Visa has long bragged about its rewards program for consumers. So when its lucrative
swipe fees got caught in the congressional crosshairs a few years back, the credit-card giant developed a special program for thenHouse Speaker Nancy Pelosi to feel its influence.
The lobbying campaign, reconstructed by
Newsweek through interviews and documents, speaks volumes about the efforts of big business to curry favor, even among perceived enemies. It also shows how such efforts can personally and politically benefit politicians, even ones like Pelosi who set out to suffocate the culture of corruption in Washington or ultimately didnt give Visa what it wanted.
The tale begins in 2007, when the credit-card industry became concerned that the new Democrats who took charge of Congress after the 2006 elections were intent on passing legislation to curtail credit-card swipe fees to vendors, which were worth billions of dollars in revenues in the industry, and to create new protections for consumers.
Visa had never been particularly close to Pelosi, a frequent critic of the financial industry, even though the credit-card giants headquarters were in her hometown of San Francisco.
Visa wanted to meet with Pelosi and her top aides to make the case against the swipe fees. That summer Visas outgoing CEO, Carl Pascarella, bumped into Pelosi on the street in the San Francisco neighborhood they share, and she arranged for him to contact her Washington office for a meet-and-greet, according to sources families with the encounter.
Around the same timeon July 21, 2008, to be exactPelosis reelection campaign received a $1,000 donation from Visas political-action committee. Two days later, according to Pelosis office, the speaker met Pascarella and the incoming Visa chief executive, Joe Saunders, in her Capitol Hill office. The three exchanged pleasantries and no specific legislation was discussed, according to Pelosis office.
Aguillen, for his part, also contributed $1,000 to Pelosi and another $1,000 to the Democratic Congressional Campaign Committee during the first half of 2008.
Separately, Pelosis husband, Paul, a major investor in California, got a lucrative phone calla pre-screen invite in March 2008 to take part in Visas $17.9 billion public stock offering, at the time one of the hottest stock offerings in an otherwise soft market. The initial-public-offering price was $44 per share and was limited to institutional investors and a group of specially selected individuals. Almost $18 billion was made available in public stock to preselected investors. Paul Pelosi made the cut.
Paul Pelosi initially
bought 5,000 shares at the $44 initial price. Within a couple of days, the shares' value soared to $64. Paul Pelosi purchased 15,000 more shares over the next three months, at much higher prices. The total quantity was valued as high as $5 million, according to the then-speakers financial-disclosure form. In late 2008, when the stock market soured, Pelosi sold 1,000 of the first IPO shares for a meager profit of $2,500 to $5,000, records show. He has kept the other 19,000 shares, which now are valued at $95 each.
Several bills affecting credit providers snaked through the House in 2008, including one introduced by Rep. John Conyers (D-Mich.) that would have ended the swipe fees, the small percentage that credit companies like Visa charge with every transaction. Another bill by Rep. Carolyn Maloney (D-N.Y.), affording significant new protection to credit-card holders, passed the House but did not make it through the Senate. Conyerss legislation passed his House Judiciary Committee with bipartisan support on Oct. 3, 2008, the last day lawmakers were in office before leaving to campaign for the election, but was not brought to the floor, which Pelosi controlled as speaker.
Pelosi tried for consumer protections in 2008, but the next year she put more muscle behind the Credit Cardholders' Bill of Rights, a bill that gave new protections to consumers and was opposed by the credit-card industry. The bill was entirely devoted to preventing consumer exploitation, and swipe fees were not included, a victory of sorts for the industry.
When confronted earlier this month at a press conference about the delay in swipe fees, Pelosi said the House waited to act on the swipe fees until we had a president that could sign the bill. Her spokesman Hammill says it is preposterous to think Visas lobbying or the stock purchases had any influence on the speakers legislative actions.
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