If anyone should understand why the investment banks need to be reined in, a member of Congress who represents Jefferson County should. Unfortunately, we're still seeing the same deference in Congress to Wall Street that we did before they blew up the world economy. [Wall Street's allies] will certainly be well funded for their next election.
Barbara Roper of Pueblo, Colo., a lobbyist on financial issues for the Consumer Federation of America.
Background:
JPMorgan led a team of banks that overcharged as much as $100 million on interest-rate swap deals after they persuaded Jefferson County to refinance nearly all its $3.2 billion of debt for a sewer project from fixed-rate bonds into floating-rate securities. When the subprime loan market collapsed, interest rates on those bonds soared. After provisions in the contracts forced the county to pay off the debt early, it defaulted. In 2009, JPMorgan agreed to cancel Jefferson County's swaps, forfeiting more than $647 million in fees. The bank gave the county $50 million and paid a $25 million penalty to settle an SEC investigation without admitting or denying the allegations.
The SEC said the bank overcharged the county on the transactions so it could funnel illicit payments to friends of county commissioners. Larry P. Langford, a former commissioner, was convicted of accepting bribes for arranging the financing and is serving a 15-year sentence. Two of his associates pleaded guilty, and two JPMorgan bankers are fighting civil charges from the SEC.
During the past two decades, Spencer Bachus has been the U.S. House of Representatives' third-biggest recipient of donations from financial companies, totaling some $7.1 million, according to the Center for Responsive Politics. JPMorgan—and its employees—constitute the congressman's single biggest contributor. On May 24 the House Financial Services Committee, which the Republican leads, voted along party lines to stall regulations for derivatives, including those aimed at keeping the rest of the nation from repeating Jefferson County's mistakes, until September 2012.
http://www.businessweek.com/magazine/content/11_23/b4231032982679.htm