Financial Services Industry PAC Contributions and Senate Committee Membership
Bennett, Randall W., Loucks, Christine, Atlantic Economic Journal
A recent article in this journal, Bennett and Loucks (2008), finds that membership on relevant committees is significantly related to financial services industry political action committee (PAC) contributions in the House of Representatives, providing further evidence that committee membership in the House matters to PACs. The different rules of the Senate would seem to give less power to committees than in the House. Senators, unlike members of the House, have the filibuster available to attempt to keep legislation from coming to a vote, and they also have greater ability to propose amendments from the floor than do members of the House.
The purpose of this paper is to examine the relationship between campaign contributions from PACs representing the financial services industry and membership on Senate committees during the period of 1998 to 2002. Congress dealt with significant legislation affecting this industry during these years. The Gramm- Leach Bliley Financial Services Modernization Act of 1999 eased many of the limits on commercial banks regarding securities and insurance activities. The USA Patriot Act of 2001 included provisions to deal with international money laundering. The Sarbanes-Oxley Act of 2002 increased oversight of accounting firms and also increased the budget of the Securities and Exchange Commission to increase the supervision of securities markets. Bennett and Loucks (2008) use this period to investigate the importance of committee membership in the House to financial services industry PACs. This paper uses the same time period to see if similar results can be found for the Senate.
The paper investigates whether PACs disproportionately contribute to members of committees that the industry represented by the PACs find relevant. It is assumed that contributions will be focused where PACs think they will be most effective. The paper tests whether the distribution of PAC contributions conforms to the pattern that would be expected if committee membership gives power to senators for which PACs are willing to pay.
Bennett and Loucks (2008) fred that membership on the House Banking Committee is significantly related to contributions from PACs representing each of the seven sectors of the financial services industry investigated. PACs representing commercial banks, savings and loans, credit unions, finance companies, the securities industry, the insurance industry, and the real estate industry give significantly more to members of the committee. In addition, membership on the House Ways and Means Committee is significantly related to contributions from commercial bank, securities, insurance, and real estate PACs, while membership on the Commerce Committee (the committee that oversees the securities industry) is significantly related to contributions from commercial bank, securities, and insurance PACs.
These findings are consistent with work, such as Kroszner and Stratmarm (1998, 2005), Bennett and Loucks (1994), Grier and Munger (1991, 1993), Stratmann (1991), and Munger (1989), which fred that relevant House committee membership is significantly related to contributions from PACs representing various constituencies. Weingast and Moran (1983) and Weingast and Marshall (1988) discuss the importance of committees to the legislative process. The standing committees have distinct jurisdictions and oversight responsibilities, which convey power to committee members over relevant issues that legislators not on the committee do not have. Grier and Munger (1991, p. 25) state that "committees in Congress, and particularly in the House of Representatives, possess disproportionate power over the policy areas in their respective jurisdictions, have the right to hold hearings, and recommend budget allocations for the bureaus in their jurisdiction." If PACs recognize the importance of committee membership, it is expected that they will attempt to obtain influence by contributing disproportionately to members of committees that are relevant to these PACs. …