Wall Street reaps profits from political investments

Since 2001, eight of the most troubled firms have donated $64.2 million to congressional candidates, presidential candidates, and the Republican and Democratic parties, according to data from the nonpartisan Center for Responsive Politics.

The donors include investment bankers Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley, insurer American International Group and mortgage giants Fannie Mae and Freddie Mac. Since March, with the exception of Goldman Sachs and Morgan Stanley, all of these companies have been bailed out by the government, sold to other companies at deeply discounted prices or simply failed.

Both political parties have become beholden to Wall Street.

Legislators failed in several instances to conduct oversight hearings or to raise concerns as the Bush administration adopted rules that fed the mortgage frenzy and set Wall Street on the route to disaster.

For instance, in 2004 when the Securities and Exchange Commission adopted a major rule change that freed investment banks to plunge tens of billions of dollars in borrowed money into subprime mortgages and other risky plays, congressional banking committees held no oversight hearings.

Congressional inaction also allowed mortgage agents to earn high fees for peddling loans to unqualified homebuyers, and prevented states from toughening regulations on predatory lending practices.

Democratic Sen. Christopher Dodd of Connecticut, the chairman of the Senate Banking Committee who ran unsuccessfully for his party's 2008 presidential nomination, has received nearly $1.3 million from employees of the eight troubled firms since 2001.

Dodd spokeswoman Kate Szostak said that since Dodd was first assigned to the banking committee in 1981, he's "taken independent, tough positions at odds with the industries the committee oversees," including the mortgage lending industry.

"In no way does he allow contributions to influence any decision he makes," she said.