Wall Street Gears Up Its Stealth Attack

(Photo: AP/CQ Roll Call/Bill Clark)

Senator Elizabeth Warren speaks during a Senate Banking, Housing and Urban Affairs Committee hearing on July 15, 2015.

It’s appropriations season again on Capitol Hill, and that means the halls of Congress are crowded with Wall Street lobbyists looking for regulatory relief in the form of legislative “riders” attached to must-pass spending bills.

“Once again, it’s like ringing the dinner gong for the lobbyists,” declared Senator Elizabeth Warren of Massachusetts in a conference call with reporters on Wednesday. “They are swarming this place. Because they have all kinds of goodies that they want to slip into the legislation.”

Financial services industry lobbyists aren’t the only ones pressing lawmakers to attach policy riders to the fiscal 2017 appropriations bills now under consideration on Capitol Hill. Riders promoted by corporate or conservative interests would weaken a broad range of worker safety, environmental, and women’s health protections, say progressive activists who organized Wednesday’s call to urge Congress to pass a “clean” budget free from ideological riders.

But Wall Street interests have historically been among the most aggressive and successful in persuading Congress to deliver policy fixes favorable to their industry via spending bill riders—provisions that would invariably trigger public outcry if debated out in the open via the normal legislative process, but that stand a better chance when tacked onto spending bills in the dead of night.

The most obvious example is the rider attached to a spending bill in late 2014 that repealed a key provision of the Dodd-Frank financial reform law passed after the 2008 fiscal crisis. That rider tossed out the so-called swaps pushout provision of Dodd-Frank, which had required bank holding companies to sequester risky derivatives trades in segregated accounts to protect consumers from hazard.

Not all of Wall Street’s wish list has fared so well. Last year, lawmakers set out to attach hundreds of riders to omnibus spending legislation, including dozens aimed at rolling back financial services protections at the heart of Dodd-Frank. These included a GOP bid (ultimately thwarted) to remove the Consumer Financial Protection Bureau’s independent funding stream, which is guaranteed through the Federal Reserve, and put congressional appropriators hostile to the agency in charge of the CFPB’s purse strings.

Another rider last year sought to block the CFPB from issuing a rule aimed at ending so-called forced arbitration, which requires consumers to waive their right to sue as a condition of doing business with a bank or other entity, or merely having a bank-issued credit card. That rider was ultimately defeated, and the CFPB has now proposed a rule to ban forced arbitration in class actions. But consumer advocates fully expect Republicans to introduce another rider this year aimed at blocking the CFPB’s forced arbitration curbs. A rider to cut off the agency’s independent funding is also expected to resurface.

Yet another hard-won consumer protection that GOP lawmakers are expected to try to undo with an appropriations rider is the Obama Labor Department’s recent “fiduciary duty” rule to protect consumers against retirement investment advice that may benefit the financial adviser at the expense of the consumer. The rule, which has been estimated to cost consumers $17 billion a year, requires such advisers to act in the best interests of the consumer.

“We will see numerous attempts to undermine financial reform,” predicts Lisa Gilbert, director of Public Citizen’s Congress Watch. There’s a key difference, though, between the riders that helped gut parts of the Dodd-Frank law in 2014, and the ones moving forward on Capitol Hill today. This time, consumer advocates are better organized, and are acting aggressively to bring the debate over riders friendly to Wall Street and other corporate and ideological interests out in the open.

“After the terrible lesson of the financial crisis, the least we can expect is that any proposals to weaken financial regulations be debated and voted on as stand-alone measures in an open process,” urged a May 17 letter to Capitol Hill authored by Americans for Financial Reform and signed by more than 200 labor, consumer, civil-rights, environmental, and other progressive groups. “The budget is not the place to try to force through provisions that are dangerous to economic stability, would not pass alone, or that the President would likely veto.”

Another difference in this year’s appropriations process is that voter anger at Wall Street continues to mount, and has emerged as a major campaign theme in the presidential contest. Voters see a clear link between Wall Street financial contributions—which continue to be the largest source of funds to the high-dollar outside groups that now drive campaign spending—and the types of legislative favors that financial services lobbyists have set out to win through backdoor riders.

Some argue that the relationship between wealthy donors’ campaign spending and the special favors they win on Capitol Hill is tenuous at best. When it comes to Wall Street rules, however, the lobbyists now flocking to Capitol Hill are worlds apart from average voters, the vast majority of whom believe the financial industry needs more regulation, not less. That may make riders a riskier political bet.

“Our belief is that we’re going to succeed in beating this stuff back, because our side has become sharper at blowing the whistle on these efforts ahead of time,” says James Lardner, Americans for Financial Reform’s communications director. “And mostly because Wall Street is tremendously unpopular, and people who are perceived as doing its bidding don’t come off well with their constituents—Republican or Democratic.”

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