Banks Donate Big Money to Gregg
By Huijuan Jia
WASHINGTON, Oct. 27, 2004-Big banks have helped Sen. Judd Gregg (R) raise big money in his campaign for reelection next month, but a bill introduced by the senator and passed by Congress in early October would cost those bankers millions of dollars.
Filings with the Federal Election Commission show that as of Oct. 13, Gregg had raised $2.95 million and had $1.78 million in the bank.
More than half of the money raised was from political action committees, according to the Center for Responsive Politics, a non-partisan group that analyzes campaign finance data. The financial industry was the second-largest contributor to Gregg’s campaign with nearly $320,000, only slightly shy of the contributions from health care industry PACs, according to the center.
Political action committees are organized by business, labor and ideological interest groups to raise and spend money to support candidates.
With $1.78 million cash on hand, Gregg shot well ahead of his Democratic challenger, Doris R. Haddock, who had $7,879 on hand and had raised $173,726 as of Oct. 13. Haddock’s contributions were entirely from individuals.
In the 2003-04 election cycle, commercial bank PACs donated $59,800 to Gregg, according to the Center for Responsive Politics. Among the top donors, Citigroup Inc.’s PAC and American Bankers Association’s PAC each gave the senator $10,000, the maximum contribution a PAC can give to a candidate per election cycle under the federal campaign finance law. Bank of America’s PAC donated $8,000 to Gregg.
Individual employees from these banks also donated money in their own name to Gregg. Under federal election law, an individual contribution is capped at $2,000 for each election or primary. Individual donations to Gregg include $1,000 from the president of Miami-based U.S. Education Finance Corp., $2,000 from the president of Education Finance Council, a trade association representing student loan companies throughout the country, $4,000 from the president of Student Loan Consolidation Center, a student loan company in California, and $1,500 from the president of Citigroup’s Student Loan Corp.
Finance industry PACs have been the largest contributors to Gregg since he was elected senator in 1992. According to Political Money Line, a non-partisan campaign-finance tracking service, when Gregg first ran for the Senate in 1992, he received about $91,000 from finance industry PACs, accounting for 7.5 percent of his total funds raised.
In 1998 when he was reelected, Gregg raised $133,625, or more than 11 percent of all his funds, from finance industry PACs. This year’s finance industry PAC contributions of $320,000 also represent about 11 percent of the total funds Gregg has raised.
Gregg is chairman of the Health, Education, Labor, and Pensions Committee and sits on the Appropriations and Budget Committees. A recent Gregg bill would have a direct impact on banks with student loan business.
The Taxpayer-Teacher Protection Act of 2004 would end the federal guarantee of a 9.5 percent rate of return to student loan lenders and use the money saved to support teachers and poor schools. The bill was sent to the White House Oct. 21 but has not been signed by President Bush.
“The government is spending millions unnecessarily because some lenders are exploiting loopholes in the federal higher education laws,” Gregg said in a statement when the bill was introduced.
To encourage lenders to make student loans under the Federal Family Education Loan program, the federal government guarantees lenders a 9.5 percent rate of return. Although students pay less than 3.4 percent interest on their loans, the government pays lenders the difference.
As a result of the lower interest rates, the amount the government paid to student loan companies more than tripled from 2001 through June 2004, from $209 million to $634 million, according to a report released Sept. 20 by the Government Accountability Office.
Under the bill, the fixed 9.5 percent interest rate would be replaced with an adjustable rate reflecting market rates. The one-year fix is expected to save the government $285 million. The temporary solution is supposed to pave the way for a permanent fix during the next Congress.
“We are putting the lending community on notice,” Gregg said when the bill was introduced. “This loophole will be closed permanently next year when Congress re-authorizes the Higher Education Act, and those savings will be used to improve student benefits.”
