Lawmakers pressuring regulators to tread lightly on implementing a key piece of the financial reform law enjoyed substantial campaign contributors from the financial sector, according to a new report.
Members of Congress pressuring regulators to go easy on the "Volcker Rule" received roughly four times as much on average in contributions from the financial industry than lawmakers pushing for a stronger rule since the 2010 election cycle, according to Public Citizen, a left-leaning group advocating for strict implementation.
Regulators are currently poring over about 17,000 comment letters they have received from the public on the rule, which is shaping up to be one of the most contentious portions of the sweeping Wall Street overhaul. That flood of input is pushing regulators to indicate that they will likely miss the July deadline for finalizing the rule, as the industry calls for regulators to go back to the drawing board on its original proposal.
“Members of Congress should not serve as megaphones for industry’s claims,” said Negah Mouzoon, researcher for Public Citizen’s Congress Watch division and co-author of the report. “They should amplify the public’s call to prohibit banks from engaging in the same risky financial activities that contributed to the financial meltdown of 2008.”
Beyond campaign donations, the report also makes clear the lopsided nature of the comments, even from those on Capitol Hill. All told, 24 separate comment letters were sent to regulators by 196 members of Congress. Seventeen separate letters were signed by 172 members pushing for a weaker rule, while just three letters signed by 20 lawmakers advocating for a tougher approach.
The Volcker Rule is a cornerstone of the 2010 Dodd-Frank law, and is aimed at ensuring banks, whose deposits are insured by the government, do not overextend themselves on risky investments in search of profit. The rule, named after former Federal Reserve Chairman and Obama adviser Paul Volcker, curbs banks from engaging in "proprietary trading," which is trading with a firm's own funds for its own profit.
However, the financial industry has heaped dire warnings on regulators charged with making the rule a reality, warning that strict implementation could prevent financial firms from ensuring markets remain accessible. Advocates of stricter Wall Street oversight have pushed back, arguing that a strict ban on proprietary trading is necessary to prevent another financial meltdown.
Of lawmakers pushing for an easier rule, Sen. Scott Brown (R-Mass.) led the way in contributions, receiving $3.6 million from the financial industry since the 2010 cycle. Brown proved to be a decisive vote on making Dodd-Frank a law in the first place, as one of just two Senate Republicans to support the final bill. Sen. Michael Bennett (D-Colo.) received the second-largest amount of industry donations, $2.5 million.
House Financial Services Committee Chairman Spencer Bachus (R-Ala.) received the largest amount of contributions among House lawmakers pushing for weaker rule, pulling in $1.7 million. Rep. Jim Himes (D-Conn.), who sits on Bachus's committee, received the next largest amount, $1.6 million, among House members.
Lawmakers pressing for a tougher rule, all Democrats, received substantially fewer contributions from Wall Street, as Sen. Jeff Merkley (D-Ore.) pulled in the most at $236,500.