KA-CHING$$ Wall Street Call in Favors
Financial Overhaul Bill Poses Big Test for Lobbyists
By ERIC LICHTBLAU and EDWARD WYATT
Published: May 22, 2010
Charles Dharapak/Associated Press
Representative Barney Frank, left, and Senator Christopher J. Dodd lead the financial committees in the House and Senate.
Nearby, supporters of Representative Michael E. Capuano, Democrat of Massachusetts, gathered that evening at a Capitol Hill town house for a $1,000-a-head fund-raiser. Just as that was wrapping up, Representative Peter T. King, Republican of New York, was feted by campaign donors at nearby Nationals Park at a game against the Mets.
It was just another day in the nonstop fund-raising cycle for members of the House Financial Services Committee, which has become a magnet for money from Wall Street and other deep-pocketed contributors, especially as Congress moves to finalize the most sweeping new financial regulations in seven decades.
Executives and political action committees from Wall Street banks, hedge funds, insurance companies and related financial sectors have showered Congressional candidates with more than $1.7 billion in the last decade, with much of it going to the financial committees that oversee the industry’s operations.
In return, the financial sector has enjoyed virtually front-door access and what critics say is often favorable treatment from many lawmakers. But that relationship, advantageous to both sides for many years, is now being tested in ways rarely seen, as the nation’s major financial firms seek to call in their political chits to stem regulatory changes they believe will hurt their business.
The biggest flash point for many Wall Street firms is the tough restrictions on the trading of derivatives imposed in the Senate bill approved Thursday night. Derivatives are securities whose value is based on the price of other assets like corn, soybeans or company stock.
The financial industry was confident that a provision that would force banks to spin off their derivatives businesses would be stripped out, but in the final rush to pass the bill, that did not happen.
The opposition comes not just from the financial industry. The chairman of the Federal Reserve and other senior banking regulators opposed the provision, and top Obama administration officials have said they would continue to push for it to be removed.
And Wall Street lobbyists are mounting an 11th-hour effort to remove it when House and Senate conferees begin meeting, perhaps this week, to reconcile their two bills. Lobbyists say they are already considering the possible makeup of the conference panel to focus on office visits and potential fund-raising.
The House’s version of the bill does not include the tougher derivatives ban, and Wall Street lobbyists said one chief target would be Representative Barney Frank, the Massachusetts Democrat who leads the Financial Services Committee and shepherded the House bill. Others include Representative Paul E. Kanjorski, the Pennsylvania Democrat with a senior role on the House financial services panel, and Representative Collin C. Peterson, Democrat of Minnesota, who leads the House Agriculture Committee, which has jurisdiction over futures contracts and derivatives.
“This is not the end of the process,” said David Hirschmann, senior vice president of theChamber of Commerce, which has spent more than $3 million to lobby against parts of the bill.
He said the chamber planned to keep fighting for a loosening of the regulatory restrictions — first in the House-Senate conference, then in the implementation phase after final passage of a bill, and “if all else fails,” in court.
Scott Talbott, a senior executive at the Financial Services Roundtable, a lobbying group that represents about 100 of the largest financial companies, said his group had already begun meeting with House members it believes will be important in getting the derivatives restrictions stripped from the Senate bill.
While the industry’s objections are widely known this late in the debate, Mr. Talbott said that the way to press the case was to meet with lawmakers and their aides as often as they could.
“There’s no substitute for old-fashioned gumshoe lobbying,” Mr. Talbott said. “The staff here knows it. We offer to resole their shoes when they wear them out.”
Along with the aggressive lobbying, of course, comes general political support from the industry, and political consultants and campaign strategists said the recent strain in relations between Wall Street and Congress had not slowed the flood of money yet.
A few lawmakers have indicated that they will curtail fund-raising from Wall Street firms in the regulatory debate because of fears of a possible conflict. For instance, SenatorBlanche Lincoln, the Arkansas Democrat who has led the push to restrict banks from trading in derivatives, said after the Securities and Exchange Commission sued Goldman Sachs that she would no longer take contributions from the firm and scrapped a possible fund-raiser with it.
Members of the House and Senate financial committees have been frequent recipients of Wall Street’s largess, and as the three fund-raisers last Wednesday for financial service members indicated, that trend shows little sign of abating.
So far in the 2010 election cycle, members of the financial committees have far outpaced those of other committees in fund-raising parties by holding 845 events, according to the Sunlight Foundation, a Washington nonprofit group that tracks fund-raisers.
Asked about the Nationals Park fund-raiser, Mr. King, who voted against the toughened regulations passed by the House and who for years has received significant contributions from the financial industry, said through a spokesman: “Judge me by my record. I am proud of my integrity.” While the list of attendees at last week’s fund-raisers are not yet publicly available, the spokesman for Mr. King said that 3 of the 20 tickets sold were “associated with Wall Street.”
Representatives Scott and Capuano did not respond through their aides to requests for comment.
The money from the financial sector goes not only to high-profile leaders of the financial committees — like Mr. Frank in the House and Senator Christopher J. Dodd, the Connecticut Democrat who sponsored the bill in the Senate, or Senator Richard C. Shelbyof Alabama, the leading Republican on the banking committee — but also to less-prominent committee members who may ultimately play a role in important votes, according to a new analysis provided to The New York Times by Citizens for Responsibility and Ethics in Washington, a nonpartisan group.
The group’s analysis found that the 14 freshmen who serve on the House Financial Services Committee raised 56 percent more in campaign contributions than other freshmen. And most freshmen on the panel, the analysis found, are now in competitive re-election fights.
“It’s definitely not accidental,” said Melanie Sloan, the director of the ethics group. “It appears that Congressional leaders are deliberately placing vulnerable freshmen on the Financial Services Committee to increase their ability to raise money.”
Take Representative John Adler, Democrat of New Jersey. Mr. Adler is a freshman in Congress with no real national profile, yet he has managed to raise more than $2 million for his re-election, more than any other freshman, the analysis found.
That is due in large part, political analysts say, to his spot on the Financial Services Committee. (Securities and investment firms and insurers were among his biggest contributors, according to data from the Center for Responsive Politics, a nonprofit research group in Washington.)
Mr. Adler’s campaign says the Wall Street money has never influenced his votes, and aides point to his stance in supporting legislation generally opposed by the financial industry. “No one has a better record of standing up for taxpayers and consumers,” said Geoff Mackler, his campaign manager.
But Mr. Adler’s likely Republican opponent, Jon Runyan, has seized on the contributions from financial firms as evidence of what he calls “shameless hypocrisy” by Mr. Adler in his dealings with Wall Street.
“He’s bashing them for their practices while taking money from them,” Mr. Runyan said in an interview. “He’s playing both sides. That may be business as usual in D.C., but to the average person, it doesn’t smell right.”
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