Opponents of an amendment to the financial regulatory reform bill say the measure has pitted them against a once-powerful Member: former House Financial Services Chairman Mike Oxley (R-Ohio).
Most of the banking industry is against the amendment, which would prohibit firms such as Goldman Sachs, JPMorgan Chase and Citibank from making certain financial transactions. But Oxley, who is not a registered lobbyist, has been putting in personal phone calls and visits to lawmakers, pushing them to support the measure, several lobbyists said.
“He’s making this personal,— said one lobbyist working against the amendment who would speak only on condition of anonymity. “It’s very important to him, and that’s the reason why we are so unclear about the outcome.—
Oxley, a senior adviser to Nasdaq’s board of directors who left Congress in 2007, previously served as Nasdaq’s vice chairman. The stock exchange is one of the only financial institutions supporting the amendment.
Nasdaq General Counsel Ed Knight defended Oxley and the stock exchange’s lobbying effort. He said the amendment also has the support of the AFL-CIO and the Consumer Federation of America.
“Markets who operate in darkness do not operate as efficiently, do not benefit investors as much and do not protect the public interest as well,— Knight said, arguing for the amendment.
“If the public is going to have confidence in the market, you have to go beyond just eliminating conflicts, you have to eliminate the appearance of conflicts of interest,— he added.
Opponents of the bill also have their share of former lawmakers on their side, including one-time Reps. Harold Ford (D-Tenn.), Vin Weber (R-Minn.) and Dick Gephardt (D-Mo.).
The Lynch amendment, named for its sponsor, Rep. Stephen Lynch (D-Mass.), would limit derivatives dealers to a less than 20 percent ownership stake in exchanges and clearinghouses.
Lynch said his amendment would help every financial institution except for the five large banks that do most of the derivative trading.
“Right now 97 percent [of trading] is controlled by these five banks,— Lynch said, quoting a Comptroller of the Currency statistic that also includes HSBC and Bank of America.
While lobbyists have taken to calling the amendment the “Nasdaq bill,— Lynch said the amendment is much broader than that.
“Whoever wants to get into this market, it will help them,— he said.
Lynch reintroduced the amendment Wednesday after it was pulled from the House Financial Services Committee bill because of a technical error. It was unclear as of press time if the House Rules Committee was going to allow the amendment.
Not all Democrats are supporting it.
Rep. Michael McMahon (D-N.Y.) said the legislation goes too far.
“I think what this amendment will do is lead to monopolization,— McMahon said.
Further, McMahon said the existing regulatory overhaul legislation already had conflict-of-interest language.
A crew of financial services trade groups, banks, broker dealers and stock exchanges have teamed up to try to kill the amendment.
The Securities Industry and Financial Markets Association, the New York Stock Exchange, the Futures Industry Association and others are aggressively lobbying against the provision.
“We strongly oppose the amendment,— said Cory Strupp, managing director of government affairs at SIFMA. “We believe it is anti-competitive and would prevent those with the capital, operational expertise and market knowledge from helping establish clearinghouses that will help reduce risk in the market.—
The New York Stock Exchange’s Clarke Camper sent a letter Tuesday to Democratic and Republican House leaders opposing the amendment.
“Exchanges, clearinghouses and [swap execution facilities] functioned extremely well through the financial crisis, providing the transparency, liquidity and risk mitigation that helped pull global markets through the turmoil,— Camper wrote. “The Lynch Amendment would harm our ability to continue providing these benefits and we urge you to oppose it.—
No matter what happens in the House, opponents expect to have an easier sell in the Senate. So far, no Senators have come forward willing to offer an amendment with similar language, according to financial services lobbyists.
The fight over the Lynch amendment comes as Republican leaders are upping the stakes for associations and companies to push back against the entire regulatory overhaul.
House Minority Leader John Boehner (Ohio) and Minority Whip Eric Cantor (Va.), along with other Republicans, held a meeting in the Capitol Visitor Center on Tuesday with more than 100 lobbyists. The Members railed at the K Streeters, urging them to marshal their resources against the legislation.
In addition to asking trade associations to get their members in Congressional districts to write letters opposing the legislation, Republicans asked for companies and trade associations to use their Democratic consultants to gather intelligence on whether members of the Congressional Black Caucus and the Blue Dog Coalition support the legislation.
The Republicans specifically called the Independent Community Bankers of America on the rug for supporting the regulatory reform legislation.
But ICBA’s Steve Verdier defended the community banks’ position.
“It’s got the balance we’re looking for, regulating the unregulated and leaving community banks more or less alone,— Verdier said.
Some Republican lobbyists said the meeting was too little, too late.
“It was way too late,— said another lobbyist in the meeting, who noted Democrats were bringing the reform package to the floor this week.