before things are finally straightened out.
Over the course of the last 20 years, the real estate and financial industries has been a major contributor to Congressional campaigns. Since 1995 the industry has favored Republicans over Democrats, but as the power in Congress changes so do the campaign contributions, weighing more heavily towards the party in control, according to the Center for Responsive Politics.
At the height of the collapsing real estate market, Senator Charles Schumer (D-NY) received the largest amount of money from the real estate industry in the past two decades, accounting for $3.3 million from Political Action Committees and individuals associated with the industry, according to the Center for Responsive Politics, a nonpartisan group, which tracks campaign donations.
Connecticut Senator Joe Lieberman, who has already announced his retirement apparently as a result of fallout from the crisis ranked second in terms of donations from the industry. Rep. Johnny Isakson (R-GA) followed in the third position, and retired ranking Senate Republican Chris Dodd (D-CT), who headed the powerful Senate Banking, Housing and Urban Affairs Committee, gained the fourth highest amount of donations.
For decades the industry has been one of the largest lobbying organizations in the nation’s capitol among federal lawmakers. Donations peaked at $90 million in 2005 at the height of the real estate market before declining with the weight of the market.