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Financial reform law offers look at lobbyists' efforts to shape it

Activists for banks, hedge funds and other firms have logged hundreds of meetings with federal regulators since the bill was passed. Many seek exemptions from key provisions.

November 15, 2010|By Nathaniel Popper, Los Angeles Times

Reporting from New York — Having failed to block financial reform, Wall Street is now focused on the next best thing: ensuring that the law is loosely interpreted and weakly enforced.

Lobbyists for banks, hedge funds and other firms have logged hundreds of meetings with federal regulators since the reform bill was signed into law July 21. The lobbyists are often pushing for exemptions to the bill's key provisions, including measures that would limit risky Wall Street trading and shield consumers from excessive bank fees, records and interviews show.

In an Aug. 18 meeting with Federal Reserve officials, for instance, Citigroup lobbyists warned that new rules restricting trading by hedge funds "may have a significant impact on the competitiveness of U.S. firms," according to a summary released by the Fed.

The incessant appeals — there were 18 separate meetings between lobbyists and government officials Sept. 28 alone — have become a sore spot with some regulators.

"I want to be professional and polite and courteous, and I'll let them say their peace," said Bart Chilton, a member of the Commodity Futures Trading Commission. "But I don't think it's a very valuable use of their time or mine, because that is not the direction we were instructed to go by Congress."

The meetings would normally be cloaked in secrecy. But in keeping with the spirit of financial reform, the Fed, the CFTC and two other agencies have begun disclosing their contacts with lobbyists on the new reform law, providing a rare glimpse behind the curtain.

That glimpse frequently shows companies arguing that their operations shouldn't be covered by the new regulations, or that the regulations should be narrowly written, according to summaries posted by the federal agencies on their websites.

For example, lawyers for investment firm BlackRock met with CFTC officials Sept. 23 to seek an exemption from new restrictions on the trading of derivatives — or investments whose value is tied to an underlying asset. Otherwise, BlackRock warned, it would "be forced to curtail our client-service activities" according to a document posted in connection with the meeting.

Not all of the meetings involve Wall Street firms. Four executives of Ford's consumer finance division met with Fed officials Aug. 14, asking that its vehicle loans "be exempt" from rules that are designed to rein in risky lending, according to documents released by the agency.

And the American Petroleum Institute met with Securities and Exchange Commission officials Sept. 27 to argue that new rules forcing oil and mining firms to report payments made to foreign governments "raises significant practicality and cost-benefit concerns by vastly increasing the amount of data that must be reported."

The names listed most frequently in the logs are Goldman Sachs, with 21 meetings with regulators, and JPMorgan Chase, with 23. Jamie Dimon, chairman and chief executive of JPMorgan, was among those in attendance when a bank contingent met Oct. 8 with Federal Deposit Insurance Corp. Chairwoman Sheila Bair, records show.

In all, regulators have had at least 510 meetings with lobbyists representing 325 organizations since July, according to a Times analysis of meeting logs. That's when the Fed, the SEC, the FDIC and the CFTC first began keeping the logs on their websites, in the spirit of transparency that was a driving factor for the financial reform law.

Despite taking up 2,319 pages, the Wall Street Reform and Consumer Protection Act left key details to regulatory agencies. Consumer groups applauded the decision to release details of the meetings, saying it provides a rare window into the rule-making process.

"It helps to alleviate the sense that all the important decisions are being made behind closed doors," said Barbara Roper, the director of investor protection for the Consumer Federation of America.

Regulators, lobbyists and consumer groups could not recall another instance of government agencies listing such meetings. But the lists appear to have attracted scant public notice — and do not appear to have influenced the rule-making process.

"The meetings recently have been like the meetings we have always had," said Elisse Walter, a member of the SEC.

At the same time, the logs show that consumer interests are heavily outnumbered by Wall Street.

More than 90% of the groups that appear in the meeting logs are banks, hedge funds and other big companies that rely on the financial industry, according to The Times' analysis. Some worry that the imbalance could affect the rules regulators are drafting to implement the law.

"Clearly the big banks have a ton of money to put toward this battle, and the people who are fighting for reform just don't have the resources or the people," said Heather Slavkin, a policy advisor for the AFL-CIO who has attended several meetings with regulators.

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