A Lobbying Tempest Engulfs Financial Overhaul

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Associated Press

A Lobbying Tempest Engulfs Financial Overhaul

by
Jim Kuhnhenn

Sen. Banking Committee Chairman Sen. Christopher Dodd, D-Conn., right, and House Financial Services Committee Chairman Rep. Barney Frank, D-Mass., speak to reporters outside the White House in Washington. Lawmakers will tackle sticking points and try to blend House and Senate bills into a single rewrite of banking regulations. (AP Photo/Susan Walsh, File)

WASHINGTON - Congress' final tinkering with Wall Street overhaul
this month offers lobbyists a last-ditch shot to reshape the package on
behalf of clients with billions at stake.

Even as the legislation
gets tougher on banks by the week, agents of influence are hardly
strangers on Capitol Hill. Many once worked for the lawmakers they're
lobbying.

Rep. Barney Frank, chairman of a panel resolving
differences in House and Senate bills, and Sen. Chris Dodd, who
shepherded the Senate's measure, have their hands full fending off
industry efforts to dilute the final legislation. They must do so while
trying to hold together a fragile Senate coalition with only four
Republicans.

So sticking points in this legislative tempest,
whether over big banks' exotic trades or the plastic in people's
wallets, are awfully tricky.

At least 56 industry lobbyists have
served on the personal staffs of the 43 Senate and House members who
will shape the legislation over the next two weeks, according to Public
Citizen and the Center for Responsive Politics, two government
watchdogs.

What's more, the center found that lawmakers on the
committee settling differences between the House and Senate versions
have received more than $112 million over two decades from political
action committees or employees of industries affected by the
legislation.

A look at the main issues to be settled and how
lobbyists come down on them as lawmakers try to deliver on President
Barack Obama's request to give him a bill to sign by July 4.

Derivatives:

Many
corporations typically use these unregulated securities as a hedge
against market fluctuations. For instance, an airline may try to soften
the cost of a potential rise in fuel prices by betting in the
derivatives market that fuel prices will rise. But derivatives have
become instruments for risky speculation. The legislation would require
that they be traded in regulated exchanges.

The toughest Senate provision would force banks to shed most of their lucrative derivatives business.

The
proposal's chief advocate is Sen. Blanche Lincoln, D-Ark., who survived
liberal and labor attacks during a hard-fought primary runoff largely
by spotlighting her anti-Wall Street stance. Now she's stronger in the
debate.

The Obama administration and bank regulators have said her proposal goes too far.

Large banks are apoplectic, watching as it gains strength over time.

Volcker Rule:

A
Senate plan known as the Volcker rule, after former Fed Chairman Paul
Volcker, would prohibit banks from betting on the markets with their
own money. It would let regulators determine the best way to put into
place that prohibition, which would apply to all securities trades, not
just derivatives.

Several Democratic lawmakers want to strengthen
that by giving regulators less latitude to modify the prohibition, and
by preventing financial firms from betting against securities they
assemble for their clients.

Large banks see billions of dollars
in trades slipping away. They prefer a House plan that merely says
regulators could ban such trades. But Frank appears set on the tougher
route.

Debit card fees:

Americans use debit cards more than
credit cards. But their use costs merchants money: For every swipe,
merchants pay 1 percent to 2 percent to banks and credit networks.

A
proposal that passed the Senate would require the Federal Reserve to
limit those fees, and it has created a lobbying donnybrook between
banks and retailers.

Most of the fees go to banking giants. But
the face of the lobbying effort has been small community banks and
credit unions that say they will be disproportionately hurt if they
lose such fees.

The proposal excludes banks with assets under $10
billion. Officials at small banks say their institutions still would
have to lower their fees to compete with bigger banks or drop their
debit card programs.

Consumer protections:

The final
legislation would create a government consumer financial protection
entity. This was once considered the most contentious step sought by
the administration.

The House bill exempted accountants, tax
preparers, real estate agents and auto dealers from this oversight. The
Senate bill has no such exceptions.

Auto dealers have lobbied
fiercely to be excluded from the law's reach, arguing that they
assemble loans but don't administer them. Obama has fought back,
elevating the issue to a test of White House strength.

___

Online:

House Financial Services Committee: http://tinyurl.com/y4uercn

Senate Banking, Housing and Urban Affairs Committee: http://banking.senate.gov

Consumer Federation of America: http://www.consumerfed.org

Public Citizen: http://tinyurl.com/2a5zyn9

Center for Responsive Politics: http://tinyurl.com/23qbmwo

 

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