As the 2008 US election year gains momentum, FO Week’s Jim Kharouf analyses how exchanges and firms are contributing money to various members of Congress and presidential hopefuls. Today’s story is the first in an exclusive three part series on the futures industry and campaign financing.
New York Mercantile Exchange (Nymex) stands as the largest campaign contributor among US exchanges, an FO Week analysis of contributions to various federal elections shows.
A study of political action committees (PACs) for US exchanges and Wall Street firms has shown that Nymex is the largest in terms of money spent in the current 2007-2008 election cycle. Its top executives also personally contributed sizable amounts to key members of Congress and presidential candidates.
For the current election cycle, Nymex’s PAC currently holds $521,000 and has contributed $512,375 to congressional candidates, other PACs and presidential candidates for the 2008 election cycle. Nymex began the current election cycle with $1.04m, according to data published by The Center for Responsive Politics, which gleans its information from Federal Election Commission.
The cash held by the Nymex PAC is comparable to the amounts it held and contributed during the prior 2005-2006 election cycle, during which Nymex received $1.24m and spent $903,700 on federal primaries and elections.
Nymex’s position as the top industry PAC is a surprise to many in the industry, a rank traditionally held by Chicago Mercantile Exchange (CME) or Chicago Board of Trade (CBoT). The CME PAC ranks second to Nymex, having spent $325,071 so far with total receipts of $513,301, while the CBoT PAC has spent $260,250 so far, with total receipts of $114,672.
The Nymex PAC dwarfs money raised and spent by several stock and options exchange PACs. Chicago Board Options Exchange (CBOE), the largest among securities exchanges has total receipts of $311,185 and has spent $248,500. After that, the fall off is dramatic. International Securities Exchange (ISE) has just $47,815 in receipts and has spent just $8,500 so far. NYSE Euronext’s PAC reported $62,299 in total receipts to date and has spent virtually all but $1,028. Those accounts can be replenished and spent in the current election cycle up until December 31. Intercontinental Exchange (ICE) does not have a PAC registered under the ICE name, but ICE chairman and CEO Jeff Sprecher has personally donated $75,900.
There is nothing illegal or politically unusual about Nymex’s political activities. Experienced Washington sources told FO Week that Nymex’s war chest of PAC money and its willingness to spend most of it on various candidates shows it is a serious player on Capital Hill among industry participants.
Nymex chief legislative counsel De’Ana Dow told FO Week that the exchange faces a political challenge on at least two fronts – education of Congressional members and participating in the host of energy related legislation in recent years that could harm Nymex as an exchange. Dow said Nymex is often brought up by the average voter who often blames the exchange for $100 per barrel crude oil and demands that Congress to do something. Often, that pulls Nymex into the process.
“Being in energy and metals, that puts us in the limelight more often than not,” Dow said. “We have a huge task with our energy market to stay on top of all of these things that are constantly flying around Washington.”
In the days of the so-called “pay-to-play politics,” Washington sources say such contributions will garner an audience with staff or a Congress member on various issues. But one source cautioned that campaign contributions generally have little pull when it comes to larger industry issues – such as, for example - merging Commodity Futures Trading Commission with Securities and Exchange Commission. Instead contributions generally mean the senator or representative’s office will pick up the phone when called and may lend support to language in a piece of futures related legislation. The perception of calling in favours or votes is overblown, said Dow and other Washington sources.
“It certainly gives you an opportunity to meet members of Congress and for them to know who you are and make your case,” Dow said. “You can spend all the dollars in the world but if you don’t have a good story to tell, and you’re not a person they can believe and trust, you’re not going have a relationship where there is an information flow.”
It is interesting to note how much Nymex and other exchange PACs allocate to key senators and representatives who are members of the Senate and House Agriculture Committees. In FO Week’s analysis, the Nymex PAC contributed a total of $70,500 to ten of the 21 members of the Senate Ag Committee and $47,500 to eight of 46 congressmen on the House Ag Committee either directly or though PACs that have candidates names associated with a particular member. Money is also sent to the Democratic and Republican national committees, which in turn distribute cash to various candidates.
Among members of the Senate Ag Committee who have received contributions from the Nymex PAC, Senator Ken Salazar (Democrat-Colorado) received $18,000 in 2007 while $10,000 each went to Senetor Sherrod Brown (Democrat-Ohio), Senator Richard Shelby (Republican-Alabama) and Senator Saxby Chambliss (Republican-Georgia), the ranking Republican member of the committee. Chambliss also received $2,300 from Nymex president and CEO James Newsome.
Top House Ag member recipients include Republican. Jerry Moran (Republican-Kansas) who has received $12,500 from the Nymex PAC, plus another $2,000 each from Newsome and Nymex Chairman Richard Schaeffer.
Dow and other lobbyists in Washington say that a good portion of their time is spent educating various members of Congress about the futures markets and how a particular bill could impact them.
“Our primary goal is building relationships, getting them to know who we are and education,” Dow said. “We spend a huge amount of our time educating Congressional members about the role and function of our market.”
Nymex’s PAC also has contributed to presidential campaigns such as $10,000 to Hillary Clinton and $7,900 to Chris Dodd, who has since dropped out of the race. Both Schaeffer and Newsome have contributed individually to several campaigns. Newsome gave $4,600 to Rudi Giuliani and $3,000 to Dodd. Schaeffer contributed $6,900 to Giuliani, $2,000 to Dodd and $2,300 to John McCain.
Nymex does not endorse a candidate.
**Next week – a closer look at CME and CBOT PACs and political connections.