By Silla Brush - 11/12/09 01:06 AM EST
The nation’s biggest financial firms are racing to Capitol Hill to sway lawmakers against legislation that could give the government broad new powers to break up large firms.
JPMorgan Chase & Co., Citigroup, HSBC, Prudential and MetLife are among the big banks and insurers that have had more than half a dozen meetings to lobby lawmakers in just the last 10 days.
The amendments have not been introduced yet, but their authors aim to give the government greater powers than the Obama administration had originally proposed to limit the size and scope of the country’s biggest financial companies. The government might be able to step in even if the firms are not on the verge of failing.
“If we’re going to give power to bail out companies when they are too large … why don’t we pre-emptively determine those corporations or financial institutions that are ‘too big to fail,’ identify them and then make sure they don’t remain too big to fail?” Kanjorski said recently on CNBC.
Big financial companies argue that there is nothing inherent in the size of a company that poses a threat or that should lead the government to impose heavy restrictions.
“We will be active on Capitol Hill, pointing out the unique and important value large financial firms contribute to economic growth and job creation in the United States,” said Rob Nichols, president of the Financial Services Forum. “Large institutions provide significant value to customers — in the sheer size of credits they can deliver, in the array of products and services they can provide and their geographic reach — that smaller institutions cannot provide.”
The forum represents 18 financial firms that are among the biggest names in the industry.
The big firms have met with the offices of Reps. Kanjorski, Perlmutter, Carolyn McCarthy (D-N.Y.) and Gregory Meeks (D-N.Y.), among others, said a source who attended the meetings.
Financial Services Committee Chairman Barney Frank (D-Mass.) provoked concerns in the financial industry when he said recently that he was working with both Kanjorski and Perlmutter on the amendments. Frank’s backing would likely grant the necessary support to pass the amendments.
Frank said he could envision legislation that would let government officials split the commercial and investment banking divisions of banks on a case-by-case basis.
Such a move would effectively reinstate for specific firms the 1933 Glass-Steagall Act that was repealed in 1999. Some critics blame the repeal for allowing financial firms to grow into behemoths that they argue threatened the broader economy and contributed to the financial crisis.
The consumer advocate group Public Citizen is marking the 10th anniversary of the repeal to call for greater regulation of big firms.
Small banks are also encouraging the general aim of Kanjorski’s amendment.
“We certainly support the direction he’s going,” said Steve Verdier, senior vice president for the Independent Community Bankers of America (ICBA), an association that represents 8,000 small banks.