Vice President Dick Cheney and other Bush administration officials hit Capitol Hill on Tuesday to sell the $700 billion Wall Street bailout, getting a mixed reception from lawmakers who argued about the role of government in business.
But there was little dissent in 1999, when Sen. Mitch McConnell and the rest of Kentucky's congressional delegation voted to deregulate Wall Street banking and investments. They — and most other members of Congress — brushed aside concerns that deregulation could create massive financial institutions that would be "too big to fail," requiring a government bailout if they started to stagger.
"You could deal with one company for all your financial services needs," Sen. Jim Bunning, R-Ky., said at the time, praising the Financial Services Modernization Act. "All the other major countries already have their financial industry set up that way. We'd just be catching up."
The Kentucky delegation went on to collect millions of dollars in combined campaign donations from the financial sector, while the banking, securities and insurance industries merged into the creature that is now collapsing and calling for government aid.
McConnell, the Senate Republican leader, collected more than $4.3 million in donations from the financial sector in the last 20 years, according to a report issued Tuesday by the Center for Responsive Politics, a non-partisan watchdog group.
That sum means McConnell ranks eighth-highest in Congress for money taken from the financial sector, not counting senators who are running or have run for president and therefore have collected far more for nationwide campaigns, including Republican John McCain and Democrat Barack Obama.
McConnell has been individually feted in New York City by major banks, including a 2005 luncheon given in his honor by UBS and Citigroup, which raised at least $60,000 for his campaign fund. Former Sen. Phil Gramm, R-Texas, who sponsored the Wall Street deregulation bill and then left Congress to become an investment banker at UBS, helped organize that event and donated $4,000 to McConnell.
Among others in the Kentucky delegation who voted for Wall Street deregulation in 1999, and who are still in Congress, Bunning got $2.4 million; Rep. Ed Whitfield, R-Hopkinsville, got $697,116; Rep. Ron Lewis, R-Cecilia, got $551,266; and Rep. Hal Rogers, R-Somerset, got $406,765, according to the Center for Responsive Politics. Totals are for donations from 1989 to 2008.
Lewis is retiring from Congress at the end of this year, while McConnell, Whitfield and Rogers stand for re-election Nov. 4. Bunning has said he'll run for re-election in 2010.
Asked to comment on McConnell's 1999 vote, spokesman Robert Steurer said it wasn't just McConnell. Most of the Senate voted for Wall Street deregulation, including many Democrats, he said. Steurer quoted Sen. Charles Schumer, D-N.Y., as saying at the time, "This bill is vital for the future of our country. If we don't pass this bill, we could find London or Frankfurt or, years down the road, Shanghai becoming the financial capital of the world."
A Whitfield spokeswoman likewise noted that her boss was far from alone in supporting the 1999 law, and she said the congressman doubted whether deregulation — as opposed to greed — led to the current meltdown.
"It's always easy to point fingers and try to place blame when any kind of crisis arises," Whitfield wrote in a statement. "Addressing our current financial situation and turning our economy around is a difficult challenge we as a nation face and we in Congress must address."
The offices of Bunning and Rogers did not respond to questions Tuesday about their 1999 votes.
The Financial Services Modernization Act repealed the Glass-Steagall Act of 1933, which ordered the separation and individual regulation of commercial and investment banks — and kept them apart from the insurance industry — to minimize the risk of total economic collapse if one sector was ailing. Congress passed that law in response to bank failures during the Great Depression. But nine years ago, under intense lobbying by the financial sector, lawmakers said such protections no longer were necessary.
"The Financial Services Modernization Act overhauled the financial services industry by eliminating outdated Depression-era laws that have hampered the industry's ability to increase its efficiency," Sen. Larry Craig, R-Idaho, wrote in a 1999 article on behalf of the Senate Republican caucus.
Of all the Kentucky lawmakers to support Wall Street deregulation in favor of free markets, only Bunning has publicly denounced the proposed $700 billion bailout, as he has the federal government's assistance in recent weeks for individually failing financial institutions, such as insurance giant AIG.
"It's financial socialism, and it's un-American," Bunning said Tuesday at a Senate Banking Committee hearing with Treasury Secretary Henry Paulson, who is pushing the system-wide bailout.
By contrast, McConnell has lined up behind the Bush administration's Wall Street bailout and urged Congress to pass it without delay. Strong government action is needed immediately to save the economy, McConnell said in a Senate floor speech Monday.
"When there's a fire in your kitchen threatening to burn down your home, you don't want someone stopping the firefighters on the way and demanding they hand out smoke detectors first or lecturing you about the hazards of keeping paint in the basement," McConnell said.