Using the bully pulpit of the State of the Union address, President Barack Obama continued to target Wall Street on Wednesday, calling for Congress to act swiftly to pass sweeping financial regulatory reform. Obama’s aggressive posturing comes as the financial services industry is scrambling to find its voice to rebut the president’s assault while facing withering clout on Capitol Hill.
“There’s a real void in the financial services community,— said one banking lobbyist, who would speak only on the condition of anonymity. “The fray is coming to them quickly, and they don’t have anything in place to fistfight with. I think the industry should be scared.—
In the address, Obama urged Congress to hold Wall Street accountable, and he continued to press Members about changing the way business is done in Washington, D.C., by pushing back against special interests.
After several weeks of chastising Wall Street for its barrage of lobbyists working to weaken financial regulatory reform, industry groups seem not to be aggressively pushing back publicly. But with the onslaught of Obama’s populist rhetoric coupled with their loss of influence, the banks may not be able to mount much of an opposition.
“In the current environment, most of these guys are smart enough to realize that to do anything publicly right now [isn’t smart],— one financial services lobbyist said. “There is so much animosity toward the industry, it’s palpable. It’s not just Democrats, but Republican staff feel the same way.—
“It’s poisonous,— the lobbyist added of the political environment on Capitol Hill for banks.
At least one attempt to form an impromptu coalition among big banks to fight Obama’s proposed new bank tax and other measures that the industry believes would be punitive was nixed after there was little appetite by the banks to fund the effort, according to one financial services lobbyist.
Three of the industry’s largest trade groups — the Financial Services Forum, the Financial Services Roundtable and the Securities Industry and Financial Markets Association — are taking a conciliatory tone, at least for now.
FSF spokeswoman Erica Hurtt said the trade group is “pro-reform— and is “actively engaged in the dialogue on how to best modernize and reform our financial supervisory structure.—
SIFMA spokesman Andrew DeSouza echoed the forum’s stance.
“The entire industry remains unified in its commitment to enacting responsible regulatory reforms that strengthen our system and get America’s economy back on track and create jobs,— he said.
Despite their mollifying tone, the groups, which largely represent the biggest financial institutions in the country, are opposed to Obama’s recent bank tax proposal.
SIFMA has hired constitutional lawyer Carter Phillips of Sidley Austin to study a possible legal battle against the proposed tax, but DeSouza said it was premature to discuss how the trade group would move forward until after specific legislation is introduced.
The tax is just the latest issue weighing on an industry that is having a hard time sticking together. Smaller banks, which would be exempt from the tax — along with hedge funds and private equity firms, which are also likely to be exempt from the tax — are against an aggressive lobbying strategy.
As the Senate looks to take up the reform mantle, the lobbying strategy on regulatory reform could devolve into each bank or entity for themselves with industry trade groups being forced into supporting the lowest common denominator as member companies disagree on the best way to push their agenda in Washington.
While Wall Street may be quieting its war of words with the administration, banking executives may be likely to put their pocketbooks away when Democrats come asking for campaign contributions, according to several lobbyists.
The top brass at banks and financial institutions have typically been big personal contributors to Democrats, particularly in the 2008 elections, but that could change in 2010.
“The financial services industry is right up there with being one of the most loyal donors to Democrats,— one industry consultant said. “Not just [political action committees], but executives in Manhattan are wondering where their checks went, and some Republicans are saying, You bought this mess and now you want us to help you undo it.’—