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Lobbyists swarm agencies as Dodd-Frank is implemented

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Throughout the last Congress, which adopted far-reaching reforms of the financial sector through the Dodd-Frank Wall Street Reform and Consumer Protection Act, there were an average of 577 clients lobbying on issues related to the act. Eventually some 1,172 clients—including banks, ratings agencies, investment banks, securities firms and a host of other interests with a stake in the legislation—listed Dodd-Frank or related issues on their lobbying disclosure forms. And in 2011, lobbyists for some 488 clients are still lobbying on the bill, according to the most recent data from the Center for Responsive Politics.

The number of major banks, securities firms, investment banks, ratings agencies, insurers, corporations, labor unions and other groups listing the act peaked during the second quarter of 2010, when the law passed Congress, with a significant percentage of the lobbying clients still registered a full year later.

The Wall Street reform bill was a mammoth undertaking, consisting of more than 2,300 pages, and requiring agencies to write a total of more than 240 new regulations. With 108 new rules due to be adopted this summer on the first anniversary of its enactment, and a dozen bills introduced by Republican members to repeal the bill in whole or in part, government-relations wings of the Wall Street banks and lobbying firms in Washington, D.C., have been busy. The rule making process has been a pitched battle among consumer groups, the financial industry and regulators. And with the sheer number and complexity of these nuanced rules, several implementation deadlines have been pushed back.

There are eleven different agencies and bureaus involved in the rulemaking process, and as of July 1, only 38 rules have been finalized, with 26 deadlines missed. Which is hardly surprising: the financial industry firms whose actions contributed to the crisis have the most to lose—or gain—if they can influence the regulatory process.


A shift in gear for Wall Street firms

In 2008, when the crisis was at its most intense and a succession of financial giants like Bear Stearns, Lehman Brothers, Merrill Lynch and American International Group teetered on the edge of insolvency, Wall Street firms began a prolific lobbying campaign. Goldman Sachs, one of the firms at the center of the storm, created a team of insider lobbyists between 2009 and 2010, hiring the likes of Michael Paese, former staffer to the financial reform bill’s House sponsor, Rep. Barney Frank, D-Mass., at a major post and former Democratic presidential candidate and House leader Richard Gephardt to lobby for them.

In 2008, Goldman reported spending $3.4 million on lobbying, its highest total until 2010, when its reported total topped $4.6 million. Goldman Sachs wasn’t alone: the top ten banks, in terms of deposits, reported spending a total of $87 million lobbying Congress on multiple issues, including the Dodd-Frank legislation, from 2009 to 2010.

Here is a breakdown of the amount each of the 10 banks spent:

Name of Bank Amount spent in 2009 Amount spent in 2010 Amount spent in 2011
Bank of America $3,680,000 $3,980,000 $930,000
JP Morgan Chase $6,170,000 $7,410,000 $1,750,000
Citigroup $5,560,000 $5,840,000 $1,360,000
Wells Fargo $2,950,000 $5,430,000 $1,940,000
Goldman Sachs $2,830,000 $4,610,000 $1,320,000
Morgan Stanley $2,880,000 $2,750,000 $740,000
Metlife Inc. $6,160,000 $5,490,000 $1,620,000
Taunus Corporation (Deutsche Bank ) $970,000 $2,596,000 $370,000
HSBC North America $2,536,573 $3,060,000 $980,000
US Bancorp $170,000 $1,332,073 $350,000

Focusing on the federal agencies

After the law passed, lobbyists switched focus from Capitol Hill to the federal regulatory agencies. There were at least 529 clients listing at least one of the 11 regulatory agencies implanting Dodd-Frank in the lobbying disclosure forms they filed with Congress in 2009 and 2010.

General Electric was among the interests who have reported contacting regulatory agencies consistently on Dodd-Frank and related issues, in part because the act brings its subsidiary and financing arm, GE Capital, more oversight from the Federal Reserve. With about $600 billion in assets, GE Capital was one of the non-bank investment companies that were prescribed for additional review under the newly created Financial Stability Oversight Council, Dodd-Frank’s attempt to provide more supervision for “too big to fail” banks without breaking them up. GE lobbied regulatory agencies and Congress in an attempt to roll back the more stringent oversight, records show.

The American Bankers Association, another group that has targeted regulatory agencies, disclosed spending $17 million in 2009 and 2010, and $2 million in the first quarter of 2011. The ABA, which is the trade group for commercial banks, lobbied on issues such as weakening the newly created Consumer Financial Protection Agency and sought to repeal several provisions of the law.

The Securities and Financial Market Association, one of Wall Street’s largest lobbying group, has also made attempt to slow down the rulemaking and regulatory processes underway by the federal agencies.

In a recent interview with Bloomberg TV head of SIFMA, a trade group for securities firms, banks and asset managers (its members include Goldman Sachs, BlackRock, and a Citigroup subsidiary) said that the industry is not opposed to Dodd-Frank but would like the agencies to take their time with the rule making process since banks could potentially lose their profitability with the additional oversight. “Our biggest concern is that no one is doing a study of the overall economic impact of these regulations,” he said.

Standard & Poor’s, the credit rating agency, also features on the list of lobbying clients targeting the regulatory agencies. S&P’s parent company, McGraw Hill, has spent $3 million in the last two years. Like the other ratings agencies, Standard & Poor’s was faulted for giving high-risk securities investment-grade ratings. Lobbying records show that MCGraw listed “oversight of credit ratings agencies” as one of the main issues they worked on in the last few years. Under Dodd-Frank, firms like S&P were mandated for additional oversight under the SEC, which will require ratings agencies to release reports showing their internal processes at least once a year. Additionally, Dodd-Frank mandates some checks on conflicts of interest that arise when firms like Standard and Poor’s rate products of Wall Street firms on whom they depended for their profits.

Among the insurance industry the American Insurance Association was one of the most prolific lobbyists on issues related to Dodd-Frank. The new law called for Treasury to establish the Federal Insurance Office to collect data on the industry and offer a study next year on how  to modernize the insurance industry, including consideration of moving oversight from the states to the federal level.

With the ongoing rulemaking, Dodd-Frank issues have become a full employment opportunity for lobbyists.

Lobbyists who were listed as hired guns for some of the largest banks and investment groups working on specific Dodd-Frank related issues include some of DC’s prominent players. These include Tony and Heather Podesta, the husband-wife Democrat-leaning power lobbyists who together have contributed more than $275,000 in the 2010 election cycle.

Others include Kenneth Kies of the Federal Policy Group who contributed about $136,000 and Lawrence O’Brien of the OB-C group who contributed $135,000.

Lawmakers that received the most in contributions from lobbyists who listed Dodd-Frank issues on their disclosure forms among others issues include Senate Majority Leader Harry Reid, D-Nev., who received more than $186,000 followed by Sen. Rob Portman, R-Ohio ($154,700), Sen. Blanche Lincoln, D-Ark. ($146,400) and Rep. Charles Schumer, D-N.Y. ($130,600).