Wall Street Got Burned In Washington This Year, For Once

It's a Christmas miracle!

So, that happened. It was a tough year to be a bank lobbyist in the nation's capital. Wall Street's biggest banks worked both houses of Congress, the Obama administration and five independent regulatory agencies, all to come away at year's end with approximately … nothing. An interest group accustomed to playing on offense was, at times, forced into defensive mode, protecting its turf with only modest success.

Listen to HuffPost's analysis of the yearlong struggle over economic policy in this week's "So, That Happened" podcast. The fun starts at 21:54.

Banks started the year with a long Washington wish list. They wanted to tie up the Consumer Financial Protection Bureau with reams of red tape. They wanted to charge high hidden fees on auto loans -- a practice that disproportionately hits the pocketbooks of people of color. They wanted to poke a big hole in the Volcker Rule, which bans banks from placing speculative securities bets with taxpayer-backed money. They wanted to let banks with assets measured in 12 figures operate with thinner capital cushions and larger amounts of risky borrowed money. They wanted to kill a new rule that would require financial advisers to act in the best interests of their clients (amazingly, this is not already the law).

The banks lost every one of these fights.

Wall Street usually wins in Washington. The bank lobby closed out 2014 by securing subsidies for risky derivatives trading and a long delay in the implementation of the Volcker Rule. And indeed, this year's setbacks may be the inevitable result of too much winning the year before.

But part of the larger problem for bank advocates is the new style of governance imposed by the Republican Congress: Lawmakers just don't pass many bills anymore. The bank lobby -- which had a history of generous campaign contributions to Democrats prior to the 2010 passage of the Dodd-Frank Wall Street reform law -- can no longer rely on simply getting legislation passed and seeing it signed into law. And even if Congress did pass a straightforward bill curbing Dodd-Frank, President Barack Obama would almost certainly veto it.

Instead, banks now have to hope that their pet projects get included in the year-end funding bill for the federal government. Obama has repeatedly warned lawmakers against approving spending bills that include major regulatory rollbacks. For bank lobbyists to succeed, they have to convince Republican leaders that their pet projects are worth risking a government shutdown, which the public would almost certainly blame on the GOP.

As a result, lobbyists have to pursue bizarre, multi-stage strategies designed to give Republican leaders the ability to promise that bank handouts are, in fact, uncontroversial, bipartisan measures. These schemes begin with the introduction of the bill -- will any finance-friendly Democrats sign on as co-sponsors? -- and proceed to the committee level. House Financial Services Committee Ranking Member Maxine Waters (D-Calif.) has blocked most efforts to defang Dodd-Frank. But if a dozen bills are moving at the same time, each with a token Democrat or two in support, then Waters has to pick her battles. Something almost inevitably slips through.

The bill then hits the House floor, where Republicans attempt to churn up Democratic votes. If enough Democrats flip, then GOP leaders can point to those votes as evidence that the measure belongs in a bipartisan year-end funding bill.

That's exactly what happened in 2014 with subsidies for derivatives trades. When Waters and Sen. Elizabeth Warren (D-Mass.) led the charge against the policy, then-House Speaker John Boehner (R-Ohio) noted that over 90 Democrats had previously supported the measure on the House floor. Surely it couldn't be that bad.

Most members of Congress -- Republican and Democrat alike -- don't have a strong grasp of financial policy. It's hard to know whether a favor requested by a bank lobbyist is a genuine technical correction or a cold-blooded attempt to swindle consumers. If a few otherwise progressive Democrats approve of a bill and Warren doesn't cry foul, then plenty of Democrats will be willing to get the lobbyists off their backs by voting in favor.

And there are a few dozen House Democrats who will back bank lobbyists even when Warren draws a line in the sand. In November, 88 Democrats, including DNC Chair Debbie Wasserman Schultz (D-Fla.), voted in favor of a bill that would help auto dealers charge higher loan rates to black, Latino and Asian customers. It was the sort of thing that lobbyists had hoped might make it into the year-end spending package, but the passage of the bill prompted an uproar among activists online, and the provision never made it into the broader legislation.

But while it's rare for bank lobbyists to lose all the battles they pick on Capitol Hill, it's still more unheard of for the industry to take fire the way it did this year.

When lawmakers were examining a long-term highway bill, trying to figure out how to get it passed, they noticed a proposal from the Congressional Progressive Caucus to nix $17 billion in payments that the Federal Reserve makes to banks. The practice is a holdover from the early days of the central banking system, but now essentially functions as a thank-you to banks just being banks.

Suddenly, bank lobbyists weren't trying to get deregulatory favors; they were trying to preserve a straightforward subsidy that was on the chopping block. This was a product of the bank lobby's partisan drift toward the GOP. Republicans are anti-regulation and anti-tax. Banks are into that stuff. But when the broader business lobby really wants the government to pay for something -- like, say, decent highways to ship goods over -- Republicans steadfastly refuse to pay for the maneuvers with tax increases of any kind.

As a result, silly items like billions of dollars in free money for banks start to look like appealing targets.

Banks didn't take the full $17 billion hit. Through aggressive lobbying, they were able to nudge it down to $7 billion. It could have been worse, but bank lobbyists didn't see it as a win. In retaliation, lobbyists for one bank scaled back a traditionally high-end holiday party they throw for members of Congress and key staffers, downgrading the culinary offerings to mini hot dogs and hamburgers.

But it's okay, bank lobbyists. According to the Sunlight Foundation, median pay for D.C. lobbyists is over $179,000 a year, more than triple the nationwide median income for entire households.

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