Lobbyists Can't Get in Door
Wall Street Finds It Hard to Reach Lawmakers to Lobby on Financial Overhaul
By AARON LUCCHETTI And DAMIAN PALETTA
Wall Street's lobbying army is marching around Washington in a push to shape the final financial-overhaul bill. But it has gotten harder to get through the door with some lawmakers.
One bank has complained that it no longer has access to House Financial Services Committee Chairman Barney Frank (D., Mass.), whose schedule has filled up to accommodate negotiations with his Senate counterparts during the next two weeks.
Mr. Frank and the top Republican on the House Financial Services Committee, Rep. Spencer Bachus (R., Ala.), also have postponed scheduled fund-raising events since the conference held its first meeting on Thursday. Messrs. Frank and Bachus are among 43 lawmakers responsible for hammering out differences in the bill, which will have a broad impact on how banks are regulated and do business.
There are three reasons why bending the ear of lawmakers suddenly has become a bigger challenge for financial-services industry lobbyists. Some lawmakers want to avoid even the slightest appearance that Wall Street is getting one last chance to throw its weight and money around on key provisions of the bill, including toughened oversight and other banking and securities cash cows.
Some lawmakers also have said they have little time to listen to outside lobbyists, particularly since Democrats are hoping to have the financial-overhaul bill signed into law by July 4. Mr. Frank, for example, hasn't ruled out face-to-face meetings, but his legislative schedule is packed, according to a person familiar with the matter. He still is holding meetings by phone.
The House Financial Services Committee's top Republican, Rep. Spencer Bachus (R., Ala.), left, confers with the panel's chairman, Barney Frank (D., Mass.), in April.
Meanwhile, some banks have been told that their views are known already, given the long debate over how many legislative changes are needed in response to the financial crisis.
Not surprisingly, banks and securities firms still are pressing their case. Bank of America Corp. Chief Executive Brian Moynihan recently met with White House officials in Washington. A few weeks ago, J.P. Morgan Chase & Co. Chairman and CEO James Dimon made a series of phone calls to lawmakers to argue that several provisions of the bill could damage the banking system and overall economy.
"The closer you get to the end of the process, the more intense everyone's efforts get," says William Sweet, a partner at law firm Skadden, Arps, Slate, Meagher & Flom. "A lot of people are losing sleep." Mr. Sweet isn't lobbying on the bill.
In the first quarter, the latest period for which figures are available, the securities and investment industry spent $28 million on lobbying, according to the Center for Responsive Politics. Some of that spending likely is funding part of the current lobbying push.
If the first quarter's pace continues through the rest of 2010, the industry's total lobbying would surpass by 18% the all-time high set in 2008.
Conference members have seven other fund-raising events scheduled this month, according to the Sunlight Foundation, a group that tracks such events. Rep. Carolyn Maloney (D., N.Y.), for example, still plans to hold a $2,400-a-person reception on June 23 at the Carole King and James Taylor concert at Washington's Verizon Center.
A campaign spokesman said there was nothing improper about Ms. Maloney continuing to hold fund raisers while negotiating final details of the financial-regulation bill.
In recent weeks, many banks and securities firms have narrowed their lobbying efforts to two or three core issues that could hurt them the most if the legislation forces changes in their business strategy or operational structure.
The more-targeted approach contrasts with grumbling by some executives that more than a dozen parts of the House and Senate bills could spell big trouble for financial firms.
"There is a lot of discussion," says Kenneth Bentsen, executive vice president and top lobbyist at the Securities Industry and Financial Markets Association, the biggest Wall Street trade group.
The group has winnowed down its own concerns to the thorniest issues, many of which are "technical," Mr. Bentsen says, and could hinge on specific language about how rules triggered by the legislation should be implemented.
For example, the Senate bill passed last month contains two provisions that are being hotly contested by financial firms. The first provision, by Sen. Blanche Lincoln (D., Ark.), would force banks that accept federally insured deposits and other aid to sever their derivatives arms. Derivatives are privately negotiated, loosely regulated contracts that fluctuate in value based on myriad financial instruments and scenarios.
On Monday, Ms. Lincoln clarified the proposal, saying that bank-holding companies could spin off their derivatives businesses into affiliates and not completely jettison these operations. But banks are still worried about the impact and costs.
Derivatives have been a particular focus of regulators, given their opacity and culpability in the financial crisis. Critics of the Lincoln proposal, including some financial regulators, contend that the effort to separate derivatives units underestimates the importance of such instruments in helping clients of banks manage legitimate financial risks.
Other changes to derivatives, such as forcing more of the contracts to trade on exchanges, are viewed by some financial-industry executives as more palatable and potentially effective. Some in Washington have suggested blending Ms. Lincoln's proposal with a separate Senate provision to restrict proprietary trading known as the Volcker rule.
Both provisions are aimed at keeping banks out of excessively risky businesses. Some Wall Street bankers warn that the current language of the Volcker rule, named for former Federal Reserve chief Paul Volcker, now an adviser to President Barack Obama, might restrict banks from putting small amounts of money in asset-management vehicles such as hedge funds. Such a change likely would please banking regulators but annoy investment clients who like to see banks put some of their own money into the same products and services pitched to clients.
Other provisions would protect municipalities doing business with Wall Street and make banks hold onto some of the consumer loans they sell to investors.
Meanwhile, one of the bill's original ideas—setting up a new process for the government to wind down a failing large financial institution—is less-contested because the House and Senate agree about the major points.
—Dan Fitzpatrick contributed to this article.
Write to Aaron Lucchetti at aaron.lucchetti@wsj.com and Damian Paletta at damian.paletta@wsj.com
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