Banks step up spending on lobbying to fight proposed stiffer regulations
Expenditures jumped 12% to $29.8 million last year among the eight financial firms that spent the most to influence legislation.
By Nathaniel Popper
February 16, 2010
Reporting from New York
Even as the financial industry has sought to keep a low public profile, some of the country's largest banks have ramped up their spending on lobbying to fight off some of the stiffest regulatory proposals pending in Congress.
Lobbying expenditures jumped 12% from 2008 to $29.8 million last year among the eight banks and private equity firms that spent the most to influence legislation, according to data compiled from disclosure forms filed with Congress.
The biggest spender was JPMorgan Chase & Co., whose lobbying budget rose 12% to $6.2 million, enough for the firm to have more than 30 lobbyists working for it. Among other banks, spending on lobbying rose 27% at Wells Fargo & Co. and 16% at Morgan Stanley.
"I have never seen such a scrum of bank lobbyists as I have in the last year -- and I've worked on quite a few bank issues over the years," said Ed Mierzwinski, a lobbyist for the U.S. Public Interest Research Group, a coalition of state consumer organizations. "It seems like everybody is out of work except for bank lobbyists."
Much of the increase in spending on lobbying in 2009 came in the final three months of the year as Congress voted on financial reform bills. Many Washington observers say industry lobbying has been even more intense this year, as President Obama has proposed a new tax on big banks, caps on their size, and curbs on their investment in often lucrative but risky hedge funds and private equity funds.
"This is a watershed moment," said Scott Talbott, a lobbyist for the Financial Services Roundtable, which represents about 100 of the largest financial firms. "The industry will be changed forever after this year."
Bank lobbyists, however, are trying to limit just how much the industry has to change. They are fighting some provisions in the Obama administration's broad industry-overhaul proposal, especially a plan to create a consumer protection agency to oversee financial services.
The House passed its version of the legislation in December. But its prospects are uncertain in the Senate, where talks between Republicans and Democrats on a compromise version recently broke down.
At a hearing this month, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), who has had a generally warm relationship with the financial community, lashed out at the "refusal of large firms to work constructively with Congress."
"Too many people in the industry have decided to invest in an army of lobbyists, whose only mission is to kill the common-sense financial reforms that we are working so hard up here to try to achieve," Dodd said.
Lobbying by insurers and banks, including Morgan Stanley, may kill a provision in the overhaul bill that would make retail brokers more accountable to their clients, Bloomberg News reported last week.
The intensified efforts on Capitol Hill have come as banks, facing unrelenting anger over the financial crisis and government bailouts, have avoided publicly resisting a push to reform the industry. Many of the firms even reduced campaign contributions by their political action committees last year. And three big banks that have faced especially heavy public criticism -- Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc. -- cut back or held steady on lobbying last year.
But the increased spending by other firms -- as well as by industry groups -- suggests financial firms are making their voices heard more than ever.
"Despite the decline in credibility with the public, the banks appear to have increasing power" on Capitol Hill, said Travis Plunkett, a lobbyist with the Consumer Federation of America.
The banks generally declined to comment on their lobbying. Wells Fargo said its 27% increase was justified because the bank nearly doubled in size by acquiring struggling Wachovia at the height of the financial crisis.
The banks have emphatically proclaimed a desire to see reform of the sort being discussed by legislators. At a Senate hearing this month, JPMorgan and Goldman Sachs executives said they wanted to see the government help make the financial industry more stable.
"I fully and enthusiastically agree that we have to put 'too big to fail' behind us," said Gerald Corrigan, a senior executive at Goldman Sachs.
But outside of public view, bank executives have expressed concerns about the steps that Congress and the Obama administration have been looking at.
In a survey late last year by the Center for the Study of Financial Innovations, an industry-sponsored think tank, bankers said the biggest risk to the financial system was "political interference," with "too much regulation" coming in third. In the last such survey, in May 2008, liquidity was named as the top risk, "too much regulation" was No. 8 and "political interference" was not in the top 30.
Corrigan of Goldman Sachs criticized the specific steps that were recently proposed by Obama and former Federal Reserve Chairman Paul Volcker. "It's not at all clear to me, at least at this stage, that the focus is on the issues that were really at the heart of the crisis itself," he said at the Senate Banking Committee hearing.
Consumer advocates say it is the banks' opposition -- not their desire for reform -- that has carried the day.
"They are glossing over the fact that they are opposing the most far-reaching reforms that would actually require them to sacrifice some control," said Plunkett of the Consumer Federation of America.
Lobbying isn't the only way financial firms make their views known. Political giving by employees and PACs is another way.
There is also the more personal approach. Top executives from at least eight financial firms journeyed to Washington this month to meet with senators. The executives included Bank of America Chief Executive Brian Moynihan, JPMorgan CEO Jamie Dimon and the leaders of US Bank and Bank of New York Mellon.
"There's lots of CEO interest in coming to Washington," said Talbott of the Financial Services Roundtable.