<div dir="ltr">
<div id="header">
<h1><a href="http://dealbook.nytimes.com/" title="Go to DealBook Home"><img src="http://graphics8.nytimes.com/images/blogs_v3/dealbook/dealbook_print.png" alt="DealBook - A Financial News Service of The New York Times"></a></h1>
<div class="">
</div>
</div>
<div id="dealbook">
<div align="left">
<span class="" title="2013-05-23T21:44:39+00:00">May 23, 2013, <span>9:44 pm</span></span>
<h3 class="">Bank’s Lobbyists Help in Drafting Financial Bills</h3>
<address class="">By <a href="http://dealbook.nytimes.com/author/eric-lipton/" class="" title="See all posts by ERIC LIPTON">ERIC LIPTON</a> <span>and</span> <a href="http://dealbook.nytimes.com/author/ben-protess/" class="" title="See all posts by BEN PROTESS">BEN PROTESS</a></address>
<div class="">
<p>WASHINGTON — Bank lobbyists are not leaving it to lawmakers to draft legislation that softens <a href="http://topics.nytimes.com/topics/reference/timestopics/subjects/c/credit_crisis/financial_regulatory_reform/index.html?inline=nyt-classifier">financial regulations</a>. Instead, the lobbyists are helping to write it themselves.</p>
<p>One bill that sailed through the House Financial Services Committee this month — over the objections of the <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/t/treasury_department/index.html?inline=nyt-org">Treasury Department</a> — was essentially <a href="http://dealbook.on.nytimes.com/public/overview?symbol=C&inline=nyt-org">Citigroup</a>’s, according to e-mails reviewed by The New York Times. The bill would exempt broad swathes of trades from new regulation.</p>
<p>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.)</p><p>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.</p><p>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.</p><p>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.</p><p>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.</p><p>In recent weeks, Wall Street groups also <a href="http://politicalpartytime.org/party/34826/">held fund-raisers</a> for lawmakers who co-sponsored the bills. At one <a href="http://politicalpartytime.org/party/34611/">dinner Wednesday night,</a>
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.</p><p>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 <a href="http://topics.nytimes.com/top/reference/timestopics/people/b/ben_s_bernanke/index.html?inline=nyt-per">Ben S. Bernanke</a>, the <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_reserve_system/index.html?inline=nyt-org">Federal Reserve</a> chairman. The changes, they added, were in an effort to reach a compromise over the bills, not to undermine Dodd-Frank.</p>
<p>“We
will provide input if we see a bill and it is something we have
interest in,” said Kenneth E. Bentsen Jr., a former lawmaker turned Wall
Street lobbyist, who now serves as president of the Securities Industry
and Financial Markets Association, or Sifma.</p><p>The close ties
hardly surprise Wall Street critics, who have long warned that the banks
— whose small armies of lobbyists include dozens of former Capitol Hill
aides — possess outsize influence in Washington.</p><p>“The huge
machinery of Wall Street information and analysis skews the thinking of
Congress,” said Jeff Connaughton, who has been both a lobbyist and
Congressional staff member.</p><p>Lawmakers who supported the
industry-backed bills said they did so because the effort was in the
public interest. Yet some agreed that the relationship with corporate
groups was at times uncomfortable.</p><p>“I won’t dispute for one second
the problems of a system that demands immense amount of fund-raisers by
its legislators,” said Representative Jim Himes, a third-term Democrat
of Connecticut, who supported the recent industry-backed bills and leads
the party’s fund-raising effort in the House. A member of the Financial
Services Committee and a former banker at <a href="http://dealbook.on.nytimes.com/public/overview?symbol=GS&inline=nyt-org">Goldman Sachs</a>,
he is one of the top recipients of Wall Street donations. “It’s
appalling, it’s disgusting, it’s wasteful and it opens the possibility
of conflicts of interest and corruption. It’s unfortunately the world we
live in.”</p><p>The passage of the Dodd-Frank Act, which took aim at
culprits of the financial crisis like lax mortgage lending and the $700
trillion derivatives market, ushered in a new phase of Wall Street
lobbying. Over the last three years, bank lobbyists have blitzed the
regulatory agencies writing rules under Dodd-Frank, chipping away at
some regulations.</p><p>But the industry lobbyists also realized that Congress can play a critical role in the campaign to mute Dodd-Frank.</p><p>The
House Financial Services Committee has been a natural target. Not only
is it controlled by Republicans, who had opposed Dodd-Frank, but
freshmen lawmakers are often appointed to the unusually large committee
because it is seen as a helpful base from which they can raise campaign
funds.</p><p>For Wall Street, the committee is a place to push back
against Dodd-Frank. When banks and other corporations, for example,
feared that regulators would demand new scrutiny of derivatives trades,
they appealed to the committee. At the time, regulators were completing
Dodd-Frank’s overhaul of derivatives, contracts that allow companies to
either speculate in the markets or protect against risk. Derivatives had
pushed the insurance giant <a href="http://dealbook.on.nytimes.com/public/overview?symbol=AIG&inline=nyt-org">American International Group</a>
to the brink of collapse in 2008. The question was whether regulators
would exempt certain in-house derivatives trades between affiliates of
big banks.</p><p>As the House committee was drafting a bill that would
force regulators to exempt many such trades, corporate lawyers like
Michael Bopp weighed in with their suggested changes, according to
e-mails reviewed by The Times. At one point, when a House aide sent a
potential compromise to Mr. Bopp, he replied with additional tweaks.</p><p>In
an interview, Mr. Bopp explained that he drafted the proposal at the
request of Congressional aides, who expressed broad support for the
change. The proposal, he explained, was a “compromise” that was actually
designed to “limit the scope” of the exemption.</p><p>“Everyone on the
Hill wanted this bill, but they wanted to make sure it wasn’t subject to
abuse,” said Mr. Bopp, a partner at the law firm Gibson, Dunn who was
representing a coalition of nonfinancial corporations that use
derivatives to hedge their risk.</p><p>Ultimately, the committee
inserted every word of Mr. Bopp’s suggestion into a 2012 version of the
bill that passed the House, save for a slight change in phrasing. A
later iteration of the bill, passed by the House committee earlier this
month, also included some of the same wording.</p><p>And when federal regulators <a href="http://www.cftc.gov/PressRoom/PressReleases/pr6553-13"> in April</a>
released a rule governing such trades, it was significantly less
demanding than the industry had feared, a decision that the industry
partly attributed to pressure stemming from Capitol Hill.</p><p>Citigroup
and other major banks used a similar approach on another derivatives
bill. Under Dodd-Frank, banks must push some derivatives trading into
separate units that are not backed by the government’s insurance fund.
The goal was to isolate this risky trading.</p><p>The provision exempted
many derivatives from the requirement, but some Republicans proposed
striking the so-called push out provision altogether. After objections
were raised about the Republican plan, Citigroup lobbyists sent around
the bank’s own compromise proposal that simply exempted a wider array of
derivatives. That recommendation, put forth in late 2011, was largely
part of the bill approved by the House committee on May 7 and is now
pending before both the Senate and the House.</p><p>Citigroup executives said the change they advocated was good for the financial system, not just the bank.</p><p>“This
view is shared not just by the industry but from leaders such as
Federal Reserve Chairman Ben Bernanke,” said Molly Millerwise Meiners, a
Citigroup spokeswoman.</p><p>Industry executives said that the changes —
which were drafted in consultation with other major industry banks —
will make the financial system more secure, as the derivatives trading
that takes place inside the bank is subject to much greater scrutiny.</p><p>Representative <a href="http://topics.nytimes.com/top/reference/timestopics/people/w/maxine_waters/index.html?inline=nyt-per">Maxine Waters</a>,
the ranking Democrat on the Financial Services Committee, was among the
few Democrats opposing the change, echoing the concerns of consumer
groups.</p><p>“The bill restores the public subsidy to exotic Wall
Street activities,” said Marcus Stanley, the policy director of
Americans for Financial Reform, a nonprofit group.</p><p>But most of the
Democrats on the committee, along with 31 Republicans, came to the
industry’s defense, including the seven freshmen Democrats — most of
whom have started to receive donations this year from political action
committees of Goldman Sachs, <a href="http://dealbook.on.nytimes.com/public/overview?symbol=WFC&inline=nyt-org">Wells Fargo</a> and other financial institutions, records show.</p><p>Six
days after the vote, several freshmen Democrats were in New York to
meet with bank executives, a tour organized by Representative Joe
Crowley, who helps lead the House Democrats’ fund-raising committee. The
trip was planned before the votes, and was not a fund-raiser, but it
gave the lawmakers a chance to meet with Wall Street’s elite.</p><p>In addition to a tour of Goldman’s Lower Manhattan headquarters, and a meeting with <a href="http://topics.nytimes.com/top/reference/timestopics/people/b/lloyd_c_blankfein/index.html?inline=nyt-per">Lloyd C. Blankfein</a>, the bank’s chief executive, the lawmakers went to <a href="http://dealbook.on.nytimes.com/public/overview?symbol=JPM&inline=nyt-org">JPMorgan</a>’s Park Avenue office. There, they chatted with <a href="http://topics.nytimes.com/top/reference/timestopics/people/d/james_dimon/index.html?inline=nyt-per">Jamie Dimon</a>, the bank’s chief, about Dodd-Frank and immigration reform.</p>
<p>The bank chief also delivered something of a pep talk.</p><p>“America
has the widest, deepest and most transparent capital markets in the
world,” he said. “Washington has been dealt a good hand.”</p><p><em>Eric Lipton reported from Washington, and Ben Protess from New York.</em></p></div>
</div>
</div><br clear="all"><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br><br><img src="http://users.moscow.com/waf/WP%20Fox%2001.jpg"><br>
</div>