Well before Congress reached agreement on the details of its financial overhaul legislation,industry lobbyists and consumer advocates started preparing for the next battle: influencing the creation of several hundred new rules and regulations. The bill,completed early Friday and expected to come up for a final vote this week,is basically a 2,000-page missive to federal agencies,instructing regulators to address subjects ranging from derivatives trading to document retention.
But it is notably short on specifics,giving regulators significant power to determine its impact and giving partisans on both sides a second chance to influence the outcome.
The much-debated prohibition on banks investing their own money,for example,leaves it up to regulators to set the exact boundaries. Lobbyists for Goldman Sachs,Citigroup and other large banks already are pressing to exclude some kinds of lucrative trading from that definition.
Regulators are charged with deciding how much money banks have to set aside against unexpected losses,so the Financial Services Roundtable,which represents large financial companies,and other banking groups have been making a case to the regulators that squeezing too hard would hurt the economy.
Consumer groups,meanwhile,are mobilizing to make sure that regulators deliver on promised protections for borrowers and investors. They worry that the shift from Capitol Hill to the offices of regulators could put the groups at a disadvantage.
Its out of the public eye,so a natural advantage that we benefit from public outrage we lose that a little, said Cristina Martin Firvida,a lobbyist for AARP,which advocates for older Americans. We know theres still a lot here left to do.
The legislation is intended to expand federal oversight of the financial industry to police risks to the broader economy and to protect consumers of financial products. It would also impose federal regulations for the first time on the trading of derivatives,the complex financial instruments that can be used to make large bets. But Brett P Barragate,a partner in the financial institutions practice at the law firm Jones Day,estimated that Congress had fixed in place no more than 25 percent of the details of that vast expansion.
Congress is doing this in broad strokes, said Scott Talbott,a lobbyist for the Financial Services Roundtable. Where the rubber meets the road is the regulatory process. President Obama hopes to sign the bill into law by the Fourth of July. In his weekly address on Saturday, Obama said,I urge Congress to take us over the finish line,and send me a reform bill I can sign into law.
Interest groups have been preparing for months. When the Consumer Bankers Association convened its annual meeting in early June,there was still plenty of time to lobby Congress. But the groups president,Richard Hunt,told his board that the group should shift its focus to the rule-making process. The board voted to increase the groups budget and staff.
Now we hope to have a good give and take with the regulators on the best interests of the consumer and the industry, said Hunt. Shaping regulations is a different game than shaping legislation. Political considerations carry less weight.