Why Promontory matters


Today’s New York Times looks into the case of Promontory Financial Group, a self-described “leading strategy, risk management and regulatory compliance consulting firm focusing primarily on the financial services industry.”

What’s notable, according to the Times , is that:

Nearly two-thirds of its roughly 170 senior executives worked at agencies that oversee the financial industry. The founder, Eugene A. Ludwig, is a former comptroller of the currency and a law school friend of Bill Clinton; the latest hire, Mary L. Schapiro, ran the Securities and Exchange Commission until late last year.

Building off those connections, the Promontory Financial Group has emerged as a major power broker in Washington, helping Wall Street navigate an onslaught of new rules and regulatory scrutiny. Promontory accompanied Morgan Stanley when the bank urged regulators to rethink limits on risky trading, records show. It also joined Bank of America, Citigroup and other big banks at the Treasury Department to discuss plans for dismantling failing financial firms.

Using Sunlight’s Dodd-Frank meeting logs tracker, the Times found ten instances where firm executives met with regulators to discuss “thorny issues like the so-called Volcker Rule that curbs risky trading.”

While Promontory does show up in meetings logs, it’s not registered to lobby for any of the clients that the Times mentions. A search through lobbying records finds that the last time Promontory registered to lobby, it was on behalf of General Motors back in 2009, handling financial services issues for GMAC. (GM paid Promontory almost $5 million over several years.) The firm also registered to lobby on behalf of Ameritrade in 2004-2005 (receiving $280,000 in lobbying fees), also handling financial services issues.

A Promontory spokesperson told the Times: “Promontory does not seek to influence regulators and does not lobby…This does not mean we never attend a government meeting with clients.”

All of this gets at some tricky questions about what should and what should not count as lobbying, and increasing evidence suggests that more and more unregistered consultants are doing more and more work that looks and smells like lobbying without meeting the technical definitions. Sunlight has called for more extensive lobbying disclosure to address these issues.

The article also gets at the fact that when it comes to representation before rulemaking agencies, industry lobbyists, who have the resources to hire the most well-connected experts, who can use both their connections and policy knowledge to drive the rulemaking process on behalf of their clients.

The simple fact is that when it comes to rulemaking, the big banks dominate. A Sunlight analysis found that in the two years since July 21, 2010 (when the president signed Dodd-Frank), regulators at the three major banking regulatory agencies – Treasury, the Fed and the Commodities Futures Trading Commission (CFTC) – have reported meeting with 20 big banks and banking associations on average a combined 12.5 times per week – as compared to on average just 2.3 meetings with reform-oriented groups. The top 20 banks show up 1,298 times in meeting logs at the three agencies, while groups favoring tighter regulations of the financial markets show up just 242 times.