Brutal Stretch Ahead for Lobbyists

Deck Stacked Against Wall Street's Defenders as Reform Bill Hits Senate Floor

Posted April 30, 2010 at 5:28pm

Financial services lobbyists are bracing for a bruising couple of weeks.

After watching Republicans fail to soften the financial reform bill before it hit the Senate floor, K Street is still working fervently behind the scenes to get changes inserted in Senate Banking, Housing and Urban Affairs Chairman Chris Dodd’s (D-Conn.) manager’s amendment and to find sponsors for other amendments that would move the bill away from some of the more punitive anti-Wall Street measures.

So far, they’re having little success.

“This is the worst possible outcome,” one in-house financial services lobbyist said. “You’re just throwing s— against the wall and seeing what sticks.”

Wall Street was counting on Dodd and his Republican counterpart on the Banking panel, ranking member Richard Shelby (Ala.), to reach a bipartisan agreement, which likely would have led both sides to agree to sharply curtail amendments in order to speed the bill to passage with minimal changes.

But now, Wall Street lobbyists are confronting legislation that they already loathe — and a wide-open amendment process with Senate Democrats working on several populist measures that would make the bill even more unpalatable, such as requiring big banks to spin off their derivatives desks.

Making matters worse for the industry, Senate Republicans appear unwilling to take the heat for being in bed with Wall Street, so lobbyists say it’s nearly impossible to get substantive changes in their favor made to the legislation.

While Dodd and his staff continued to work over the weekend on the manager’s amendment, lobbyists said the provisions that are the most controversial and potentially harmful to their business model — such as creation of a resolution authority, federal pre-emption and creation of a new consumer protection agency — are expected to be debated on the Senate floor.

The chamber will kick things off Tuesday by considering an amendment from Sen. Barbara Boxer (D-Calif.) that would ensure no taxpayer money is used to bailout struggling financial firms.

Democrats were hammered on the issue in the weeks leading up to the bill hitting the floor, and by allowing Boxer to offer an amendment responding to GOP critics, Democratic leaders are lining up a quick, high-profile victory for an incumbent facing a difficult fight for re-election.

But Democrats will also have to hold their Members together to beat back politically charged amendments, and splinters in the party will likely be exposed on provisions meant to break up large banks and expand oversight of the Federal Reserve. Indeed, the financial reform debate will not be strictly divided along partisan lines, but both sides still hope to score points in the process.

Financial services lobbyists said that is exactly what keeps them up at night.

However, Sen. Mark Warner (D-Va.), a Banking panel member who made millions as a business executive, said the complex nature of financial reform opens the debate to mass confusion, which lobbyists might capitalize on.

“The problem with some of this stuff is that it is so complex that, in a sense, you could have someone like me — with 20 years in the finance industry — still have to take a full year to try to understand it,” Warner said. “Those are the challenges.”

Majority Leader Harry Reid (D-Nev.) has assured an open amendment process, and aides expect the bill to be on the Senate floor for at least two weeks. Some estimate anywhere from three dozen to more than 100 amendments will be offered, and in a tradition as historic to the institution as any, not all of them will necessarily be tied to the topic at hand.

Sen. Tom Coburn (R-Okla.) is readying an amendment dubbed the “12-step reform program” to end Congress’ addiction to spending, but he is also considering others on border security and energy issues, likely written in language difficult for some Democrats to vote against.

As one Democratic aide affirmed, “We’re preparing for them to embarrass us.”

Still, Democrats are certain that in two weeks they will be celebrating passage of sweeping financial reform that will serve as a red meat issue on the campaign trail this fall.

The biggest banks, largely the targets of the bill, have issued a full-court press with in-house lobbying teams, trade associations and contract lobbyists to try to weaken the bill.

The American Bankers Association’s Ed Yingling said the trade group is ready to do battle on dozens of amendments.

“This is a bill that we think really will determine the future of the banking industry, from the smallest bank to the largest bank, and unfortunately, because there was no agreement worked out, it is going to be a very chaotic and dangerous process,” Yingling said. “The concern has to be that even when Senators understand that something needs to be done, the political situation and the fear of being labeled, in the case of a bank or not a bank, as something being special interest.”

The group isn’t leaving anything on the table.

As the largest third-party financial services group representing small and large banks, the ABA has an extensive grass-roots network, with 50 independent state trade associations.

The trade association has put together a spreadsheet listing each amendment with supporters and opponents, and the group has its state associations “geared up to work the grass roots in their state on a given amendment on a moments notice,” Yingling said.