The Ohio Congresswoman (and the House’s longest-serving woman) on the vested interests in our broken system, how the bailout made things worse, and if she traded earmarks for donations.
Last April, Congresswoman Marcy Kaptur of Ohio attended a Washington dinner where Jamie Dimon, the CEO of JP Morgan Chase, was a speaker. Kaptur, whose district includes Toledo and counties along the Michigan border, had recently been told by local realtors that JP Morgan Chase was a top forecloser in the area—and this in a district devastated by the economic downturn. Foreclosures had almost doubled, unemployment was close to 20 percent in some areas, and Toledo was now the eighth poorest city in the nation. Kaptur, in front of a group of distinguished guests that had been hailing the CEO as a reformer and “the new face of Wall Street,” told Dimon what she’d heard from her realtors: despite repeated attempts at mortgage workouts, JP Morgan Chase representatives often did not return phone calls. Dimon first denied it could be true, then had a bank executive vice president hand Kaptur a business card.
After getting nowhere with the executive vice president, Kaptur told a version of this story on C-SPAN. Just minutes later, a JP Morgan Chase representative called and said the bank would indeed work with her constituents on the mortgage workouts. Weeks passed until finally, in mid-June, Kaptur was able to arrange a workshop. Members from about ten frustrated families, who up to that point had felt ignored by the bank, took turns yelling at the JP Morgan Chase representatives, who attended only by telephone. Then, just over a month later, Kaptur learned that JP Morgan Chase had distributed fliers inviting people in danger of losing their homes to a session in Columbus on Friday, July 17. Alarmed homeowners took the day off—if they were employed—to attend the meeting and plead with bank representatives to help them find a way to stay in their homes. When they arrived, no one from the bank was there. Not until one in the afternoon did anyone from JP Morgan Chase show up.
To Kaptur, these incidents typify what America’s large financial institutions have become: uncaring behemoths beholden only to shareholders, far removed from the existential struggles of working families. And they’ve made her angry—angry enough that Michael Moore, who was watching C-Span one day and happened to catch this little-known congresswoman railing against the Wall Street bailout, decided to put her in his latest documentary, Capitalism: A Love Story. In one scene from the film, Moore and Kaptur are standing outside Congress, and she tells him: “The people here aren’t really in charge. Wall Street is in charge.” Hyperbole? Possibly. But to watch her impassioned speeches from the House floor imploring her foreclosed constituents to break the law and squat in their homes, you can be fairly certain what it’s not: demagoguery. Her constituents are suffering, and the way she sees it, for the government to give billions in taxpayer dollars to the same institutions that caused the suffering is not only illogical, it’s outrageous.
First elected in 1982, Kaptur is serving her fourteenth term in the U.S. House of Representatives, making her the longest serving woman in that chamber. She sits on three committees (Appropriations, Budget, and Oversight and Government Reform) and three subcommittees (including Defense). A Democrat, Kaptur is widely regarded as a progressive and was recently voted “Most Valuable Member” of the House by The Nation. Yet she’s also pure heartland: the daughter of Polish-American grocers, Kaptur resides in the same Toledo house where she was born and raised. While Kaptur’s growing renown can be attributed to her fiery speeches on the bailout, she has begun speaking out on another key issue, one that receives much less press but is perhaps even more significant: the “absolutely corrupt” way that political campaigns are financed today—which, she says, fuels the toxic hyper-partisanship that characterizes twenty-first century American politics.
So it was particularly shocking when, just days before we spoke, Kaptur’s name turned up on a leaked list of House members being questioned about ties to a defense lobbying firm called PMA Group—and about whether she traded earmarks for campaign donations. (The names of six other members of the subcommittee for Defense were also on the list.) I spoke with Kaptur by phone on a Saturday, catching her in the Capitol just moments after the historic healthcare bill passed the House.
—Jake Whitney for Guernica
Guernica: You’ve been in Congress for twenty-six years, yet you’ve said the influence of money in Washington is worse than it’s ever been. You’ve described the new fundraising system as “absolutely corrupt.” What did you mean?
Marcy Kaptur: It used to be that most of your fundraising was done at the local level. Though you might get elected to a federal position, your real milieu was your district. When I first came to Congress, there was an organization starting up called the Democratic Congressional Campaign Committee. Then came the National Republican Congressional Committee. During the eighties and nineties, they just blossomed into full-fledged campaign organizations—partisan campaign organizations that were separate from the Democratic National Committee or your local party. And they began to set goals for members and campaign against members. Which was unheard of when I first got here—you would never campaign against a member, certainly in your own state.
Members of Congress are viewed as targets. Imagine working in an environment like that. It’s a very different place than when friendships used to form across the aisle, which are essential to getting things done.
Guernica: What’s it like today?
Marcy Kaptur: In my first campaign, I raised about one hundred eighty thousand dollars. Today, [a couple of] million dollars is spent in the average race—on both sides. So chances are, when someone speaks to you, they’re asking for money. They’re not talking about an issue before Congress; they’re talking about some event that’s coming up. Or maybe it’s the end of the quarter and they want a campaign contribution. The place has become so overly conscious of money that it’s overwhelmed the conduct of [legislative] business. Both parties are trying to recruit millionaires, since it’s a lot easier to run them since they have their own money. Look at Bloomberg. He spent one hundred million dollars and got 50.6 percent of the vote. It’s egregious. [Campaign finance] has taken on a life of its own. There are big interests that gravitate toward that—partisan interests in both parties—whether it’s Eric Cantor [Republican Whip] or Chris Van Hollen [Democrat from Maryland and chairman of the DCCC] or Rahm Emanuel. Their basic job is to raise money. During the last cycle of Congress, they raised about three hundred thirty-nine million dollars for each two-year cycle [for both houses]. Come now.
Guernica: You’ve said that this system is responsible for the extreme partisanship we’re seeing because it turns members of Congress into “archenemies.” Why?
Marcy Kaptur: Members of Congress are viewed as targets. They even use that term: a targeted member. There are ranked lists of the top targets: he’s the number one target; she’s the number two target. Imagine working in an environment like that. It’s a very different place than when friendships used to form across the aisle, which are essential to getting things done. Over a period of time, it poisons the waters because it’s like the election never ends. If you stand outside the DCCC or the NRCC, you’ll see [members of Congress] rushing in to use the telephones. They’re under a lot of pressure. How do you raise three million dollars? I’ve never done that. I remember one congressman who used to spend 90 percent of his time on the phone. They convince all the new members that if they don’t raise this money, they’re going to lose their next election. So people just dial for dollars all the time. It’s a terrible way to enter the institution. But that’s the new culture.
Guernica: How do we change it?
Marcy Kaptur: We need a Canadian or British-like campaign financing system. They have very strict limits on the amount of money that can be spent. I have a bill to overturn Buckley vs. Valeo, which is the court decision that equates money with speech. Congress has never chosen to override that. They could, through legislation. The Brits have free television time as a condition of licensing. So there are ways to reform it, but in all my years, there has never been a serious effort at reform. Usually what they do is, they have something they call reform and then they change which [avenues] you can send the money through—you can send it through a committee or through a special PAC or whatever. There is a whole industry supporting [the status quo]: pollsters, media companies, advertising companies.
Guernica: What about the McCain-Feingold bill? Did that accomplish any true reform?
Marcy Kaptur: Look what happened as a result of it: we’re spending double what we used to. So I’ll let you answer your own question. That’s one of those bills that they tout as reform, but in the end not only is it hollow, it’s worse than what we had before.
Guernica: Do you think McCain and Feingold knew it wouldn’t accomplish much, or do you think they were attempting genuine reform?
Marcy Kaptur: I can’t pre-judge them. Maybe the people who wrote [the bill] were quite clever; maybe the senators didn’t fully know. But it’s interesting that when McCain ran for president, he sure had a lot of money. We need disarmament—and it’s got to come from both sides. I’m very open to various reform bills. But I want serious ones. I have several of my own. You know in Canada, you can’t accept any PAC money? The highest contribution you can accept is $1,100. That’s it. So it can happen if we want it to. And I think the American people really want it. But those who are vested in the current system like it this way. Because there are huge interests at stake—the people who do the ads, for instance. They make 15 percent [on an ad]. So if you’re spending a million dollars and you get 15 percent of that, times forty candidates, that’s a lot of money.
Guernica: Is there much support for change within Congress?
Marcy Kaptur: It’s never been coalesced. It’s very diffuse. And there are a lot of people who like it this way.
Guernica: After the Jack Abramoff scandal a few years ago, we heard a lot of talk about cracking down on the kinds of gifts lobbyists can give members of Congress. Has their influence been curbed?
Marcy Kaptur: You can’t accept meals from lobbyists anymore—I never took them anyway—but what they did was they raised the amount individuals can contribute to $2,300. So to me, that was something that looked like reform, but really wasn’t. It’s kind of like dealing with bonuses on Wall Street rather than dealing with the profits of the corporation or the overall compensation of all the executives. You miss the whole for the part. That’s what they’re doing here: “Oh, you can’t use a [lobbyist’s] airplane.” Fine, I agree with that. But then you more than double the amount that wealthy interests can give you? It makes it much more difficult when you don’t come from one of these money-center districts. But what happens is the representative of the money-center district becomes more empowered because they can steer contribution dollars. And I think PAC donations went from five thousand dollars to ten thousand dollars, and there’s another provision where—I’ve never gotten it so I’m not exactly sure—they can give another eleven thousand dollars. Boy, they can give big money.
The bailout made things a lot worse. What the financial institutions basically did was save themselves—let the republic be damned.
Guernica: But the influence of the lobbyists themselves has been curbed a bit?
Marcy Kaptur: In terms of disclosure and stopping certain practices, yes. But it certainly hasn’t stopped the big money flow.
Guernica: How did you end up in Michael Moore’s new film?
Marcy Kaptur: He took several of the speeches I’d made and decided to use them in the movie. After that was done, he [called and] said we’d like to come interview you. They came and interviewed me [in D.C.]. But at that point I didn’t know I would be in the movie. I thought they were interviewing different members. I didn’t know that I would end up in the final cut.
Guernica: One reason he put you in the film is because you’ve been very critical of the Wall Street bailout. Admittedly, it seems a bit illogical to be giving billions of taxpayer dollars to the same people and institutions that wrecked the economy in the first place. Yet the economy has stabilized and banks are starting to lend again. So the bailout seems to have worked, no?
Marcy Kaptur: The bailout made things a lot worse. What the financial institutions basically did was save themselves—let the republic be damned. Look at the result: Essentially five or six institutions, which then controlled about 30 percent of deposits, now control close to 40 percent. So they’ve become even bigger and more concentrated. Institutions that were not banks became [bank holding companies] to protect themselves. And they haven’t done the mortgage workouts yet and foreclosures are increasing—and the credit system has been upended. The local banks that didn’t do anything wrong now have to pay higher insurance fees and supervisory fees. This is causing more credit to seize up at the local level. That has resulted in over 125 bank closures. In Ohio, we only had four money-center banks left, but now we’re down to three because PNC came in and bought National City and put ten thousand more people out of work. Who knows how many of the remaining three will survive. So the big institutions control 40 percent of all deposits in the country now, and twelve of them have 90 percent of the credit card accounts. That is an oligopoly. It’s a system where the big guys are just getting bigger, making huge profits—who else in America is?—and they basically use the government of the United States as their insurance company.
Guernica: We were told that we had to rescue these institutions because they were “too big to fail.” So these “too big to fail” institutions have gotten even bigger?
If it weren’t for Perot during the nineties, we wouldn’t have had any fiscal discipline at all. So thank God for his two races for president, because both parties got the message.
Marcy Kaptur: Yes, they have. There was a great editorial in the [November 5] Wall Street Journal by Charles Gasparino. He wrote a book called The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System. He goes back to the nineteen seventies and eighties and shows how every time these institutions did something that was imprudent, our government rewarded them—whether it was long-term capital management, the Mexican peso bailout, the Savings and Loan crisis, Enron, and now this. The financial institutions just kept taking more and more, and they kept transferring their losses to the public—and they are still doing it. Too big to fail? I say these institutions are too big to work.
Guernica: Why does the government allow it?
Marcy Kaptur: Because the financial industry is the largest contributor to elections—on both the executive and legislative sides. And they are very sophisticated in their approach to elected officials. They hire the best talent and are very good at representing their interests. They’ve made a lot of money doing it, but they’ve hurt the country. They’ve hurt the country so much.
Guernica: So it was reckless behavior by Wall Street that got us into this mess—bizarre derivatives, credit-default swaps, securitizing of risky mortgage loans. But there is still a debate about which party was responsible for allowing that type of freewheeling atmosphere to reign. Republicans are the party of deregulation, but key legislation that gave freer rein to Wall Street was passed during the Clinton Administration. Which party do you think is most at fault?
Marcy Kaptur: Both. But if you go back to 1994 when Newt Gingrich [became speaker of the House], Republicans went down to the Banking, Finance, and Urban Affairs Committee, took the sign off the door, and put up a new sign. This one read Financial Services. And then they went about changing all of the laws, whether it was underwriting, criteria, interstate banking, the Glass-Steagall Act. All of this led to very high-risk behavior. I’m a city planner by training, and I spent a lot of time in housing. I started seeing all of these home equity loans being made. I said, “What’s this all about? People are cashing their equity out for boats and vacations and whatever.” I’d talk about it but nobody would care. But they over-leveraged the market. If it weren’t for Perot during the nineties, we wouldn’t have had any fiscal discipline at all. So thank God for his two races for president, because both parties got the message. So terms like “pay-as-you-go” and “balanced budget” came into the vocabulary coming out of the spendthrift nineteen eighties. We finally began to get the [nation’s finances] in order by 2000, but then we got Bush and it all went south. But while [balancing the budget] was going on, the Clinton Administration was signing bills like the revocation of Glass-Steagall.
Guernica: What was Glass-Steagall?
Marcy Kaptur: Since the time of the Great Depression, Glass-Steagall separated investment banking from commercial banking. It said that their interests were different—that high-risk behavior [what investment banks take part in] was different from prudent behavior [what commercial banks are supposed to engage in]. There were deposit ratios that were established. If you got a dollar in your local bank, you could only lend ten dollars—not a hundred. Those rules were thrown out the window in the late nineties. And now it has yielded this. And this damage is… oh, my. It is so much worse than anything we’ve had before, it’s mind-numbing.
Guernica: You mentioned how Newt Gingrich changed the Banking, Finance, and Urban Affairs Committee to Financial Services. One result of that was the implementation of fees on savings accounts. Do you think that was part of a strategy to get people to stop saving money and start spending it?
Marcy Kaptur: Yes, I really believe that. In the nineteen eighties, we were assuming a huge debt as a country. Reagan wanted all kinds of missile and defense systems. But he didn’t want to pay for them. I said, “this is wrong.” So when I was a member of the banking committee in the eighties, I went over to the Federal Reserve. It was about the time Greenspan was first appointed. I had been tracking how much of our debt was owned by foreign interests. At the time, it was only about 8 percent. It’s about 80 percent now. So I said to Greenspan, “We need a Save America bond campaign; would you work with me on that?” He sort of looked at me curiously. He said, “Well, we don’t like to do that.” I said, “Mr. Greenspan, we could set up a special computer program where every one of your Fed offices around the country could become a savings bond headquarters, and we, as the American people, would buy up the debt, because we shouldn’t have all this foreign ownership of debt, because we’ll be paying foreign countries interest—and we should really be paying the interest to ourselves.” But he basically said to me, “We really like to deal with our twenty bond houses up on Wall Street.” So I came back and created some legislation, worked with the savings bond office over at Treasury, and we named a year the “Savings Bond Year,” and the campaign was called the “Save America Bond Campaign.” But the people with power never helped. The people with real power, like Mr. Greenspan, turned his back. I wanted to have little postal savings stamps where children could buy little denominations and own a bond. So all over the country, people would be thinking about saving as well as about spending. I got no help. I really understand that [the big financial institutions] wanted to get us into debt. And [Greenspan] had a lot of friends in the bond industry. I didn’t fully appreciate back then how powerful they are. He wanted to keep them happy. Now the vast majority of what floats our economy is foreign money and credit. And we owe them interest. So we’re in hock.
Guernica: Let’s talk about the revolving door between Wall Street and the Treasury Department. The person who initiated the bailout, Hank Paulson, is a former CEO of Goldman Sachs. We recently learned that Obama’s Chief Economic Advisor, Larry Summers, accepted millions in speaking fees from Wall Street companies that received bailout money. The conflicts of interest go on and on. At the same time, the argument for recruiting Wall Street executives into the government is that they are the financial experts. So if this is the talent pool to choose from, how do we avoid conflicts of interest?
Marcy Kaptur: Anyone who’s had their fingers on any of the financial damage that’s been done should not be allowed to serve in the federal government or receive federal contracts for the rest of their careers. That revolving door should be slammed shut. So I don’t agree with the appointments that were made in the last administration or in this one. How can you have the architects of the disaster in charge of its remediation? How do you even think about that?
Guernica: You’ve mentioned a company called BlackRock. What does BlackRock teach us about the revolving door?
These people are powerful; these institutions are powerful. They seem to operate in their own realm where they are untouchable. Nobody should be untouchable.
Marcy Kaptur: BlackRock is a very important company with many interests. They just received an exclusive contract from the Federal Reserve to manage Maiden Lane I—the Bear Stearns toxic asset—as well as Maiden Lane II and Maiden Lane III—whatever those are. They’re being paid billions for it. The man who heads up BlackRock, Laurence Fink, is the man who worked for First Boston in the early eighties, and when Freddie Mac took a billion dollars in mortgages and securitized it—he did that for them. I’m looking back at the history of these people, and I’m saying to myself: “These are the same people who created the system that has now collapsed, and now we’re putting them in charge of resolution. How do I know that they don’t have skin in the game?” There’s no transparency. BlackRock owns BlackRock Realty in New York. And they own Peter Cooper Village—Stuyvesant Town, the largest real estate development in the country. It just went bankrupt—over a billion dollars in losses. How does BlackRock Realty relate to BlackRock Solutions, which has a contract over at the Fed? Maybe there’s no connection—how do I know? All I know is that they’ve got their fingers in a lot of different pies, and they’re big pies. How do we know there aren’t conflicts of interest?
PennyMac—there’s another one. It’s been completely reformed by former Countrywide executives. They’re going around the country picking up the depreciated assets in the housing market, and they—Countrywide—were a major offender that helped create the crisis we’re in. So now we’re just going to let their executives morph into PennyMac and pick up those properties for pennies on the dollar? We need major investigations of these people and these firms.
Guernica: You’ve said it’s almost like letting the criminals clean up their own crime.
Marcy Kaptur: Well, I have a real question about this. These people are powerful; these institutions are powerful. They seem to operate in their own realm where they are untouchable. Nobody should be untouchable.
Guernica: Turning to the wars for a moment—we are privatizing more and more aspects of war these days. The green zone in Iraq, for example, has all these American food chains set up in it. Halliburton is making boatloads of money. Private security companies like Blackwater are making fortunes acting as mercenary armies. With all of these companies profiteering from war, does it put added pressure on the U.S.—especially during a recession—to start wars or continue them?
Marcy Kaptur: [Long pause] I’m thinking of Eisenhower’s speech to beware of the military-industrial complex. [Another long pause] I think the chief pressure for America to be at war in the last quarter century is our over-reliance on imported petroleum. That is our chief strategic vulnerability. Right now, the nation is poised at the tip of the spear to do whatever is necessary to keep access to that. This week, Exxon signed the first contract in American history inside of Iraq. I have nothing personally against anybody who works at Exxon. But I don’t feel good that those resources will now keep the world dependent on petroleum for a while longer. So it isn’t so much that these supplier companies want war to make profits, but the whole system of production is so dependent on imported petroleum—and it’s the largest category of our trade deficit. We’ve turned the country inside out for that.
Guernica: Let’s talk about the news that broke this week. Your name was on a list of congresspeople being questioned by House ethics officials about ties to a defense lobbying firm called PMA Group. As I understand it, they are questioning whether PMA Group gave you campaign contributions and you in return steered earmarks—projects, contracts, etc.—to their clients. What happened?
Marcy Kaptur: Nothing. I don’t even know what they’re referring to. I went to [Nancy Pelosi] and asked for a copy of what they were referring to. I went to her on Monday [November 2], and I still don’t have anything in my hands. So I don’t even know what they were talking about.
Guernica: Were you questioned by ethics officials?
Marcy Kaptur: The congressional ethics office asked members for documents, and we supplied them. But I don’t even know what they’re talking about and I don’t know… I think you better ask them, because I don’t know what it is they are talking about.
Guernica: But PMA Group did donate money to your campaign, correct?
Marcy Kaptur: That is absolutely on the record.
Guernica: So they are asking about whether or not you steered earmarks to their clients in return. Is that what they are looking at?
Marcy Kaptur: Possibly. You’ll have to ask them.
Guernica: Did you do anything wrong?
Marcy Kaptur: Absolutely not.
Guernica: If you had it to do over again, would you do anything differently?
Marcy Kaptur: I would do nothing differently.
Guernica: While we’re on the subject of earmarks: Some members of Congress have made a career out of railing about them—John McCain, in particular…
Marcy Kaptur: I’ve noticed he does that.
Guernica: But it seems that many members of Congress fight for them—and it’s hard to blame them. Earmarks bring jobs to their districts and improve the lives of their constituents. The argument against them is that the federal government shouldn’t pay for local projects. Where do you stand?
Marcy Kaptur: I don’t really understand where this whole furor [over earmarks] has come from. We have large numbers of requests that we have to try to assist with. I’m asked by every mayor, every county commissioner, every state representative. Whether it’s river cleaning, bridges, highways, railway stations, visitor centers. It’s extensive. Remember that project in Alaska for Ted Stevens: the bridge to nowhere? Well, I had a bridge in my district. We had the only interstate in America with a lift bridge. So in the middle of the day as traffic was moving across Northern Ohio headed to, say, Michigan, this bridge would lift and stop everything. I had to bring in money to build a new bridge. It took me about fifteen years to get it done. But I thought, “Who else cares about this?” Yet we had traffic backups and all kinds of problems in the region because of it. I don’t know what kinds of criteria Mr. Stevens used, but in our case it was a major bottleneck. I’m very proud of our accomplishment there. So doesn’t a member have a responsibility to do what her community wants her to do?
Guernica: So you’re saying it’s a congressperson’s responsibility to do what he or she can for their district, including bringing in earmarks. Then why does John McCain spend so much time—and get so much political mileage—yelling about them?
Marcy Kaptur: Take a look at his state. Arizona is heavily subsidized. If you look at the amount of federal dollars going in there—I think about half its territory is reservations [in fact, it is one quarter]. And he’s got all those military bases—that’s a big defense state. So he gets a lot of defense dollars, too. He also gets research dollars for the major research facilities there. And don’t forget about all those water projects. So I’m thinking to myself, “Maybe he feels his state is immune [to needing earmarks] because it’s basically a federal subsidy.” Whereas regions like ours—I call ours a free-market region—our people have been subsidizing him for fifty years. We don’t have anything that compares to what they get in Arizona. One time I was looking at a map of how many federally subsidized parks are in that state. The number is huge. It’s about a third of the state.
Guernica: Are you saying McCain already gets a bunch of federal dollars poured into his state, so he…
Marcy Kaptur: Bathtubs full. Bathtubs full. You know, I’ve thought about taking him on, but he’s in another chamber. I wish he’d give up some of what he’s got. Why doesn’t he share? [Laughter]
Guernica: How good a job do you think Obama has done with the economy?
Marcy Kaptur: I’ll quote one of my friends from Illinois, Phil Hare. He says: “It’s not G.D.P., it’s J.O.B.” [Laughter] That means we need jobs.
Guernica: What grade would you give him?
Marcy Kaptur: The largest room in the world is room for improvement.
Guernica: So what’s that, a C or D?
Marcy Kaptur: In my region, he wouldn’t be passing.
Guernica: I find it interesting that commentators on the right like Glenn Beck and Rush Limbaugh paint Obama as a radical socialist, while commentators on the left like Bill Maher say he’s not even a liberal when it comes to economic matters.
Marcy Kaptur: [Laughter] Well, I think he’s got the wrong economic advisors. But they seem to take care of Wall Street just fine.
Marcy Kaptur Recommends:
Saving Capitalism: Keeping America Strong by Pat Choate
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Photo by B. Wu via Flickr.