Eight of the twelve new members chosen to take seats on the House Financial Services Committee can count the finance, insurance and real estate sector as the top contributor to their election.

Incoming Rep. Robert Dold is the top recipient of money from the finance, insurance and real estate sector among all freshmen elected in November's midterm elections. Dold, who raised $554,024 from the sector, according to the Center for Responsive Politics, is one of ten freshmen appointed to the committee overseeing the financial sector.

Another new member of the committee, Rep.-elect Steve Stivers, previously worked as a lobbyist for Bank One, which is now owned by JPMorgan Chase. Stivers received $294,105 from the finance sector.

In July 2010, Stivers came to Washington for a fundraiser thrown by financial lobbyists in Washington and hosted by incoming Financial Services Committee chairman Spencer Bachus. Bachus received nearly 63% of his 2010 campaign contributions from financial interests.  Bachus recently stated his philosophy for governing the committee, "In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks."

Bachus also hosted a fundraiser for incoming committee member Michael Fitzpatrick. Fitzpatrick, who this year reclaimed the Philadelphia suburbs seat he lost in 2006, raised $122,250 from the finance sector.

Two freshmen from the nation's financial capital, New York, were appointed to the committee as well. Rep.-elect Michael Grimm, who won election from Staten Island, raised $222,350 from the finance sector. This amounted to 24 percent of the total money that he raised for his campaign, the largest percentage from the finance sector of all newly appointed members. Grimm defeated Democrat Michael McMahon, who also sat on the Financial Services Committee. Rep.-elect Nan Hayworth, hailing from upstate New York, raised $204,215 from the finance sector.

The Financial Services Committee has always been a coveted spot for lawmakers facing tough reelection races in expensive districts. These lawmakers are in need of large campaign contributions and the finance sector is the biggest contributing industry of all. Since 1998 the finance sector has contributed nearly $2 billion to federal election campaigns.

Most recently, the Democrats appointed eleven of their "frontline" freshmen lawmakers to the committee to help them raise money for reelection. According to the Huffington Post's Ryan Grim and Arthur Delaney the committee is "known as a "money committee" because joining it makes fundraising, especially from donors with financial interests litigated by the panel, significantly easier."

Nearly all of the freshmen appointed to the committee are likely to face tough reelection races in either 2012 or 2014.

Dold's North Shore district went heavily for Barack Obama in 2008. Fitzpatrick's district is a classic swing district won by Barack Obama and John Kerry in recent elections. Sean Duffy represents a Wisconsin district that was held by Democrat David Obey for 40 years and won by both John Kerry and Barack Obama. Quico Canseco won by a small margin in a Texas border district that narrowly went for Barack Obama in 2008. Robert Hurt barely won election over freshman Democrat Tom Perriello in a Virginia district that John McCain won by a couple of points in 2008. Stivers, Hayworth and Grimm could all face challenges in a different climate come 2012.

See below for all new members and the amount raised from the finance, insurance and real estate (FIRE) sector. All data provided by the Center for Responsive Politics.

Lawmaker	Total FIRE	Total Raised	FIRE rank as contributor
Robert Dold	$554,024	$2,458,562	#1
Steve Stivers	$294,105	$5,237,413	#1
Michael Grimm	$222,350	$925,231	#1
Nan Hayworth	$204,215	$1,762,048	#2
Steve Pearce	$176,580	$2,235,263	#3
Blaine Luetkemeyer	$170,735	$1,270,308	#1
Robert Hurt	$127,200	$1,899,261	#3
Michael Fitzpatrick	$122,250	$1,590,663	#1
Lynn Westmoreland	$107,809	$703,253	#1
Fransisco Canseco	$101,550	$1,227,610	#1
Sean Duffy	$91,175	$1,620,447	#3
Bill Huizenga	$68,250	$591,028	#1

Yesterday the Senate unanimously voted to close a loophole that may have allowed the SEC to disregard certain FOIA requests. The loophole was uncovered only after the Dodd-Frank financial regulatory bill was enacted in July.

Many organizations took issue with the SEC FOIA exemption, prompting letters from the Project on Government Oversight on August 3 and OpenTheGovernment.org on August 10. The Sunlight Foundation endorsed both letters, as did many others.

The measure enacted in the Senate, S. 3717, was the subject of a hearing by the Senate Judiciary Committee on September 16. Companion legislation, H.R. 6086, was referred to the House Committee on Oversight and Government Reform. The measure enjoys bipartisan support, although time is running out for the House to act before the mid-term elections.

The Sunlight Foundation joined ten organizations today in expressing concern over a provision of the Wall Street Reform and Consumer Protection Act that may hinder the public’s access to SEC oversight information. The full text of the letter and list of signatories is below and on POGO's website. I wrote about Sunlight’s concerns on Sunday, which focus on FOIA exemptions and subpoena compliance carve-outs.

Thus far, two bills have been introduced in Congress to respond to the perceived lack of transparency in the FinReg bill.

First, Representative Paul introduced HR 5970,  which focuses specifically on undoing section 929I, which contains the provision in question.

Second, Reps. Issa, Towns, and Bachus introduced HR 6038, which establishes data standards for a wide variety of entities affected by the FinReg bill.

August 3, 2010

Senator Christopher Dodd Chairman Senate Committee on Banking, Housing and Urban Affairs 534 Dirksen Senate Office Building Washington, D.C. 20510

Representative Barney Frank Chairman House Committee on Financial Services 2129 Rayburn House Office Building Washington, D.C. 20515

Dear Chairmen Dodd and Frank:

We, the undersigned organizations concerned with government accountability and transparency, are writing to express our concerns about Section 929I of the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). If interpreted broadly, this provision has the potential to severely hinder the public’s ability to access critical information related to the oversight activities of the Securities and Exchange Commission (SEC), thereby undermining the bill’s overarching goals of more transparency and accountability.

As you know, Section 929I states that the SEC cannot be compelled to disclose records or other information obtained from its registered entities—including entities such as hedge funds, private equity funds, and venture capital funds that will now be regulated by the SEC—if this information is used for “surveillance, risk assessments, or other regulatory and oversight activities” outlined in the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Investment Advisers Act of 1940.[1]

SEC Chairman Mary Schapiro wrote to you last week defending this provision. She argued that registered entities need to be able to provide the SEC with access to sensitive or proprietary information “without concern that the information will later be made public.” She further explained that, prior to the passage of the Dodd-Frank Act, “regulated entities not infrequently refused to provide Commission examiners with sensitive information due to their fears that it ultimately would be disclosed publicly.” She also claimed that investment advisers routinely refuse to turn over personal trading records of investment management personnel, “instead requiring staff to review hard copies of the records on the adviser’s premises,” which “materially impacts the staff’s ability to detect insider trading activity.”[2]

These arguments do not adequately describe the SEC’s existing regulatory authority, and they fail to acknowledge that the Freedom of Information Act (FOIA) already provides sufficient exemptions to protect against the release of sensitive and proprietary information. Furthermore, the SEC has a troubling history of being overly aggressive in withholding records from the public. For these reasons, we strongly urge you to repeal Section 929I, or to at least curtail the SEC’s broad authority to withhold critical information from the public.

First, we are not convinced by Chairman Schapiro’s claim that “existing FOIA exemptions were insufficient to allay concerns [about public disclosure] due in part to limitations in FOIA.” For instance, Exemption 8 protects matters that are “contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions.” Chairman Schapiro argues that this exemption may not apply to all registrants, but it’s worth noting that the courts have broadly construed the term “financial institutions,” holding that it is not limited to depository institutions and can also include investment advisers.[3] In addition, Exemption 4 protects “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” The Department of Justice’s (DOJ) FOIA guide states that this exemption “encourages submitters to voluntarily furnish useful commercial or financial information to the government and it correspondingly provides the government with an assurance that such information will be reliable,”[4] calling into question Chairman Schapiro’s claim that additional exemptions are needed in order for the SEC to collect information from its registered entities.

Second, the SEC’s track record with FOIA raises additional concerns about giving the agency even more authority to withhold information from the public. Last year, an audit conducted by the SEC Office of Inspector General (OIG) uncovered a wide range of problems related to the SEC’s FOIA operations. We were particularly troubled by the OIG’s finding that the SEC Chief FOIA Officer was not operating in compliance with Executive Order 13392 or the OPEN Government Act; that few FOIA liaisons have written policies and procedures for processing FOIA requests, increasing the risk that the agency is unnecessarily withholding information from the public; and that there is an insufficient separation between the initial FOIA determination and the appeal process. The OIG concluded that the SEC’s FOIA release rate was “significantly lower when compared to all other federal agencies.”[5]

The OIG put forth a number of recommendations for correcting the glaring deficiencies in the SEC’s FOIA operations, such as ensuring that accurate searches are made for responsive information, providing guidelines or written policies for all FOIA-related staff that address the concerns raised by the OIG, and ensuring that all FOIA-related staff has access to sufficient legal expertise to process requests in compliance with FOIA. But according to the OIG’s most recent semiannual report to Congress, the SEC has not completed final action on any of these recommendations.[6] Rather than giving the SEC any more leeway to improperly withhold information from the public, we urge you to hold Chairman Schapiro accountable for the excessive delays in implementing the OIG’s recommendations.

Third, we notice that Chairman Schapiro is “asking the Commission to issue and publish on our website guidance to our staff that ensures [Section 929I] is used only as it was intended.” The solution for addressing the uncertainty surrounding this provision is not additional guidance. The solution is clarification in the law that public access is vital to accountability and that the existing FOIA exemptions can adequately protect confidential business information provided by regulated entities.

Fourth, Chairman Schapiro neglected to mention that the SEC already has the authority to compel registered entities to provide information and records. Under the Securities Exchange Act of 1934, the SEC has the authority to subpoena witnesses and require the production of any records from its registered entities. If these entities fail to comply, the SEC has the authority to suspend these entities, impose significant monetary penalties, and refer cases to DOJ for possible criminal proceedings.[7] But instead of using these existing authorities, Chairman Schapiro seems to think that Congress needs to provide blanket FOIA exemptions in order to convince the SEC’s registered entities to cooperate. We think such a blanket exemption fosters an environment that defers to the entities it regulates and is unadvisable.

Finally, it is unclear what Chairman Schapiro’s plans are for implementing other blanket FOIA exemptions in the Dodd-Frank Act, such as Section 404, which exempts the SEC from FOIA with respect to any “report, document, record, or information” received from investment advisers to private funds.

In the aftermath of the recent financial crisis, the need for greater transparency in our financial system is all too apparent. The SEC’s ongoing effort to withhold vital records from the public undermines the spirit of the transparency reforms in the Dodd-Frank Act, and flies in the face of President Obama’s guidance instructing agencies to adopt a “presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA, and to usher in a new era of open Government.”[8]

We call on you to repeal the unnecessary FOIA exemption in Section 929I, examine the SEC’s current record on withholding information, and take whatever steps are necessary to ensure that the SEC isn’t given any additional authority to keep its records under a veil of secrecy. We welcome an opportunity to discuss this issue with you further. To reach our groups, you or your staff may contact Angela Canterbury at the Project On Government Oversight at [redacted] or [redacted].

Sincerely,

American Library Association American Association of Law Libraries Citizens for Ethics and Responsibility in Washington (CREW) Essential Information Government Accountability Project (GAP) Liberty Coalition OMB Watch OpenTheGovernment.org Project On Government Oversight (POGO) Public Citizen Sunlight Foundation

cc: Senator Patrick Leahy

[1] “Dodd-Frank Wall Street Reform and Consumer Protection Act,” Pub. L. No. 111-203, Section 929I. http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4173enr.txt.pdf (Downloaded August 2, 2010) [2] Letter from SEC Chairman Mary Schapiro to Representative Barney Frank and Senator Christopher Dodd, July 30, 2010. http://voices.washingtonpost.com/market-cop/frank.pdf and http://voices.washingtonpost.com/market-cop/dodd.pdf (Downloaded August 2, 2010) [3] Department of Justice, “Exemption 8,” Freedom of Information Act Guide, May 2004. http://www.justice.gov/oip/exemption8.htm (Downloaded August 2, 2010) [4] Department of Justice, “Exemption 4,” Freedom of Information Act Guide, May 2004. http://www.justice.gov/oip/exemption4.htm (Downloaded August 2, 2010) [5] Securities and Exchange Commission, Office of Inspector General, Review of the SEC’s Compliance with the Freedom of Information Act (Report No. 465), September 25, 2009. http://www.sec-oig.gov/Reports/AuditsInspections/2009/465.pdf (Downloaded August 2, 2010) [6] Securities and Exchange Commission, Office of Inspector General, Semiannual Report to Congress: October 1, 2009 – March 31, 2010, pp. 98-99. http://www.sec-oig.gov/Reports/Semiannual/2010/semiapr10.pdf (Downloaded August 2, 2010) [7] Securities Exchange Act of 1934, Section 21(b) - (d), Section 32. http://www.sec.gov/about/laws/sea34.pdf (Downloaded August 2, 2010). [8] “Memorandum of January 21, 2009 – Freedom of Information Act,” Federal Register, Vol. 74, No. 15, January 26, 2009. http://edocket.access.gpo.gov/2009/pdf/E9-1773.pdf (Downloaded August 2, 2010)

I’ve been reading about a brewing controversy over whether language in the new Financial Regulations Act -- officially the Dodd-Frank Wall Street Reform and Consumer Protection Act, aka HR 4173 -- weakens public oversight over banks and investment companies. The alarm was publicly raised by Fox Business News last week  over section 929I of the legislation.

Fox's complaint: SEC is guarding the henhouse

Fox is suing the SEC for information “related to the agency’s response to complaints, tips and inquiries” stemming from the Bernie Madoff scandal. The SEC denied the FOIA request, citing the new provision.

To explain why this is important, Fox Business’s Dunstan Prial quotes SEC “whistleblower” and former SEC attorney Gary Aguirre as saying the law “permits the SEC to promulgate its own rules and regulations regarding the disclosure of records without getting the approval of the Office of Management and Budget, which typically applies to all federal agencies.”

The Washington Post’s Zach Goldfarb noted on July 28th that the SEC complies with “substantially fewer” FOIA requests than other agencies. Fox’s lawyer said the law’s purpose was to “keep the SEC’s failures secret.” The media giant's concern, no pun intended, is that the fox is guarding the henhouse. Equally plausible is the argument that the agency has been "captured" by those it regulates -- or that it's doing the will of Congress.

It seems to me that there are two anti-transparency concerns: why were the new FOIA exemptions created?, and why should the SEC be able to shrug off court subpoenas for information stemming from private lawsuits?

Goldfarb provides additional context and a caveat:

While, as Fox notes, the law exempts the SEC from disclosing records derived from ‘surveillance, risk assessments, or other regulatory and oversight activities’ this only concerns documents obtained through examinations of broker-dealers and investment advisers -- periodic or targeted reviews of financial firms.

People and organizations can still use FOIA to obtain a range of SEC information, such as inspector general reports; communications with Congress and the business community; and officials' calendar, salary and conflict-of-interest information.

SEC: These rules will improve enforcement

SEC Chairman Mary Schipiro reportedly responded to Fox’s allegations via letters to Senator Dodd and Representative Franks (which is not available on the SEC’s website, but is available from news outlets like the Washington Post.) She calls “false” the assertion that the legislation “'exempts’ the SEC from the Freedom of Information Act (FOIA).”

Out of fairness to Fox, the Chairman's characterization of its position is off base: the news conglomerate asserts that the SEC can set its own rules regarding how to comply with FOIA -- which means in practice that the SEC will only comply with FOIA requests to the extent it wants to -- but Fox does not claim the agency is exempted from FOIA entirely. Her characterization of Fox’s assertion seems to be a strawman.

The nub of Chairman Schapiro’s argument is that “[i]n order for our efforts [to protect investors, including those in hedge funds, private equity funds, and venture capital funds] to be successful, it is important that registered entities be able to provide us with access to confidential information without concern that the information will later be made public.”

She adds:

Prior to the Dodd-Frank Act, regulated entities not infrequently refused to provide Commission examiners with sensitive information due to their fears that it ultimately would be disclosed publicly. Existing FOIA exemptions were insufficient to allay concerns due in part to limitations in FOIA (including that certain existing exemptions may not apply to all registrants) (FN 1) and the fact that FOIA exemptions are not applicable when the SEC must respond to a subpoena (as either a party or non-party) (FN 2). The Commission's resulting inability to obtain this information hindered our capacity to enforce the securities laws and protect investors.

The first argument about “allaying concerns” is interesting because of the lack of a subject in the sentence. Whose concerns were not being allayed? Apparently the financial institutions the SEC oversees. Based upon the Commissioner’s letter, perhaps the problem from a regulatory point of view is that the SEC is relying (and perhaps must rely) on voluntary compliance from financial institutions for it to engage in regulatory oversight; FOIA (and public disclosure in general) is a side issue as to whether the SEC is empowered to do its job, and a fig leaf for financial institutions who do not wish to comply with a voluntary regulatory regime.

The second argument concerning subpoenas is not a FOIA argument, but one rather of regulated institution’s concerns that courts would be able to use information gathered by the SEC to help resolve litigation, potentially against a company’s interests. (Who knows -- they may be disclosing one set of books in court and another to the SEC.)

The good stuff is in the footnotes to her letter, which are not shown in the Washington Post’s reprint of the letter, but are available in the PDF the Post links to.

Footnote 1 explains that the FOIA exemptions do not apply to all registrants.

1 For example, FOIA exemption (b)(8) protects matters that are "contained in or related to examination, operating or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions (emphasis added).

Footnote 2 discusses the SEC’s response to subpoenas, which is unrelated to FOIA but does concern a person’s ability to have his or her day in court.

2 With respect to subpoenas, the staff is forced to contest them on grounds such as relevance and common law privileges. Depending on how a judge resolves the issues, the SEC may be ordered to produce sensitive records received from a registered entity to the firm's competitors. In some cases, the firms whose records could be disclosed have not even been parties to the proceeding in which the subpoena had been issued. Such disclosures obviously may cause significant harm to the businesses whose records and information are disclosed, and to the integrity of our examination program.

As a gesture towards the public, the Commissioner says that she is “asking the Commission to issue and publish on our website guidance to our staff that ensures the provision is used only as it was intended.” Congress didn't provide much guidance to aid the SEC, as the committee report that accompanied the legislation (House Report 111-517) does not provide any context as to legislative intent or explanation for this change in these provisions.

FOIA law prior to passage of the financial regulation bills (5 USC 552) seems to address the SEC’s concerns. FOIA exemption 4 excludes from disclosure “a trade secret or privileged or confidential commercial or financial information obtained from a person.” FOIA exemption 8 excludes information “contained in or related to examination, operating, or condition reports about financial institutions that the SEC regulates or supervises.”

Three Exemptions to FOIA and Court Subpoenas

Looking at the legislation itself, it appears that three exemptions have been inserted, all of which exempt the SEC from certain FOIA requests and court subpoenas arising from civil matters.

Exemption #1

First, a new provision was added to the rules regarding “public availability of information” for security exchanges, 15 USC 78x. Note that the SEC no longer needs to comply with court subpoenas or FOIA requests. Here's the language (with emphasis added in bold, and notes in square brackets):

‘‘(e) RECORDS OBTAINED FROM REGISTERED PERSONS.—

‘‘(1) IN GENERAL.—Except as provided in subsection (f), the Commission shall not be compelled to disclose records or information obtained pursuant to section 17(b), or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities.

‘‘(2) TREATMENT OF INFORMATION.—For purposes of section 552 of title 5 [FOIA laws, in other words], United States Code, this subsection shall be considered a statute described in subsection (b)(3)(B) of such section 552 [and thus be exempt from FOIA]. Collection of information pursuant to section 17 shall be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of title 44, United States Code [the section that establishes Office of Information and Regulatory Affairs within the Office of Management and Budget].’’.

I am not clear what provision 17(b) refers to, although I would guess that it is section 17(b) of the Securities and Exchange Commission Act of 1934 concerning “automated quotation systems for penny stocks,” codified at 15 USC 78-q2. If I'm right, this provision concerns the making publicly available of information regarding trading activity. (Note that subsection (f), not reproduced here, contains examples of when the agency must respond to subpoenas, e.g., in lawsuits brought by the government.)

Exemption #2

Second, a provision was modified that requires investment companies to maintain records, (15 U.S.C. 80a-30), which now allows the SEC to shrug off court subpoenas demanding information for the resolution of civil suits, as well as ignore FOIA requests. Inserted text is in caps; deleted text is struck through and in brackets; text I am emphasizing is in bold.

(b) Investment Company Act of 1940.—Section 31 of the Investment Company Act of 1940 (15 U.S.C. 80a-30) is amended—

(1) by striking subsection (c) and inserting the following:

‘‘(c) Limitations on Disclosure by the Commission.—Notwithstanding any other provision of law, the Commission shall not be compelled to disclose ANY RECORDS OR INFORMATION [internal compliance or audit records], or information contained therein provided to the Commission under this section, OR RECORDS OR INFORMATION BASED UPON OR DERIVED FROM SUCH RECORDS OR INFORMATION, IF SUCH RECORDS OR INFORMATION HAVE BEEN OBTAINED BY THE COMMISSION FOR USE IN FURTHERANCE OF THE PURPOSES OF THIS TITLE, INCLUDING SURVEILLANCE, RISK ASSESSMENTS, OR OTHER REGULATORY AND OVERSIGHT ACTIVITIES. Nothing in this subsection authorizes the Commission to withhold information from the Congress or prevent the Commission from complying with a request for information from any other Federal department or agency requesting the information for purposes within the scope of jurisdiction of that department or agency, or complying with an order of a court of the United States in an action brought by the United States or the Commission. For purposes of section 552 of title 5, United States Code, this section shall be considered a statute described in subsection (b)(3)(B) of such section 552. COLLECTION OF INFORMATION PURSUANT TO SECTION 31 SHALL BE AN ADMINISTRATIVE ACTION INVOLVING AN AGENCY AGAINST SPECIFIC INDIVIDUALS OR AGENCIES PURSUANT TO SECTION 3518(C)(1) OF TITLE 44, UNITED STATES CODE.’’;

(2) by striking subsection (d); and

(3) by redesignating subsections (e) and (f) as subsections(d) and (e), respectively.

As you can see, the pendulum has swung away from broader disclosure. Instead of excluding “internal compliance or audit records,” now no entity can compel the SEC to disclose any records or information, or anything derived from them, except for the reasons identified above. Again, this isn’t just a FOIA exemption, but also allows the SEC to decline to provide materials subpoenaed by a court by a lawsuit brought by anyone except the federal government.

I do not know what it meant here by an “administrative action.”

Exemption #3

A third provision was added, which provides FOIA and subpoena exemptions regarding disclosure of information by investment advisers (15 USC 80b-10). Here's the text, with my emphasis in bold.

c) INVESTMENT ADVISERS ACT OF 1940.—Section 210 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-10) is amended by adding at the end the following:

‘‘(d) LIMITATIONS ON DISCLOSURE BY THE COMMISSION.—Notwithstanding any other provision of law, the Commission shall not be compelled to disclose any records or information provided to the Commission under section 204, or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities. Nothing in this subsection authorizes the Commission to withhold information from the Congress or prevent the Commission from complying with a request for information from any other Federal department or agency requesting the information for purposes within the scope of jurisdiction of that department or agency, or complying with an order of a court of the United States in an action brought by the United States or the Commission. For purposes of section 552 of title 5, United States Code, this subsection shall be considered a statute described in subsection (b)(3)(B) of such section 552. Collection of information pursuant to section 204 shall be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of title 44, United States Code.’’.

I am conjecturing that section 204 is codified at 15 USC 80b-4, which requires investment advisers to keep records and make reports to the SEC. In addition to creating an exemption from FOIA, this is another get-out-of-court-free provision, where courts are prohibited from compelling the SEC from provide records from investment advisers. In other words, it’s again up to the SEC’s sole discretion.

What does this say about transparency?

What does this all mean? I don’t really know. It appears that less information will be available to the public or to resolve lawsuits. The SEC is granted a freer hand to help shield corporate information from public view, and apparently the agency is unafraid to wield that power. Based on the Commissioner’s letter, these provisions have shown up in legislation before -- thus demonstrating how omnibus legislation allows a pre-existing laundry list to be enacted into law.

This also shows how difficult it can be to figure out what’s going on. With the move into the regulatory implementation phrase -- and a request for public comments on the implementation of these regulations already issued by the SEC -- it is likely that those who are in the know will work very hard to keep the rest of us from figuring out what’s going  on ... until it’s too late.

• Disclosure: I was a law clerk for Fox Television Stations Incorporated and had no dealings with Fox News.

Four key lawmakers on the financial reform conference committee are seeking to create loopholes in the so-called Volcker Rule and the derivatives section of the bill, according to Talking Points Memo.

The four lawmakers are Reps. Luis Gutierrez, Greg Meeks, Dennis Moore and Mel Watt. They have received a combined $5.5 million from the finance, insurance and real estate sector (FIRE) over their careers. All but Gutierrez received over 20% of their total career campaign contributions from the finance, insurance and real estate sector making them heavily reliant on the industry to fund their campaigns. Gutierrez received 19% of his contributions from the finance sector.

Lawmaker	Party	FIRE Contributions	Total Career Contributions	Percent from FIRE
Gregory Meeks	D	$1,461,292.00	$4,350,723.00	33.59%
Mel Watt	D	$952,138.00	$4,204,301.00	22.65%
Dennis Moore	D	$2,339,991.00	$11,551,282.00	20.26%
Luis Gutierrez	D	$772,407.00	$3,990,337.00	19.36%

The loopholes that would be created are being suggested in a letter sent by the 68 members of the New Democrat Coalition, a group of moderate Democrats who have opposed many of the tougher regulations proposed for derivatives trading. TPM obtained a draft of the letter, which can be viewed here.

Meeks and Moore are both members of the New Democrat Coalition.  The Hill reported earlier this week that the New Democrats are drafting a letter urging the conference committee to drop a provision proposed by Sen. Blanche Lincoln requiring banks to spin off their derivatives trading desks into separate units.

During debate in the House over financial reform in 2009 the New Democrats played a key role in exempting a wide-swath of end-users from derivatives trading oversight and limiting the number of trades that will occur on an open clearinghouse.

Over their careers, the thirty-one congressmen appointed to the conference committee to hash out differences between the House and Senate versions of financial reform received a total of $43.5 million from the finance, insurance and real estate sector (FIRE), according to data obtained from the Center for Responsive Politics.

The conference committee will begin meeting today at 2:15 pm to hash out differences between the two chamber's bills written to reform the financial sector. (The Sunlight Foundation will be covering the conference committee here.) The conference committee is made up of twelve senators and thirty-one members of the House.

Many of the House members appointed to the conference committee are heavily reliant on contributions from the FIRE sector to fund their reelection campaigns. Twelve conferees have received over 20% of their total career contributions from the FIRE sector.

Topping this list is House Financial Services Committee Ranking Member Spencer Bachus, who has received 46% of his career contributions from the FIRE sector. Bachus is also the top recipient among House conferees of total contributions from the FIRE sector with $4.28 million over the course of his career.

Rep. Paul Kanjorksi, the chairman of the Subcommittee on Capital Markets, Insurance and Government-Sponsored Entities, is the second highest recipient of contributions from the FIRE sector and second-most reliant on those contributions among House conferees. Kanjorski has received $3.85 million from the FIRE sector over his career, accounting for 44% of his total career contributions.

The Chairman of the House Financial Services Committee and chief architect of the House version of the bill, Rep. Barney Frank, is also among the top recipients of FIRE contributions and most reliant on their funding. The $3.33 million in FIRE contributions to Frank's campaigns account for 33.6% of his total contributions received over his career.

Other members of the conference committee who received over 20% of their total contributions from the FIRE sector include Reps. Jeb Hensarling (34.6%), Gregory Meeks (33.6%), Judy Biggert (30.3%), Ed Royce (30.2%), Carolyn Maloney (29.63%), Nydia Velazquez (22.8%), Mel Watt (22.6%), Scott Garrett (21%) and Dennis Moore (20.2%).

Nine of the House members appointed to the conference committee received under 10% of their career contributions from the FIRE sector. Two of these lawmakers are chairmen of powerful committees. House Energy & Commerce Committee chairman Henry Waxman received only 5.6% of his career contributions from the FIRE sector and House Judiciary Committee chairman John Conyers received only 4.8% from the FIRE sector.

The others receiving under 10% include Reps. Howard Berman (9.9%), Sam Graves (9%), Darrell Issa (8.6%), Elijah Cummings (8.4%), Joe Barton (8.1%), Leonard Boswell (7.5%), Gary Peters (7.3%) and Mary Jo Kilroy (4.7%).

See below for a full table with FIRE contributions data. Calculations for total career contributions exclude candidate self-financing.

Lawmaker	Party	FIRE Contributions	Total Career Contributions	Percent from FIRE
Spencer Bachus	R	$4,287,174.00	$9,308,506.00	46.06%
Paul Kanjorski	D	$3,858,641.00	$8,631,857.00	44.70%
Jeb Hensarling	R	$2,569,025.00	$7,417,678.00	34.63%
Barney Frank	D	$3,332,260.00	$9,913,143.00	33.61%
Gregory Meeks	D	$1,461,292.00	$4,350,723.00	33.59%
Judy Biggert	R	$1,793,917.00	$5,911,226.00	30.35%
Ed Royce	R	$2,929,632.00	$9,700,216.00	30.20%
Carolyn Maloney	D	$3,097,927.00	$10,455,604.00	29.63%
Nydia Velazquez	D	$1,381,574.00	$6,058,922.00	22.80%
Mel Watt	D	$952,138.00	$4,204,301.00	22.65%
Scott Garrett	R	$1,445,423.00	$6,858,355.00	21.08%
Dennis Moore	D	$2,339,991.00	$11,551,282.00	20.26%
Frank Lucas	R	$986,154.00	$4,981,517.00	19.80%
Luis Gutierrez	D	$772,407.00	$3,990,337.00	19.36%
Shelley Moore Capito	R	$1,716,082.00	$10,514,333.00	16.32%
Lamar Smith	R	$1,264,198.00	$8,417,101.00	15.02%
Bobby Rush	D	$552,605.00	$3,749,676.00	14.74%
Edolphus Towns	D	$1,182,585.00	$9,140,618.00	12.94%
Collin Peterson	D	$668,664.00	$6,386,757.00	10.47%
Maxine Waters	D	$450,216.00	$4,338,793.00	10.38%
Heath Shuler	D	$423,334.00	$4,212,302.00	10.05%
Howard Berman	D	$959,091.00	$9,689,183.00	9.90%
Sam Graves	R	$760,628.00	$8,426,439.00	9.03%
Darrell Issa	R	$444,339.00	$5,166,114.00	8.60%
Elijah Cummings	D	$439,424.00	$5,208,334.00	8.44%
Joe Barton	R	$1,405,529.00	$17,185,272.00	8.18%
Leonard Boswell	D	$820,621.00	$10,851,998.00	7.56%
Gary Peters	D	$329,180.00	$4,512,451.00	7.29%
Henry Waxman	D	$348,525.00	$6,180,488.00	5.64%
John Conyers	D	$298,306.00	$6,119,757.00	4.87%
Mary Jo Kilroy	D	$325,277.00	$6,808,542.00	4.78%

Senators selected to work to combine the House and Senate financial regulation bills in a conference committee are some of the top recipients of campaign contributions from the finance, insurance and real estate sector (FIRE). In total, these twelve senators have received over $57 million from the FIRE sector over the course of their careers, according to data obtained from Center for Responsive Politics.

Senator	Career FIRE Contributions
Schumer, Charles E (D-NY)	$16,708,236.00
Dodd, Chris (D-CT)	$14,067,712.00
Shelby, Richard C (R-AL)	$5,635,030.00
Chambliss, Saxby (R-GA)	$3,507,960.00
Corker, Bob (R-TN)	$3,188,550.00
Johnson, Tim (D-SD)	$3,150,865.00
Reed, Jack (D-RI)	$2,918,732.00
Lincoln, Blanche (D-AR)	$2,612,159.00
Harkin, Tom (D-IA)	$2,534,445.00
Crapo, Mike (R-ID)	$1,809,715.00
Gregg, Judd (R-NH)	$1,070,249.00
Leahy, Patrick (D-VT)	$637,282.00

New York's Charles Schumer, D-N.Y., is the leading recipient among the Senate conferees with $16.7 million in contributions over his career. Schumer has long been an ally of the New York-based financial industry, but has been remarkably quiet as Congress has focused on reforming Wall Street. Schumer remains in support of the bill despite hometown pressure from industry friends, campaign contributors and Mayor Michael Bloomberg.

His support for the financial reform bill goes against a long history of supporting deregulatory actions for Wall Street. In the late 1990s and 2000 Schumer enthusiastically supported measures that ended the Glass-Steagall separation between commercial and investment banks and the enforced deregulation of derivatives trading.

The new rules for derivatives trading included in the Senate bill remain a serious sticking point in the coming conference committee. Senate Banking Committee chairman Chris Dodd, D-Conn., has already attempted once to eliminate a provision in the bill, penned by conference committee member Sen. Blanche Lincoln, D-Ark., ($2.61 million), requiring banks to spin off their derivatives trading portofolios. Dodd is the second largest recipient of FIRE campaiagn contributions on the conference committee with $14 million for his career.

Dodd is also connected to Wall Street with seven of his former staffers currently lobbying for financial organizations. Organizations represented by Dodd's former staffers include Goldman Sachs, Genworth Financial, MBIA, National Association of Mortgage Brokers and New York Bankers Association.

One former Dodd staffer turned financial industry lobbyist runs a financial lobbying firm with the former senior advisor to Dodd's Republican counterpart on the Banking Committee, Sen. Richard Shelby, R-Ala., the third highest recipient of contributions from the FIRE sector on the conference committee ($5.63 million).

Andrew Lowenthal and Lendell Porterfield run a bipartisan lobby shop providing clients with instant access to the Senate Banking Committee and, with both of their former bosses on the financial reform conference committee, the final chance to change the sweeping regulatory bill.

Recently joining Lowenthal and Porterfield as a partner in their firm is Dwight Fettig, a former Legislative Director to Sen. Tim Johnson, D-S.D., the sixth highest recipient of FIRE contributions appointed to the conference committee ($3.15 million). Johnson stands to become the next chairman of the Banking Committee after Dodd retires this year. The credit card industry, largely based in his state, has always counted on the support of the senior South Dakota senator.

Johnson, a career recipient of $391,400 in campaign contributions from the credit card industry, was one of ten Democrats to vote against an amendment to the financial reform bill capping “swipe fees” for debit card transactions. “Swipe fees” are charges to merchants for purchases made by customers using debit cards and often drive up retail prices for consumers. Credit card companies and banks are still lobbying hard to remove this provision from the bill. Johnson, however, is only one of four conference committees members to vote against the amendment making it unlikely the provision will be removed.

The conference committee will have to decide which portions of the House and Senate bills will be placed into a final version to be voted on and signed by the President. The House and Senate must pass bills with identical language. To do so, conference committees including members from both chambers meet to craft a compromise between the House and the Senate. The House has yet to name conferees.

The remaining members on the conference committee include Democrats Jack Reed, D-R.I., ($2.92 million), Tom Harkin, D-Iowa, ($2.53 million) and Patrick Leahy, D-Vt., ($637,282) and Republicans Saxby Chambliss, R-Ga., ($3.51 million), Bob Corker, R-Tenn., ($3.19 million), Mike Crapo, R-Wyo. ($1.81 million) and Judd Gregg, R-N.H., ($1.07 million).

Bank lobbyists are really laying it out there. The New York Times reported over the weekend that lobbyists presented their case against an amendment that could reduce debit card fees, the existence of which increase the price of pretty much everything you and I purchase, by threatening to withhold campaign contributions.

The Senate approved a series of amendments unfavorable to the banking industry over the last week, but this one was widely regarded as the most surprising. Meddling in dealings between businesses generally is anathema to Republicans and a relatively low priority for Democrats.

And this was not an easy vote. Lobbyists for the wounded but formidable banking industry made clear to some senators that this decision would affect future campaign donations, according to people who participated in those conversations.

And this is just over an amendment that would allow the Federal Reserve to create rules governing debit card fees. It doesn't even directly create rules, but allows a body that is often greatly favorable to the big banks to set rules, providing another opportunity for the banks to lobby. Not the toughest amendment, but on a subject so sensitive that banks are willing to use the quid pro quo argument.

These lobbyists continue to make the argument for lobbyist contact disclosure that much more salient. Shouldn't we know who's directly trying to bribe members of Congress?

Multiple stories point to a huge lobbying effort on the part of the financial industry as the Senate debates reform to the financial sector. Banks, hedges funds, derivatives clearinghouses, investment firms and all the major industry trade groups are all on the ground lobbying to try and change, alter and weaken the coming reforms. And that's pretty much where our knowledge of the efforts to influence our elected representatives ceases. Lobbying disclosures do nothing to provide the public with information regarding who lobbyists meet with and what exactly their lobbying relates to.

This brings up a serious point when we consider the reason for a transparency or disclosure policy. Who benefits from the cursory information released in current lobbying disclosures? What disclosures would better benefit the public? Does the issue that the transparency policy seeks to address require a tougher response?

The Senate is currently debating financial reform, one part of which is the requirement that all derivatives be traded in the open. This is an application of transparency and disclosure to a particular problem: opacity in the derivatives trading market led to a lack of knowledge across the financial world as to the level of risk that many firms were taking on. Another argument, equally as valid, would be that the actual product of over-the-counter derivatives and specific types, i.e. credit default swaps, were so risky that they were one of the direct causes of the economic crisis. You're likely to support a different response depending on what your narrative of problem is. If these products are viewed as so dangerous as to have been a direct cause of the crisis a considerable option would be to ban them. If the problem is simply under the radar trading and a lack of knowledge among traders, banks and regulators then transparency would seem more appropriate.

One could view lobbying the same way. Did financial sector lobbying lead to a deregulation of the industry, particularly around derivatives? And then wasn't that lobbying part of the root cause of the current economic crisis? If that is the narrative then stricter regulations on lobbying might be in order. Whenever I read the comment threads of stories or posts about lobbying they are riddled with ordinary people stating that lobbying should be banned. Same thing goes when I talk about politics at the bar. The only issue is that, unlike with credit default swaps or any other dangerous product, lobbying cannot be banned.

The First Amendment provides for the right to petition the federal government. Of course, companies, individuals or organizations with a lot of money can hire a bunch of people to do it for them. Short of a constitutional amendment altering the First Amendment or an amendment ending corporate personhood (I doubt this would matter in terms of lobbying), there is no way to ban lobbying.

Transparency in the lobbying profession, along with regulations governing types of practices (which are often applied to targets of lobbying and not the lobbyists themselves), is likely the sole means to assuage the public's fears about the profession. Current disclosure policy provides for the following: names of lobbyists, client name, issues lobbying on, amount spent/amount contracted, government entity contacted, some revolving door disclosure and voluntary listing of bill numbers, names and policies. This is all very cursory information that does little to inform the public of how outside interests are attempting to influence government policy.

The one significant change in disclosure that goes to the root of the public fears of lobbying would be immediate disclosure of lobbyist contact with lawmakers, government officials and government offices. When people complain about banks lobbying Congress or health insurers lobbying Congress they are feeling powerless because they have no idea what the level of influence is and where the influence is directed. There an informational valley here that creates extreme distrust and fear.

Representative democracy suffers when people don't trust their elected representatives when they are in Washington. The best way to alleviate this dilemma is to increase the information flow out of Washington. To paraphrase John Adams, knowledge diffused through the people can provide opportunity to prevent abuses of the system of representative democracy.

Last week, Ezra Klein wrote a post on how members of both parties are still running around raising money from Wall Street for their campaigns. This despite the obvious loathing that the public has for everything finance-related. Klein wrote:

Both parties, in fact, know the risks and are choosing to take the hit rather than forgo the cash. This isn't because they love being attacked or even think that the toxicity of Wall Street is overstated. It's because, to use a metaphor that's in vogue right now, our system of campaign finance turns politicians into vampire squids wrapped around the wallets of the rich, relentlessly jamming their blood funnels into anything that smells like money.

And for the past twenty years there's been no better smell of money than the one eminating from Wall Street. As my colleague Larry Makinson pointed out back in 2008, "the finance, insurance and real estate (FIRE) industries that collectively are at the center of the current crisis are the single largest sector–by far–of all the major economic and interest groupings that give campaign contributions to federal politicians."

If you needed any confirmation of this, see the graphic that was put together for Larry's nearly two year old post:

Lawmakers can't avoid raising money from the finance sector. It's where the majority of campaign contributions come from.

Amazingly, despite the fundraising and the lobbying and the sheer volume of contributions, the financial sector is not getting what they want. In fact, they may be facing much more severe reforms after the bill goes through the amendment process.

The Washington Post offers this sometimes hilarious article loaded with anonymous statements from angst-ridden finance sector lobbyists unhappy that their puppet strings have been severed.

Lawmakers from both parties have been eager to excoriate Wall Street. But industry lobbyists warn that populist proposals to shrink, break up or otherwise shackle some of the giants of the financial world could do more harm than good to the economy. These advocates say that stiff regulation could stifle the flow of credit, undermine American competitiveness in global markets and cost jobs.

Among the terms that lobbyists used to describe elements of the legislation: "Draconian." "Crazy." "Insanely unproductive."

They had expected the most vexing provisions in the bill sponsored by Sen. Christopher J. Dodd (D-Conn.), chairman of the banking committee, to be scratched by now, or at least scaled back.

These lobbyists had hoped that Dodd and Sen. Richard C. Shelby of Alabama, the committee's ranking Republican, would have privately hammered out a bipartisan deal months ago. It didn't happen. Then Dodd and Sen. Bob Corker (R-Tenn.) gave it a whirl. No dice.

Of course, the lobbyists don't like the open process that an actual Senate floor debate provides. Instead, they pine for the behind the scenes deal-making that Americans know and really don't love:

Looking past the Senate debate, industry lobbyists say they hope Frank and the Obama administration can help remove some of the most objectionable provisions that survive the Senate.

"They've got to get this thing off the [Senate] floor and into a reasonable, behind the scenes" discussion, said one lobbyist. "Let's have a few wise fathers sit around the table in some quiet room" and work out the details.

Yes, "'a reasonable, behind the scenes' discussion." The American people loved that when it happened during the health care debate. This time they'll enjoy it even more.