The financial industry is finding that winning in Washington comes at a cost.
Wall Street lobbied aggressively and succeeded late last year in persuading lawmakers to roll back rules for the $700 trillion derivatives market. Instead of generating momentum for further changes to the Dodd-Frank Act, the victory sparked a populist uprising among Democrats that’s had wide-ranging consequences, including stymieing less controversial requests from regional banks like Capital One Financial Corp.
“A short while ago there was bipartisan agreement on a number of common sense improvements,” said Rob Nichols, president of the Financial Services Forum that represents the chief executives of Wall Street’s biggest banks. “Unfortunately, that bipartisan agreement is gone.”
Financial companies and their employees spent $169 million on the November elections and had expectations that their bid to loosen regulations would get easier with Republicans in control of both the House and Senate. Now, there is second-guessing that banks overplayed their hand, according to lobbyists. The December win on swaps rules has become a rallying cry for Senator Elizabeth Warren, a frequent critic of Wall Street, and spurred repeated White House vows to defend Dodd-Frank.
Attacking Dodd-Frank
The fallout has frustrated banks, which hope it’s temporary. Democrats who previously said they wanted to revise the law now won’t even discuss it. Republicans are altering their strategy for attacking Dodd-Frank. And lobbyists have been hindered in their efforts to persuade Senate Democrats to champion changes to financial rules.
A sign of the political headwinds has been regional banks’ difficulty winning bipartisan support for a bill that would free them from stringent oversight imposed on lenders with at least $50 billion of assets.
Capital One considers getting the threshold increased a top legislative goal this year, according to people with knowledge of the matter.
The company’s inability to persuade Democrats to lead the charge in the Senate, particularly home state Senator Mark Warner of Virginia, has reverberated through the ranks of financial lobbyists, according to two people involved in the talks. The message is clear that Warren’s attacks on the industry have made even moderate Democrats skittish to stand up for banks, the people said.
Capital One’s discussions with Warner aren’t unique, said company spokeswoman Tatiana Stead. “We have had identical and multiple discussions with his Senate colleagues and other elected officials,” she said.