A flurry of opposition from New York City-area politicians and House moderates is aimed at blunting tough new financial regulations – an 11th-hour lobbying blitz that could shift momentum once again in the Wall Street reform fight.
A pair of letters – from the New Democrat Coalition and New York City Mayor Michael Bloomberg – stake out a view that’s been politically risky amid the populist anger over Wall Street: don’t be too tough on the banks.
“We are deeply concerned by the very real possibility that, as a result of the Senate derivatives provision, America’s largest financial institutions will move their $600 trillion derivatives businesses overseas, at the expense of both the U.S. economy, as well as the economy of New York State and New York City,” said the New Democrat Coalition letter.
That letter, signed by New York Reps. Gary Ackerman and Michael McMahon, is expected to gather more signatures before it is sent to House leaders and Rep. Barney Frank (D-Mass.), who is leading the conference committee.
Already, the battle over regulating derivatives had more ups-and-downs than the NBA finals.
First, Sen. Blanche Lincoln’s amendment to force Wall Street banks to spin-off their lucrative swaps desks was sure to be sliced out during conference committee negotiations over financial reform with a quiet assist from the Treasury Department.
Then conventional wisdom suggested that the political risk associated with appearing to do Wall Street’s bidding meant Lincoln’s provision would almost certainly remain, perhaps with a strict “Volcker rule” ban on proprietary trading to go with it.
Now New York officials and others are speaking up. Bloomberg has also weighed in with a letter to Rep. Carolyn Maloney (D-N.Y.) in which he warns against taking “punitive actions” actions against the financial industry
“These short-sighted proposals would provide major advantages to our foreign competitors, reduce U.S. economic activity and the tax revenues needed to pay for essential services, decrease the number of middle-class jobs, and create a dependence on overseas firms for the expertise and capital so critical to a well-functioning market economy,” Bloomberg wrote.
One House official said the pushback from moderates and the New York delegation could slow momentum for the derivatives language. “Barney Frank is one of the most liberal members of the House so it’s not surprising he would support [Lincoln]. But he also knows how to count votes,” his person said.
Industry executives also believe the pressure, while coming late in the game, could eventually stem what had been a strong tide against Wall Street.
“Hard to tell where the tipping point is — where [Democrats] start deciding not to support the bill,” one industry official said. “Everything is related to everything else — interchange, Volcker, Lincoln, CFPA, etc. Nothing is agreed to until everything is agreed to. At the very least, those letters put Barney and the leadership on notice that their votes aren't a given. Going to be a tricky next week or so.”
Chris Frates contributed to this report.