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Donations poured in as Brown’s role grew

With vote near, financial sector delivered $140k

By Donovan Slack
Globe Staff / December 12, 2010

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WASHINGTON — Campaign contributions to Senator Scott Brown from the financial industry spiked sharply during a critical three-week period last summer as the fate of the Wall Street regulatory overhaul hung in the balance and Brown used the leverage of his swing vote to win key concessions sought by firms.

From mid-June until the Fourth of July, according to a Globe analysis of his campaign finance reports, the Massachusetts senator took in $140,000 from banks and investment firms and their executives, including companies based in the state, such as MassMutual and State Street Corp. That is 400 percent more than the $28,000 received on average by all Republican senators during the same three weeks.

As the money poured in, Brown and his Senate staff were working both publicly and behind the scenes to scuttle $19 billion in fees on the financial industry that would have paid for part of the regulatory overhaul, and to weaken a provision intended to curb certain types of investment activities by banks and insurance companies.

Both efforts were successful and were adopted as part of the final bill, which was signed by President Obama on July 21.

Instead of the new bank fee, costs of the overhaul will be paid using leftover funds from the 2008 taxpayer-financed bank bailout. And instead of being prohibited from investing their own reserves in stocks and other securities, financial institutions will be allowed to wager up to 3 percent of their own money in hedge funds and other investments, thanks to Brown’s efforts.

Wall Street contributed lavishly to Democrats and Republicans alike for most of the year as it sought to influence deliberations on the sweeping overhaul legislation. But the timing of Brown’s increase in contributions from those sources stands out.

Industry sources contributed just $12,000 during that time to Representative Barney Frank of Massachusetts, chairman of the House Financial Services Committee, who was an architect of the legislation. That is less than one-tenth the amount Brown got.

Brown declined to comment about his midsummer fund-raising success. His spokeswoman, Gail Gitcho, issued a prepared statement saying, “The changes Senator Brown pushed for in the legislation were designed to protect jobs in Massachusetts and keep taxes low.

“There is absolutely zero connection between policy and fund-raising,’’ she said. “To insinuate otherwise is just plain wrong.’’

Federal law allows politicians to accept campaign contributions from executives who directly benefit from their legislative actions. But some watchdogs say such a sudden increase in contributions during critical deliberations deserves public scrutiny.

“It definitely raises one, if not two, eyebrows,’’ said David Levinthal of the independent Center for Responsive Politics, which tracks campaign finance.

Brown swept into office with the promise of changing the culture in the Capitol by eschewing business as usual and “returning Washington to the people.’’

His aggressive fund-raising from corporate executives with interest in legislation, however, is typical of inside-the-Beltway politics, said Jennifer Duffy, senior editor of the nonpartisan Cook Political Report, which analyzes congressional elections.

“I give him credit for being a fast learner,’’ said Duffy, a onetime National Republican Senatorial Committee official.

Brown has a stockpile of campaign cash left over from his election, and he has continued to raise money in preparation for his expected bid for reelection in 2012.

By the end of September, he had $6.7 million in his campaign account, records show.

At least $1.35 million of that came from the financial sector, according to the Center for Responsive Politics. That is an impressive haul, considering he raised it in only one year. The ranking member on the Senate Banking Committee, Republican Senator Richard Shelby, raised a total of $1.5 million from the industry during the past two years.

Overall, Brown’s one-year take is the eighth highest of all senators’ two-year campaign totals from the sector. Topping that list are senators Charles E. Schumer ($4.9 million) and Kirsten Gillibrand ($2.4 million), both Democrats of New York.

The financial sector is one of the largest industries in Massachusetts and a crucial economic engine for the Bay State.

The bill, called the Wall Street Reform Act was a response by the Obama administration and the Democratic majorities in Congress to the largest economic crisis since the Great Depression.

By June this year, both the House and Senate had passed different versions of a bill designed to rein in some risky practices by the financial industry that helped lead to the crisis. Between June 10 and June 29, a conference committee led by Frank and Senator Chris Dodd was working to reach a compromise that would pass both houses.

To avert a filibuster and secure Senate passage, Democrats desperately needed the freshman senator from Massachusetts to break ranks with the GOP and join the majority.

Brown’s public position on the regulatory bill had evolved from one of skepticism, saying it was a job killer, to one of possible support as he worked for changes that he said would mitigate job losses. Brown also worked on a number of other bipartisan amendments, including one strengthening consumer protection for military families and another preventing mortgage lenders from paying more to brokers who sell riskier mortgages.

The senator and his staff have said they consulted closely with financial companies, as well as with consumer advocacy groups and economists. During an appearance on CBS’s “Face the Nation’’ in April, Brown said he opposed the proposed bill because it would cost between 25,000 and 35,000 jobs in Massachusetts.

Brown’s office explained after his appearance that he had received those figures directly from MassMutual Financial Group. MassMutual said it had not given the senator specific predictions of future job losses, but that it had given him estimates of losses during the recession. The company subsequently acknowledged those estimates were inflated.

Brown’s vote indeed proved decisive. The final tally in the Senate was 60 to 39, the bare minimum to beat a GOP filibuster. The only other Republicans voting in favor were Maine’s Olympia Snowe and Susan Collins. Brown quickly drew criticism from his backers in the Tea Party movement and from conservatives who battled against the legislation, but he was cheered by the bill’s advocates and some financial firms.

Brown’s efforts benefited large Massachusetts companies such as MassMutual Financial Group, Liberty Mutual Insurance, Fidelity Investments, and State Street Corp., whose executives and political action committees contributed $29,000 to Brown during the three-week period he was extracting the concessions from Democrats.

They also benefited major out-of-state institutions such as Goldman Sachs, UBS, and JPMorgan Chase. Those and other out-of-state financial interests gave Brown a total of $50,000 during the period.

Industry groups said political contributions are not tied to legislative action.

“There is no connection between money and votes,’’ said Scott Talbott, spokesman for the Financial Services Roundtable, which lists Fidelity, State Street, and JPMorgan Chase among its scores of member firms. “The industry supports candidates who take a thoughtful approach to the issues facing the industry.’’

Liberty Mutual and MassMutual declined to comment.

The financial sector also was a strong backer of Brown in his special-election victory against Democrat Martha Coakley in January. In a six-day period just before the Jan. 19 election, financial firms and executives contributed nearly $450,000 to Brown’s campaign.

After his election, financial industry contributions had slowed to an $8,200 weekly average before the spike that began in June. After his work on the financial legislation, they dropped to a weekly average of $7,400 through the end of September.

Partisan critics said Brown has broken his promise not to do business as usual in Washington.

“It didn’t take long for Senator Brown to sell out the ‘people’s seat’ to Wall Street,’’ said Veronica Turner, executive vice president of 1199 SEIU United Healthcare Workers East, which has staged protests in Boston because Brown did not support an extension of unemployment benefits and funding of certain Medicaid programs. “This pattern of financial industry fund-raising in conjunction with key congressional votes calls into question Brown’s independence.’’

But Gitcho, Brown’s spokeswoman, said the senator’s position proved the opposite.

“Wall Street hated this reform bill and wanted to see it killed,’’ Gitcho wrote in the prepared statement. “Let me repeat: Senator Brown voted for the bill that the financial industry opposed.’’

Donovan Slack can be reached at dslack@globe.com. Follow her on Twitter: @DonovanSlack.

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