Jan 4 Big U.S. banks are set on getting Congress
this year to loosen or eliminate the Volcker rule against using
depositors' funds for speculative bets on the bank's own
account, a test case of whether Wall Street can flex its muscle
in Washington again.
In interviews over the past several weeks, half a dozen
industry lobbyists said they began meeting with legislative
staff after the U.S. election in November to discuss matters
including a rollback of Volcker, part of the Dodd-Frank
financial reform that Congress enacted after the financial
crisis and bank bailouts.
Lobbyists said they plan to present evidence to
congressional leaders that the Volcker rule is actually bad for
companies, investors and the U.S. economy.
Big banks have been making such arguments for years, but the
industry's influence waned significantly in Washington after the
financial crisis. The Obama administration's regulators and
enforcement agencies have been tough on banks, while lawmakers
from both parties have seized opportunities to slam Wall Street
to score political points.
Banks now see opportunities to unravel reforms under
President-Elect Donald Trump's administration and the incoming
Republican-led Congress, which appear more business-friendly,
While an outright repeal of the Volcker rule may not be
possible, small but meaningful changes tucked into other
legislation would still be a big win, they said.
"I don't think there will be a big, ambitious rollback,"
said one big-bank lobbyist who was not authorized to discuss
strategy publicly. "There will be four years of regulatory
Proponents of the Volcker rule say lenders that benefit from
government support like deposit insurance should not be gambling
with their balance sheets. They also argue such proprietary bets
worsened the crisis and drove greedy, unethical behavior across
Bankers intend to counter that proprietary trading had
little to do with the root causes of the crisis. They say
Volcker is inherently flawed because it can be challenging to
tell whether a trader is speculating or filling customer demand.
As the industry begins a fresh lobbying push, watchdogs say
they are worried about big banks going back to a casino-like
"Wall Street is salivating at their reversal of fortune,"
said Dennis Kelleher, CEO of Better Markets, which pushes for
tighter financial regulation. "If you get to keep profits and
stick taxpayers with the losses, why not?"
Changing the rule through Congress would require 60 votes in
the Senate, including support from at least eight Democrats.
Lobbyists say they intend to court business-friendly Democrats
like Joe Manchin in West Virginia, Heidi Heitkamp in North
Dakota, Joe Donnelly in Indiana, Jon Tester in Montana, and
possibly Angus King in Maine.
However, Senators on the left like Elizabeth Warren in
Massachusetts and Bernie Sanders in Vermont, loud and frequent
critics of Wall Street, could pressure anyone who supports a law
that helps big banks.
"It's dangerous to consider any effort to modify or repeal
Volcker in isolation of a larger package of banking reforms,"
said Mark Chorazak, who specializes in financial regulation at
law firm Simpson Thatcher & Bartlett LLP. "Even if there is
strong support to amend, it may take a lot of time to play out."
In particular, banks want to reverse language in the final
Volcker rule that assumes all trades are proprietary unless
banks can prove otherwise, lobbying sources said.
Banks also want to clarify language that instructs them to
hold only enough securities to satisfy "reasonably expected
near-term demand" from customers.
In making arguments to roll back the rule, bankers and
lobbyists plan to avoid talk of industry profits. Instead, they
intend to lean on the idea that Volcker is reducing market
liquidity, thereby hurting companies, investors and the economy.
As Tom Quaadman, executive vice president at the U.S.
Chamber of Commerce's Center for Capital Markets
Competitiveness, put it in an interview, Volcker needs to change
"so businesses can get started, grow, and create well-paying
(Reporting by Olivia Oran in New York; Editing by Lauren Tara
LaCapra and David Gregorio)