Buoyed by the Occupy Wall Street movement, average citizens have made an unusual push to contact federal regulators engaged in the arcane process of writing new rules to regulate big banks. But they may be drowned out by financial industry players who are spending record sums on lobbying.
The focus on this David-versus-Goliath contest is the Volcker rule, a centerpiece of the Dodd-Frank financial reform law intended to block banks from the high-risk trading that triggered the 2008 financial crisis.
Federal regulators struggling to implement the rule have received regular visits from banking industry allies and lawyers. But they've also heard from thousands of citizens blasting the banks as "fools," "hogs" and "criminals," according to a Duke University law professor who's been analyzing the comment letters.
Public interest groups such as Americans for Financial Reform and Public Citizen — and more recently activists from Occupy the SEC, an offshoot of the OWS movement — have been ginning up letters to federal agencies about the Volcker rule.
The Occupy organizers are drafting a comprehensive set of public comments, with input from financial experts, academics and even former traders, to submit to federal regulators. The Federal Reserve, Securities and Exchange Commission and other federal agencies issued a draft regulation in October and have set a Jan. 13 deadline for public comment.
"Normally the only parties that respond to agency comments are the companies that are affected by the regulations and their attorneys," and those "are always critical of regulation," the Occupy group's website says. The group is urging Web visitors to write their own public comment letters.
Occupy the SEC organizer Elizabeth Friedrich, who works for a Manhattan nonprofit, was chipper about the campaign. "I think it's really empowering to create this public comment," she said.
But they are up against a significant opposition.
Lobbying by the top commercial banks jumped 12 percent in the first three quarters of this year compared with 2010, according to the Center for Responsive Politics, even as some industries scaled back their lobbying budgets. Wells Fargo lobbying spiked to $5.9 million, compared with $3.3 million last year, the center's data show.
Lobbying has been particularly intense around the Volcker rule, which was named after former Federal Reserve Chairman Paul Volcker. The idea behind it was to bar federally insured banks from using their own money to engage in risky bets, known as proprietary trading. The draft regulation released in October has drawn fire from the banks for being too stringent, and from some watchdogs for including too many exceptions.
"The rule as crafted is overly complex; I think everyone agrees with that," said former Rep. Ken Bentsen (D-Texas), an executive vice president at the Securities Industry and Financial Markets Association.
The draft rule is complex because financial services industry lobbyists have badgered regulators to write in loopholes, countered Dennis Kelleher, president and CEO of Better Markets, a public interest nonprofit focused on the financial services industry.
"I think the regulators did a pretty good job of proposing a rule that gets close to reflecting the intent of the law," Kelleher said. "But it definitely needs improvement. And frankly, it reflects the intensive lobbying campaign of the industry to try to gut it, and water it down, and create exceptions."
The intensity of Volcker rule lobbying was on display when a federal study on how to implement it generated some 8,000 public comments, according to an analysis by Duke University law professor Kimberly Krawiec. The vast majority of the comments — 93 percent — were from financial institutions and their representatives.
Visits to federal regulators have been similarly lopsided, Krawiec found. Between the time of the Dodd-Frank law's enactment and the Volcker rule draft regulation's release in October, financial industry representatives met with federal agencies 347 times, accounting for 93.3 percent of all such visits. Visits from public interest groups and their allies numbered only 30.
Public interest advocates said the Occupy Wall Street movement has changed the tone of public debate, but they acknowledged its limits. Federal officials writing regulations depend on Wall Street players for their expertise and even for data about the banks, say Capitol Hill aides who worked on the Dodd-Frank law. And writing federal regulations requires more detailed legal and policy expertise than the average Occupy demonstrator can offer.
"The forces arrayed on the sides of this battle are incredibly uneven, as they were also during the efforts to pass Dodd-Frank," said Lisa Donner, executive director of Americans For Financial Reform. But she added that the Dodd-Frank fight yielded key reforms, even against long odds: "The fight's not done."
Rep. Elijah Cummings, D-Md., right, hugs Harold Schaitberger, General President of the International Association of Fire Fighters, after the Congressman spoke at the IAFF's Legislative Conference General Session at the Hyatt Regency on Capitol Hill, March 9, 2015. The day featured addresses by members of Congress and Vice President Joe Biden.