Lobbying for a Bailout

Across the ideological spectrum(s), there is universal agreement that business ought to “play by the rules of the game.” The most ardent fans of free markets say, essentially, that that is the only ethical obligation businesses have, beyond the pursuit of profit. It is up to government (and perhaps society more broadly) to make the rules. It is up to business to play by them. Fair enough. But what ethical standards apply to the practice on the part of business of trying to influence the very rules to which they are expected to adhere?

See this story from a few days ago, in the NY Times: Geithner Sets Limits on Lobbying for Bailout Money

The new Treasury secretary, Timothy F. Geithner, announced on Tuesday that he would crack down on lobbying to influence the $700 billion financial bailout program by companies that are receiving billions in taxpayer money.

Mr. Geithner, who was confirmed on Monday, also said he would set new limits intended to prevent political interference with decisions about which companies received bailout money.

Among other steps, the Treasury department said it would make public a log of all contacts by public officials and bank officials regarding specific financial institutions.

(Here’s another take on it, from the Washington Post: Treasury Moves to Restrict Lobbyists From Influencing Bailout Program.)

For Mr. Geithner and the Obama administration, this is matter of ethics in government, and of public accountability. And it’s not an easy one. Certainly no one thinks that decisions about how to spend the bailout money ought to be influenced significantly by the fact that some senator had his or her ear bent for half an hour by a suave lobbyist acting on behalf of a well-heeled client. On the other hand, the right to petition one’s government and thereby to have a say in public policy is a fundamental democratic freedom.

But what does it look like from the point of business ethics? What ethical limits — if any — ought there to be on lobbying by businesses? If it’s true that corporate managers ought to pursue profits within the limits of the law, ought they also attempt to influence the law in ways that stand to enhance profits? Surely if they do that, it leaves the whole “we played by the rules” defence robbed of much of its normative force: it’s pretty easy to agree to play by the rules when you get to influence what those rules are.

I’ll offer just 2 factors relevant to the current issue:

1) This looks to me like a classic example of the kind of ‘social’ dilemma that economists & philosophers refer to as ‘the Prisoner’s Dilemma.’ It’s a situation where all (businesses) would be better off if they could all just keep their noses out of the process, but each business would do better (better for its shareholders) if it interferes. P.D.’s are notoriously hard for participants to resolve; it might be unreasonable to expect businesses to forego profit-seeking in this instance.

2) Lobbying for bailout money is in some ways different for other kinds of lobbying (say, lobbying for a change in health & safety regulations). In most regulatory matters, government suffers from a pretty serious information deficit: industry often knows much more about what sorts of regulatory standards are feasible, and which will achieve desired public policy goals. So, there’s a public-interest argument for allowing (even encouraging) industry to share information & points of view with government. The spending of bailout money, it seems to me, isn’t like that. I’m not an expert on finance, but I suspect that the U.S. government (via its various regulatory and taxation agencies) has all the information it needs, in this case. So there’s not much weight to the public-interest argument here.

4 comments so far

  1. Anonymous on

    If I recall, Obama got criticized by many for making a grand announcement that he wanted to reduce the influence of lobbyists in his administration (though they mainly work the Hill, so that was grandstanding). Then two days later he submitted Geithner, whose last job on his resume was as a lobbyist for Wall street as head of Treasury. Give me an “H”! Give me a “Y”! Give me a “P”! Give me a “C, R, I, S” and “Y”! What does it spell? -Kevin McDonald

  2. Mallen Baker on

    Hi ChrisThe UK Parliament looked recently at issues around corporate lobbying, and was very clear that it is a process which enhances democracy. Governments pass laws that affect business – they need to have input from all the parties affected by laws to feed in so that the process of framing laws is better informed as to consequences.What people fear, of course, is that corporate lobbyists get privileged access and are able to lobby for business interests at the expense of the wider public interest. But it is not the process of lobbying that is wrong – it is just that there need to be checks and balances to ensure that the process is open and transparent, which of course it often isn’t.

  3. Anonymous on

    I can’t spell: I omitted the “O”-former N.J. State Spelling Bee finalist, Kevin McDonald“oh the shame…”And Obama pled exigent circumstances: the recession allows him to bend his anti-lobbying rules in this case only he says. Though pundits raked him for it.

  4. Anonymous on

    I am with the previous poster: lobbying is not intrinsically wrong. It is just important that all who want to lobby have equal access and that there is financial transparency of the process. “Showdown at Gucci Gulc” is a classic American book outlining how legislation is made, amended, refashioned after lobbyist’s complaints and input. Gucci gulch is the corridor outside the U.S. House of reps where Gucci shod lobbyists wait for a chance to talk to congresspeople. – Kevin McDonald


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