Despite being blamed for the near collapse of the U.S. economy, banking interests remain a powerful force in shaping and killing legislation on Capitol Hill. But their muscle is being tested by a series of bills aimed at bringing the industry under Washingtons regulatory thumb.
I dont know how they could bring us to this situation in this economy and have lost so much credibility as an institution, said Senate Majority Whip Dick Durbin (D-Ill.), who suffered defeat in a major battle with the banks last week. To think they still have clout in this chamber to dictate what were going to do in terms of mortgages and foreclosures. It really troubles me.
Durbin pointed to an April 23 Gallup Poll showing that only 18 percent of Americans expressed strong confidence in U.S. banks. But Durbin indicated that he believes the $37 million in campaign contributions and $56 million in lobbying expenses that commercial banks spent during the 2008 election cycle helped bolster the banks case with his colleagues.
Banking interests disagreed.
Banks continue to play an important role in shaping legislation because were experts in the economy, said Scott Talbott of the Financial Services Roundtable. A lot of our message has been the balancing act between new regulations and the effect they have on the economy.
Whether it was money, influence, expertise or some combination, banks scored a major win last week in defeating a key part of President Barack Obamas housing foreclosure mitigation plan. That plan, known as cram down and spearheaded by Durbin, would have allowed bankruptcy judges to write down the terms of some primary home mortgages so that struggling owners could stay in their homes. Durbin estimated that 1.7 million homeowners would have been helped by his bill.
Already, banks have learned that not negotiating with the Majority Whip could have ramifications in the future. Durbin took to the Senate floor Wednesday to say he will no longer support bailouts like the $700 billion Wall Street rescue plan he voted for last fall.
Their unwillingness to deal could cost them, one financial services lobbyist said.
In particular, Democratic supporters of cram down singled out the Independent Community Bankers of America, who walked away from the negotiating table late in the process.
That burned substantial bridges with the Democratic majority that is going to be rewriting the regulation of their industry, one Senate Democratic aide added.
So far, the industry hasnt backed down in pushing lawmakers to go easy on them. As the Senate looks to take up a bill this week to restrict credit card lending practices, the industry is heavily lobbying against two amendments regarding interchange fees and capping the interest rates on credit cards.
But some Members, including Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.), pointed to the slowly shrinking number of lawmakers willing to vote with the banks.
Actually, we have been doing a lot better on some of these questions, regretfully for the reasons were all aware of, because were in such bad shape economically and people attribute a lot of those conclusions to the decisions made by these institutions, said Dodd.
Terri Henderson, 6, center, whose mother is El Salvador, attends a rally with members of Congress at Union Station's Columbus Circle to announce the Restore Opportunity, Strengthen, and Improve the Economy (ROSIE) Act on July 29, 2014. The legislation provides incentives for government contractors to pay a living wage and other benefits that would help low-income workers.