Obama May Lose His Financial Reform Fight To Lobbyists

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No One Marching For The Banks


Two days before President Barack Obama called on Wall Street titans to ask their lobbyists to stand down in the fight over financial regulation reforms, JP Morgan mobilized its entire New York workforce to join the battle.

On Tuesday, it dispatched an e-mail on the reform package the Senate is considering to 30,000 employees, noting sections it liked and those it didn’t, including a tough proposal to overhaul the way banks handle derivatives.

More than 530,000 New Yorkers who work in the financial services industry could be adversely affected by the provision, the e-mail warned, according to a person familiar with it. JPMorgan workers were asked to e-mail to Democratic Sen. Kirsten Gillibrand urging her to stand up for them.

But it’s unlikely that rallying cry will spark much of a popular uprising against the financial regulation reform legislation. If anything, it underscores the inability of the Big Banks and their allies to latch onto a phrase or argument that could resonate with the public and provide the industry’s Republican defenders with the leverage to reverse the momentum in the regulation fight.

During the health care debate, GOP opponents withstood accusations of becoming the ‘Party of No’ and charges that they were denying coverage to children because they could see palpable support for their position in the screaming protesters at town hall meetings and the tanking poll numbers of Obama and health-care supporters.

Now, the shouting is on the Democrats’ side. Labor leaders next week are organizing marches on Wells Fargo and Bank of America, and AFL-CIO President Richard Trumka is expected to lead about 10,000 workers in a march down Wall Street in support of the reforms.

Change to Win Chair Anna Burger said it is “pretty outrageous” for the big banks to draw their workers into the fight. “They’re making their staff lobby against consumer protections,” she said.

“These are the same people who they forced to push bad products that put workers into debt. And now they’re using them to stop Wall Street reform,” she added.

Muscling amendments past labor’s supporters in the Senate might be an achievable goal if polls didn’t provide ample evidence that it’s not just union members who are still outraged at the financial industry.

A recent Pew study found that 61 percent of Americans say it is “a good idea for the government to more strictly regulate the way major financial companies do business.” Even the tea party activists can’t provide much cover. The Wall Street bailouts of 2008 were one of the galvanizing causes of the movement.



That’s not to say that the banks’ allies didn’t try to change the legislation’s trajectory, and Democrats for months feared that the legislation would indeed be defeated by a filibuster. Although some Republicans had hinted they might support the legislation, Minority Leader Mitch McConnell (R-Ky.) rallied his caucus in opposition to it.

The U.S. Chamber of Commerce sunk $3 million into an ad campaign and an effort to gin up grassroots opposition. And congressional Republicans settled on attacking the bill as a “bail-out,” though opened themselves to Democratic charges that they were singing from a song book prepared by pollster Frank Luntz.

Neither of those efforts got very far, and both were overshadowed by the Securities and Exchange Commission’s announcement that it was filing a civil lawsuit against Goldman Sachs accusing it of selling investments that were rigged to lose money. The case exploded in the headlines and reminded the public of all the banking shenanigans that made them angry in the first place.

Those dynamics help explain why McConnell, who had been using GOP opposition to the bill as a way to lure Wall Street campaign donations, this week freed his members to engage in negotiations on a bipartisan bill.

Of course, the fight isn’t over yet and the banks aren’t flinching even as the odds against them grow steeper.

JP Morgan, which declined to comment for this story, is opposed to a provision passed on Wednesday that would regulate the $450 trillion derivatives market for the first time. Under it, most trades would go through exchanges and clearinghouses, which would make them more transparent. Some analysts say that is key to avoiding a meltdown similar to that of 2008.

JPMorgan and USAA, a financial services company that serves military families, are worried that the so-called Volcker Rule, which is designed to prevent federally insured banks from trading on their assets, would essentially break them up.

Like JPMorgan, USAA also sent an email urging more than five million members and 22,000 workers to take their case to Capitol Hill. USAA argues that because it is primarily an insurance company, it should be exempt from the Volcker Rule. Its affiliated banks took none of the risks, and received none of the bailouts, of the bank being targeted.

“We have no problem with these limits on banks. Bring it on,” said USAA spokesman Roger Wildermuth. USAA’s problem is with language that targets banks affiliated with it. “Our members shouldn’t be penalized because we provide integrated solutions by having an affiliated bank.”

In an email sent early Friday morning, President Josue Robles urged customers to contact their senators and press for a USAA carve out. It was the first time in more than 25 years that the organization solicited its members to lobby on a federal issue, Wildermuth said.

“The current Senate bill would disproportionally impact USAA because we are a unique and fully integrated association. USAA is not like the banks and other companies that helped bring down our economy, and we never took a penny of TARP funds. We do not engage in the harmful practices this legislation seeks to resolve,” Robles wrote.

A similar email went to USAA’s employees. Wildermuth would not disclose how many members and employees have contacted their senators so far, saying only the organization is “thrilled” with their response.

Meanwhile, local bankers, who still can wield considerable influence on lawmakers, are coming to the aid of the big banks on some portions of the legislation.

The American Bankers Association last year generated 300,000 contacts on Capitol Hill and its keeping up the pressure. In March, it held a Washington summit that drew more than 1,000 local bankers, who spent part of their time meeting with their senators and congressmen.

“There is a mischaracterization about a lot of this legislation as being aimed just at the largest institutions,” said John Hall, an ABA spokesman. “Community banks, who had nothing to do with this economic crisis, are going to be greatly affected by the outcome.”

But Burger predicts the more intense lobbying efforts will backfire, only further infuriating Americans already angry at Wall Street. And Eddie Vale, a spokesman for the AFL-CIO, said a central message in the upcoming protests will be: “Make Wall Street pay.”


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Sources: Countdown with Keith Olbermann, Meet The Press, MSNBC, Politico, Whitehouse.gov, Youtube, Google Maps