Industry Lobbyists Go After Candidates

By ELIZABETH WILLIAMSON
WSJ

WASHINGTON -- Top lobbyists for the financial-services industry are feverishly working connections inside both presidential campaigns, hoping to influence a torrent of regulation certain in the aftermath of the market crisis.

As the financial-market crisis has deepened, economic advisers from both campaigns have reached out to the big industry lobbying groups, vetting ideas on what they should do.
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It is the "dirty little secret in town," said one financial-services lobbyist -- that after lambasting lobbyists on the stump, the candidates need their counsel on how to respond to a crisis with origins too complicated for most industry outsiders to understand.

"It's a dialogue...that's taken on a greater urgency in the last couple of weeks," said Steve O'Connor, senior vice president for government affairs at the Mortgage Bankers Association. The group is urging caution on regulatory proposals, he said, telling both camps, "You want to get it right."

The financial industry has invested heavily in that dialogue, giving $22.5 million in the current election cycle to Sen. Barack Obama, the Democratic candidate, and $19.6 million to Sen. John McCain, the Republican nominee, according to data from the Center for Responsive Politics.

This week, two of the biggest financial groups in Washington, the Financial Services Roundtable and the Mortgage Bankers Association, have drawn in members from across the country to grill economic advisers from both campaigns, develop policy positions and urge prudence as both parties struggle to craft a regulatory stance on the deepening crisis.

The Financial Services Roundtable has developed draft legislation that calls for the Federal Reserve to regulate brokerages and dealers that seek access to its discount window; a new federal insurance regulator within Treasury; and a mechanism for federal agencies to coordinate regulation among themselves.

The group will fine-tune that proposal at a meeting this week with the chief executives from more than 50 banks, brokerages and insurers, a three-day confab that Thursday included a private session with Obama economic adviser Ian Solomon and McCain adviser Ike Brannon.

The intensifying activity reflects industry concern that the candidates -- under the gun to say what they would do to solve the crisis -- will push solutions the industry can't live with.

Thursday, Sen. McCain said Wall Street had become a "casino" and said he would fire the current head of the Securities and Exchange Commission, Christopher Cox. Sen. McCain called for a new government entity that would buy the assets of troubled companies, then sell them off in better times.

While campaigning Thursday, Sen. Obama said that the Fed's effort to pump billions of dollars into global financial markets to ease liquidity problems was important to "maintain the functioning of our financial system and the flow of credit to American households and businesses."

Sen. Obama said he planned to meet Friday with his top economic advisers to craft a "Homeowner and Financial Support Act" that would provide capital to the financial system, liquidity to the markets and help for families who need to restructure mortgages they can't afford.

At the Financial Services Roundtable gathering, attendees heard Wednesday from House Ways and Means Chairman Charles Rangel (D., N.Y.) and Treasury Secretary Hank Paulson.

Thursday, the group's CEOs agreed to advocate for a change in accounting rules. The proposal would require financial-services firms to state their assets' value on balance sheets based on the assets' purchase price rather than market value, an approach that in the current climate has weakened companies' balance sheets.

American Bankers Association President and CEO Ed Yingling said the group is watching to see how regulation of securities houses affects its members. The group will appeal to the campaigns for prudence, should the Fed take a broader regulatory role.

The Mortgage Bankers Association has been in formal and informal contact with both campaigns. Next month, it will host Mr. Solomon for a discussion of economic policy and regulation.