Crushing failure for lobbyists

The House’s rejection of the Treasury’s Wall Street rescue plan was a defeat not only for the congressional leaders who backed it but also for the business groups that had urged Congress to act.

The U.S. Chamber of Commerce and National Association of Manufacturers warned lawmakers over the weekend that it would “score” the vote, meaning a “no” vote would affect the ratings these groups give to lawmakers at the end of each legislative session. Groups like the American Trucking Associations and the International Franchise Association said the bailout was necessary to avoid a severe economic downturn.

{mosads}In the end, though, lawmakers seemed more fearful of the possible retribution of voters than of their financial backers in business, and the push by business — at least for now — couldn’t overcome members’ own doubts about the massive rescue plan. Congressional leaders said negotiations would continue on the package in the hope of a final agreement by week’s end.

“When calls are 1,000 to one against something, that’s a tough thing to overcome,” said one lobbyist with ties to Republican members on the Hill.

The speed at which Treasury Secretary Henry Paulson and Federal Reserve Chairman Benjamin Bernanke pushed Congress to act, and the limited number of participants involved in the negotiations over the bailout bill, also made it difficult for lobbyists to affect the outcome.

In interviews with The Hill the past two weeks, many lobbyists on K Street said they were just trying to keep clients abreast of how the proposed bailout was changing. Several firms were thinking about the long-term ramifications of the financial crisis on Wall Street, reorganizing their own operations into new financial-services task forces in preparation for the coming debate about the type of regulatory structure necessary to prevent another financial meltdown.

Still, many of the business groups that most wanted the bailout to pass couldn’t convince the very people they are the closest to on Capitol Hill — House Republicans — to vote yes, and some contract lobbyists said the push by big business seemed to lack a sense of urgency.

It was a tough sell: lobbying against provisions that appear at least to be consumer-friendly, like empowering judges to rewrite mortgage terms, but for an overall bill that seems like a bailout of rich Wall Street executives who made bets on bad debts.

Apparently, those appearances weren’t lost on groups like the Chamber, whose lobbyists expressed willingness to accept some type of limit on compensation for executives at companies that participate in the government’s rescue package.

Financial-services groups did have a few successes — convincing Treasury to allow foreign banks with significant U.S. operations to participate in the government auction to buy their bad debt, for example.

But the dire warnings in statements and letters and the grassroots efforts that sought to provide real-life examples of how the tightening of credit markets was affecting businesses back home wasn’t enough.

After the House vote, the warnings from business groups seemed to become more explicit.

{mospagebreak}“Make no mistake: When the aftermath of congressional inaction become clear, Americans will not tolerate those who stood by and let the calamity happen,” said Bruce Josten, the lead lobbyist for the Chamber.

A Chamber spokesman said Josten had spent the weekend trying to rally members to pressure Congress to approve the package. Every lobbyist at the Chamber was engaged on the issue, the spokesman said.

The Financial Services Roundtable, which has been among the most active in lobbying on the bill, released a statement expressing regret over the House vote.

{mosads}“We believe that the members who voted against this vital legislation misread the economy and did not hear from the majority of people in their districts who supported this solution,” the statement reads.

In their lobbying effort, businesses have stressed how the rescue plan will help Main Street as much as Wall Street, by avoiding an economic meltdown that could lead to a prolonged recession. In that regard, the lobbying effort may have been helped by forces out of their control. The Dow Jones Industrial Average fell by 777 points Monday, its largest point drop in history, after the House rejected the bailout proposal.

In an e-mail alert to his clients, Pete Davis of Davis Capital Investment Ideas, a political intelligence firm, said the market decline “will probably be sufficient to motivate some members to switch their votes.” Twelve members would have to switch their votes for the bailout to pass.

But if the House vote was a defeat for business groups, it was a win for the National Taxpayers Union (NTU), a group that was strongly opposed to the bailout plan.

Before the vote, NTU spokesman Pete Sepp said his group was doing all it could to kill the bill, from sending representatives to Capitol Hill with the results of an online petition of voters urging members to vote no to doing as many radio and television interviews as possible. The risk to leaving a big bill for taxpayers was too great for the group to support the bailout, Sepp said.

Even so, Sepp indicated his group’s lobbying efforts were targeted at the Senate, because he believed the plan would pass the House.