Bloomberg takes a hard look at the lobbying fight over financial regulatory overhaul and concludes that despite last week’s passage of a financial regulatory overhaul package by the House, the banks won — simply by not losing as badly as they once thought they might. Their aggressive lobbying ensured that more restrictive reforms were off the table, even at a time when the banks should be in a much weaker position. What’s chilling about the piece are the details of the lobbying efforts, and the calculations of an industry continuing to fight any accountability for the economic mess at hand.
The story describes four Wall Street lobbyists meeting for breakfast at Tortilla Coast restaurant on Capitol Hill with about a dozen (unnamed) fiscally conservative House Democrats in early December. The discussion became heated, and the lobbyists were told banks should do more to increase lending and to aid struggling homeowners.
But that’s not what happened in the end. Instead, firms that helped cause the worst financial crisis in 70 years used their energy to to stave off reforms, sidestepping proposals that would have split investment and commercial banking, capped pay or seriously hurt their ability to make money, Bloomberg reports. And 27 Democrats aided their efforts by voting against any reforms at all.
“The industry is not losing as badly as it thought it might,” said Oliver Ireland, a former associate general counsel at the Federal Reserve and now a partner at law firm Morrison & Foerster in Washington. “The fact that someone had a worse proposal on the table and it doesn’t happen — it’s hard to view that as a win. It’s not as big a loss.”
The piece also examines how pro-business New Democrats held up the reform bill to force consideration of a bank-friendly amendment from Rep. Melissa Bean (D-Ill.), that would give federal regulators greater powers to override state regulations.
Instead of starting debate on legislation that was six months in the making, House Financial Services Committee Chairman Barney Frank, House Majority Leader Steny Hoyer and House Rules Committee Chairwoman Louise Slaughter marched into a meeting in the offices of Speaker Nancy Pelosi on the second floor of the U.S. Capitol.
Frank, who introduced the financial overhaul legislation, and other House leaders were in one room, while Bean and Treasury officials were in another. Hoyer shuttled back and forth, according to a person familiar with the matter.
An hour later, shortly after 6 p.m., Frank emerged from the meeting and told reporters a deal had been reached. A version of Bean’s proposal would be included in the bill.
“The differences have been narrowed, and I think you’re getting something that both sides can live with,” said Frank, a Massachusetts Democrat.
Debate on the bill began at 6:49 p.m.
“Some of the big banks had a successful run at lobbying the New Democrats,” including on the preemption issue, Frank said in a Dec. 10 interview.
That’s putting it mildly. The story doesn’t explain why Treasury officials were in the room with Bean — that’s a particularly interesting detail that the public might want to know about. Anyway, all of this explains how banks fared far better than they thought in the House bill, and there’s still a fight in the Senate to come.
Given what’s happened so far, banks clearly could win again, simply by chipping away at reforms until they end up with something that’s not nearly as bad as they once feared. One of the lobbyists even told Bloomberg the financial industry was benefiting from the fight over health care reform, because it has slowed down regulatory legislation.
That banks are making any headway “is astonishing,” said Travis Plunkett, legislative director at the Washington-based Consumer Federation of America.
“Some members of Congress seem to have memory loss,” Plunkett said. “They are forgetting that the very institutions whose amendments they’re proposing were the entities that helped cause our nation’s financial collapse. The banks are playing death by 1,000 cuts.”
And by some measures, they’re not losing, which adds up to a win.