Lobbyists Forge Letters To Pretend There's A 'Grassroots' Interest In Derivatives Reform

from the that's-called-scamming dept

This story actually comes from back in November, but I just found out about it due to a recent Planet Money episode all about the regulatory scramble to rewrite our banking rules. The whole podcast is interesting, but there's a bit in the middle about one of the tactics used by lobbyists to influence the rules: they totally forged letters from individuals and small businesses to make it seem like there was "grassroots" support for a particular position on derivatives reform.

We've seen similar things before, where various DC lobbying groups make "deals" with various groups to put their name on letters. A few years ago there was a disturbing quote from someone who did this for a living who explained how it works:
"You go down the Latino people, the deaf people, the farmers, and choose them.... You say, 'I can't use this one--I already used them last time...' We had their letterhead. We'd just write the letter. We'd fax it to them and tell them, 'You're in favor of this.'"
Except, in this latest case, the subcontractor of the subcontractor of the lobbying firm didn't even do that last part. They just forged the letters entirely -- including from a small Burger King franchise and a circuit court judge who was not happy about her name being used this way. It appears the only way this was actually noticed was because a Bloomberg reporter was lazily scanning the letters to the CFTC (the Commodity Futures Trading Commission) and was surprised to see what looked like very out-of-place letters. Everything else was from big banks and big financial institutions. Letters from a Burger King franchise seemed odd. So the reporter called... and the franchise had no idea what the CFTC was, let alone why its name was on a letter pushing the CFTC in a particular direction about derivatives reform.

And yet, these kinds of letters do influence regulatory decisions -- which is a big part of the problem.

The Planet Money podcast discusses how these regulators need lobbyists to actually understand what they're regulating. And, it's absolutely true that the regulators don't really understand the issues at all, while those in the industry do understand what kind of impact regulatory changes will have. But, really, that's an argument for taking a rather light regulatory touch on these issues, since the regulations are going to be driven by lobbyists who understand the issue better than the regulators. Thus, the end result is almost always going to be in the favor of big players in the industry who can afford lobbyists (whether they do underhanded things like forge letters or just do more aboveboard lobbying). This is the concern that many folks have.

Yes, there are problems with a light regulatory touch. But the assumption that we need heavy regulations ignores how bad people are at regulating most industries, and how much regulatory capture there is in the rulemaking. The end results of aggressive regulation, driven by lobbyists, can often be worse than no regulation at all.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    Mike42 (profile), Feb 10th, 2011 @ 2:23pm

    Make your voice heard...

    Can we really say that this behaviour is limited to this one lobbyist group, over this one issue? I doubt it.

    So, basically, any communication you try to have with your representatives in Washington will most likely be drowned out by spam from lobbyists.

    Now what does the citizen do?

     

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  2.  
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    jjmsan, Feb 10th, 2011 @ 2:24pm

    No Rules

    No regulation at all means the institutions with the most power gets a carte blanche to do whatever they want. None of us has ever lived in a situation like that. Even if you do not totally understand what you are regulating you can get enough information to figure out if you are totally screwing someone over.

     

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  3.  
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    Anonymous Coward, Feb 10th, 2011 @ 2:25pm

    In most cases, the industry lobbyists are the ones arguing for a light regulatory touch, so I don't think we really need to worry too much about lobbyists encouraging aggressive regulation.

    Also, I disagree that regulators don't usually understand the industry they're regulating. Regulators (the executive branch people who actually make rules and enforce them) are frequently experienced in their industry, and this can lead to conflicts of interest when there's a revolving door between regulators and industry companies. It's congress people that don't understand the industry, and they need lobbyists to explain it to them.

     

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  4.  
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    Anonymous Coward, Feb 10th, 2011 @ 2:42pm

    these regulators need lobbyists to actually understand what they're regulating

    I was going to say that it's our own fault for electing them, but it turns out that the CFTC is made up of five people hand-picked by the President.
    So, I guess it's our own fault for electing him. (Or them, rather; one of the five is left over from Dubya.)

     

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  5.  
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    laughingdragon, Feb 10th, 2011 @ 3:12pm

    Are lobbyists licenced, yank that license.

    We need to license lobbyists. And then if they practice fraud, yank that license.

     

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  6.  
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    Anonymous Coward, Feb 10th, 2011 @ 3:34pm

    If they forged letters, hand the case over to the police and have them charged. End of issue.

     

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  7.  
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    Anonymous Coward, Feb 10th, 2011 @ 3:38pm

    Re:

    So it's only illegal if you get caught doing it. How nice.

    How about solving the issue at the root of the problem, like having a decent verification system to actually catch pure BS instead of taking it at face value?

     

    reply to this | link to this | view in thread ]

  8.  
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    Jay (profile), Feb 10th, 2011 @ 4:01pm

    Re: Make your voice heard...

    Use twitter?

     

    reply to this | link to this | view in thread ]

  9.  
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    Thomas (profile), Feb 10th, 2011 @ 4:02pm

    Nothing new..

    They've been doing it for years. But why bother? It's easier to just slip money to the congressmen. I doubt there is a single honest person left in Congress; they all take money one way or another. Industry lobbyists are willing to do pretty much anything, including making people disappear. Legality has very little meaning to lobbyists.

     

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  10.  
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    Jay (profile), Feb 10th, 2011 @ 4:03pm

    Re: Re:

    And how would it be implemented?

     

    reply to this | link to this | view in thread ]

  11.  
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    abc gum, Feb 10th, 2011 @ 6:00pm

    Re:

    "and they need lobbyists to explain it to them."

    Heh - yeah - and they file the explanation under campaign contributions. If they were any good at their job, they might consider having knowledgeable people on their staff.

     

    reply to this | link to this | view in thread ]

  12.  
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    Anonymous Coward, Feb 10th, 2011 @ 7:08pm

    Will those lobbyist get into trouble by creating and using something equivalent to "forged document"?

     

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  13.  
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    Daddy Warbucks, Feb 10th, 2011 @ 10:26pm

    The K Street Perp Block

    So who's going to jail over this? I know any one of us would be slapped with a big fine and tossed in the can if we did this.

    Oh yeah, I forgot, no one goes to jail under a Plutocracy if they have enough money or are highly connected.

     

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  14.  
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    The eejit (profile), Feb 11th, 2011 @ 12:57am

    Re: The K Street Perp Block

    I blame the Skull and Bones.

     

    reply to this | link to this | view in thread ]

  15.  
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    Tallbonez, Feb 11th, 2011 @ 5:00am

    Regulators need lobbyists?

    "The Planet Money podcast discusses how these regulators need lobbyists to actually understand what they're regulating."

    Disagree, Most Regulators are/were lobbyists (the FDA being a shining example). If a regulator can't keep up to speed with the issues then we have no business regulating that area. Our current system of regulation simply protects the interest of campaign contributors.

     

    reply to this | link to this | view in thread ]

  16.  
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    Anonymous Coward, Feb 11th, 2011 @ 7:34am

    If it were Anon or Wikepedia or heck even anyone of us we all be in jail by now, why are they not getting prosecuted?

     

    reply to this | link to this | view in thread ]


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