One bill that sailed through the House Financial Services Committee this month over the objections of the Treasury Department was essentially Citigroups, according to e-mails reviewed by The New York Times. The bill would exempt broad swathes of trades from new regulation.
In a sign of Wall Streets resurgent influence in Washington, Citigroups recommendations were reflected in more than 70 lines of the House committees 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.) 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.
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.
This legislative push is a second front, with Wall Streets other battle being waged against regulators who are drafting detailed rules allowing them to enforce the law.
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.
In recent weeks, Wall Street groups also held fund-raisers for lawmakers who co-sponsored the bills. At one dinner Wednesday night, 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.
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 Ben S. Bernanke, the Federal Reserve chairman. The changes, they added, were in an effort to reach a compromise over the bills, not to undermine Dodd-Frank. 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.
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.
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.
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.
I wont 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 partys fund-raising effort in the House. A member of the Financial Services Committee and a former banker at Goldman Sachs, he is one of the top recipients of Wall Street donations. Its appalling, its disgusting, its wasteful and it opens the possibility of conflicts of interest and corruption. Its unfortunately the world we live in.
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.
But the industry lobbyists also realized that Congress can play a critical role in the campaign to mute Dodd-Frank. 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.