With the Senate poised to take up the issue early in 2010, the next questions are: How much more money and influence will the industry expend to try to shape the reform legislation to its liking, and will it succeed?
Industry spending to sway Congress is hardly news, but the scale of such activity surrounding this season’s finance overhaul legislation is extraordinary, even for Washington.
“What’s astonishing to me is that the special interests opposing us contributed to the failure of the financial system. They’re trying to preserve the system that failed, and Congress is listening to them in some respects,” says Ed Mierzwinski, consumer advocate for US PIRG. a public-interest research group.
With the American public still reeling over the loss of trillions in savings and pensions from 2008’s financial fiasco, Wall Street is playing defense – and there’s evidence that its outsized investment in inside politics is paying returns.
The industry, with the help of centrist Democrats, won key concessions – including limits on the power of a new consumer protection agency, preemption of state consumer protection laws, and loopholes in new rules for the $600 trillion derivatives market that helped trigger the crisis and subsequent recession.
Consumer groups say the industry’s campaign contributions to sitting congressmen influenced these outcomes. The 34 House members who offered amendments to weaken consumer protections, for instance, collectively received $3.8 million in campaign funds from the financial sector in 2009, according to analysis by Consumer Watch and the Center for Responsive Politics.