By Kevin Bogardus - 04/25/12 09:00 AM EDT
Wall Street mobilized K Street to push back against a provision in an insider-trading bill that could have forced financial analysts and intelligence operatives to register as lobbyists, new records show.
A review by The Hill of lobbying records from the first quarter of 2012 found that many of the financial sector’s biggest names lobbied on the Stop Trading on Congressional Knowledge (STOCK) Act. Many bolstered their forces with new lobbyists, while others turned to K Street for the first time as the bill moved toward President Obama’s desk to become law.
House Republicans stripped that measure from the final piece of legislation, spurring allegations from Democrats and some Republicans that the party was doing Wall Street’s bidding.
The Securities Industry and Financial Markets Association (SIFMA), which represents securities firms, banks and asset managers, was one of several groups that lobbied on the bill. SIFMA’s main concern was the political intelligence provision, which was inserted into the Senate version of the bill by Sen. Chuck GrassleyChuck GrassleySenate rivals gear up for debates Grassley pulling away from Dem challenger Overnight Finance: McConnell offers 'clean' funding bill | Dems pan proposal | Flint aid, internet measure not included | More heat for Wells Fargo | New concerns on investor visas MORE (R-Iowa).
“The way the amendment was written, it would have captured any employee of our member firm who had even the slightest of interactions with a member of Congress or federal employee who was covered under the amendment,” said Andrew DeSouza, a SIFMA spokesman. “We felt that the amendment was overly broad and would have a number of unintended consequences, and so we spent a great deal of time raising our concerns on the amendment with members of Congress in both houses, and on both sides of the aisle.”
Like SIFMA, other trade groups representing the financial sector — including the Managed Funds Association, a hedge funds trade group in Washington, and the Investment Company Institute, which represents investment companies and mutual funds — reported lobbying on the STOCK Act this past quarter.
Several watchdog groups had backed the provision and lamented its removal from the bill. Craig Holman, government affairs lobbyist for Public Citizen, said Wall Street’s lobbying campaign against the measure was “instrumental” in its demise.
“The political intelligence provision had not been seriously questioned in the legislation, and was even added to the original bill in the Senate in a bipartisan vote. It was at that point that Wall Street realized it was likely to become law — and that is when Wall Street geared up its lobbying campaign,” Holman said.
In February, on the Saturday after the STOCK Act cleared the Senate, SIFMA held a conference call with its members to discuss the bill. The trade group shared a memo by Wiley Rein attorneys that said the provision was “potentially extremely broad.”
Political intelligence is a lucrative practice, which might have contributed to the ferocity of the lobbying backlash. Some peg the global market for policy research and political intelligence services at more than $400 million.
Others in the financial realm were spooked by the measure. Many said they didn’t oppose the bill but were concerned about Grassley’s amendment.
“We followed closely the political intelligence provision of the STOCK Act because of our concern that the provision was so broadly written that it would cause numerous employees of Charles Schwab to have to register or file disclosure forms simply because they consider and analyze news coming out of Washington as part of their broader analysis of the economy and the markets,” said Michael Townsend, the company’s vice president for legislative and regulatory affairs.
Having reported lobbying on the bill this past quarter, Townsend said Charles Schwab did no direct lobbying on the issue, though it did come up in discussions between the company’s lobbyists and lawmakers and their staff.
The Duberstein Group, headed by former Reagan Chief of Staff Ken Duberstein, lobbied on the STOCK Act during 2012’s first quarter on behalf of Goldman Sachs, according to lobbying disclosure records. A spokesman for Goldman Sachs declined to comment.
As the STOCK Act gathered steam, many research firms — which provide the currency of political information to Wall Street — upped their lobbying representation. Analysts at those firms would have likely had to disclose their clients under Grassley’s amendment.
Potomac Research Group hired Peck, Madigan, Jones and Stewart Inc. in February — the first time the research firm has hired lobbyists, according to disclosure records. Jeff Peck, former Senate Judiciary Committee staff director, and Andrew McKechnie, once a policy adviser to the Senate Finance Committee, disclosed lobbying for the research firm on the STOCK Act and earning $10,000 in fees this past quarter.
The financial services firm Marwood Group hired Elmendorf-Ryan in February to lobby on “issues related to the STOCK Act.” Led by well-known Democratic lobbyists Steve Elmendorf and Jimmy Ryan, the firm earned $10,000 in lobbying fees from Marwood this past quarter.
Marwood already had Ogilvy Government Relations on its lobbying team, with prominent GOP lobbyists Wayne Berman and Drew Maloney lobbying on issues related to the STOCK Act. Marwood paid the firm $70,000 in lobbying fees last quarter, along with $160,000 for 2011.
Gerson Lehrman Group also has Elmendorf-Ryan as part of its lobbying representation. The K Street shop reported lobbying on issues related to the STOCK Act last quarter for the research firm, earning $60,000 in lobbying fees last quarter and $220,000 for all of 2011.
Gerson Lehrman also has Mercury/Clark & Weinstock among its K Street corps, though it’s not clear if they lobbied on the STOCK Act. The lobby firm said it was “following financial-services issues” on behalf of Gerson Lehrman last quarter and didn’t mention a specific bill, according to lobbying disclosure records.
Instead of having political intelligence consultants disclose their clients, Congress authorized the Congressional Research Service (CRS) and the Government Accountability Office (GAO) to study the industry and share their findings with Capitol Hill in a year — an outcome that many in the financial sector had hoped for.
“We felt that a study of the issue was an appropriate move forward given the complexity of the issue,” said DeSouza of SIFMA.
Townsend of Charles Schwab agreed.
“We were satisfied with the outcome because the required study will allow time for more careful analysis of the issue,” Townsend said.
The issue is unlikely to go away, however. Public Citizen’s Holman believes the release of the GAO and CRS study on the political intelligence industry next year will reignite the battle with Wall Street.
Holman also noted that Reps. Louise Slaughter (D-N.Y.) and Tim Walz (D-Minn.) introduced a stand-alone bill that would require political intelligence consultants to register as lobbyists. Grassley is considering offering similar legislation.
“Sen. Grassley is considering the introduction of a freestanding bill to implement political intelligence registration. He’s looking at refinements to address the criticisms of the prior provision, such as that it was overly broad,” a Grassley spokeswoman said.