Three years after Congress passed what supporters claimed were unprecedented federal regulations meant to prevent a repeat of the 2008 financial collapse, lobbyists for banks and Wall Street firms have more sway than ever on Capitol Hill.
Republicans and some Democrats have targeted the package passed in 2010, known as Dodd-Frank, for intense criticism. Conservatives decry the string of comprehensive new regulations as onerous and guilty of stunting economic growth.
Financial industry interests have also complained, flooding lawmakers who want to rewrite Dodd-Frank with cash in the last two election cycles and gaining new influence when Republicans seized control of the House.
This political alliance has begun paying handsome dividends for financial companies as legislators hostile to the new regulations are willing to go to considerable lengths to make sure the industries covered by the oversight are given a chance to craft reforms more to their liking.
The New York Times reports on Friday that House Republicans working on bills to repeal Dodd-Frank and loosen myriad other financial regulations have allowed banking lobbyists to draft much of the legislation themselves. Three-quarters of the language in one bill that easily passed the House Financial Services Committee had been written by lobbyists for Citigroup. Industry officioals defend such a practice as “common” in Washington.
Wall Street and big banks, once reviled as the driving forces of the 2008 market crash and subsequent recession, have seen their reputations significantly polished in the nation’s capital. Banks and their lobbyists now enjoy a “resurgent influence” with business-friendly Republicans and election-wary Democrats in Congress.
Bank lobbyists are not leaving it to lawmakers to draft legislation that softens financial regulations. Instead, the lobbyists are helping to write it themselves.
One bill that sailed through the House Financial Services Committee this month — over the objections of the Treasury Department — was essentially Citigroup’s, according to e-mails reviewed by The New York Times. The bill would exempt broad swathes of trades from new regulation.
In a sign of Wall Street’s resurgent influence in Washington, Citigroup’s recommendations were reflected in more than 70 lines of the House committee’s 85-line bill. Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word for word. (Lawmakers changed two words to make them plural.)
The lobbying campaign shows how, three years after Congress passed the most comprehensive overhaul of regulation since the Depression, Wall Street is finding Washington a friendlier place.
The cordial relations now include a growing number of Democrats in both the House and the Senate, whose support the banks need if they want to roll back parts of the 2010 financial overhaul, known as Dodd-Frank.
This legislative push is a second front, with Wall Street’s other battle being waged against regulators who are drafting detailed rules allowing them to enforce the law.
The payoff for both sides in the equation is incredibly attractive. Financial companies have been able to ingratiate themselves with lawmakers already receptive to their calls for fewer regulations by spending huge sums on lavish lobbying events and bankrolling scores of congressional candidates.
And as its lobbying campaign steps up, the financial industry has doubled its already considerable giving to political causes. The lawmakers who this month supported the bills championed by Wall Street received twice as much in contributions from financial institutions compared with those who opposed them, according to an analysis of campaign finance records performed by MapLight, a nonprofit group.
In recent weeks, Wall Street groups also held fund-raisers for lawmakers who co-sponsored the bills. At one dinner Wednesday night, corporate executives and lobbyists paid up to $2,500 to dine in a private room of a Greek restaurant just blocks from the Capitol with Representative Sean Patrick Maloney, Democrat of New York, a co-sponsor of the bill championed by Citigroup.
Industry officials acknowledged that they played a role in drafting the legislation, but argued that the practice was common in Washington. Some of the changes, they say, have gained wide support, including from Ben S. Bernanke, the Federal Reserve chairman. The changes, they added, were in an effort to reach a compromise over the bills, not to undermine Dodd-Frank.
It’s unlikely to be a coincidence that the chairman of the House committee in charge of financial industry oversight and at the center of granting direct access by lobbyists to the drafting of important regulatory bills has been wined and dined by some of the nation’s leading banks.
According to Pro Publica, Texas Rep. Jeb Hensarling met with several banking executives at an exclusive Utah ski resort — complete with a celebrity chef to cater the event — only weeks after attaining chairmanship of the House Financial Services Committee. That is the same committee now discovered to be letting lobbyists for Citigroup and other banks draft legislation intended to gut federal financial regulations.
The posh party for Hensarling’s campaign PAC may not have breached any election laws, but it presented an “invaluable opportunity” for financial companies and their lobbyists.
In January, Rep. Jeb Hensarling, R-Texas, ascended to the powerful chairmanship of the House Financial Services Committee. Six weeks later, campaign finance filings and interviews show, Hensarling was joined by representatives of the banking industry for a ski vacation fundraiser at a posh Park City, Utah, resort.
The congressman’s political action committee held the fundraiser at the St. Regis Deer Valley, the “Ritz-Carlton of ski resorts”known for its “white-glove service” and for its restaurant by superstar chef Jean-Georges Vongerichten.
There’s no evidence the fundraiser broke any campaign finance rules. But a ski getaway with Hensarling, whose committee oversees both Wall Street and its regulators, is an invaluable opportunity for industry lobbyists.