Banks strike out in omnibus

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The financial industry came up empty-handed in the massive government funding package unveiled early Wednesday morning.

After pushing for a host of policy riders, including provisions to rework portions of the Dodd-Frank financial reform law and delay a contentious rule on investment advisers, Wall Street had nothing to show for it in the final 2,000-page bill.

{mosads}To add insult to injury, the banking industry was also unable to roll back a recent policy change that cut billions of dollars banks had received from the Federal Reserve for more than a century. That policy tweak was included in recent highway bill to help cover the costs for the overall legislation.

“Failing to pass needed regulatory relief while forcing banks to pay for roads and bridges is unconscionable and comes with very real costs for both hometown banks and the broader economy,” said Rob Nichols, the incoming president and CEO of the American Bankers Association.

It was just one year ago that the financial industry managed to include language scrapping a Dodd-Frank provision, in must-pass “cromnibus” legislation. The measure scrapped a requirement that banks separate trades in financial derivatives from traditional bank accounts that enjoy a government backstop, and its late inclusion incited a revolt from liberal Democrats, led by Sen. Elizabeth Warren (D-Mass.).

Opposition to rolling back financial rules nearly sank the massive spending package, and Warren was quick to discourage a similar effort this time around — and it appears negotiators wanted no repeat of similar drama to wrap up 2015.

The lack of any policy riders easing financial rules is striking, given that Senate Banking Committee Chairman Richard Shelby (R-Ala.), who also is a senior appropriator, pushed to include his broad regulatory relief legislation in Senate appropriations legislation drafted earlier this year.

Shelby had wanted to see a host of changes to financial rules made, including upping the threshold from $50 billion to $500 billion for banks to earn heightened regulatory scrutiny.

But even more modest attempts to ease rules for smaller banks, ones that had some buy-in from Democrats, were not included in the final bill.

Shelby said Tuesday before the omnibus text was released that his goal all along was to achieve something significant.

“I’ve said all along, we’re not interested in trivial things, we’re interested in the substantive,” he said. “We’re not interested in cutting a deal on something that has no real relevance to things, just a name, you know?”

Lawmakers also shirked the financial industry by not including a policy rider that would delay a rulemaking effort by the Labor Department that would impose new restrictions on retirement investment advisers. That “fiduciary duty” rule has been fiercely contested by the industry for years, and language delaying it was included in earlier appropriations bills drafted by both the House and Senate.

And finally, the funding bill did nothing to step back a more recent bank setback. A five-year, $305 billion highway bill passed earlier this month by Congress helped cover the cost of the legislation by scrapping billions of dollars banks regularly received from the Federal Reserve. The central bank had been making regular dividend payments to banks that buy member stock for over a century.

But lawmakers discovered this year that there were billions of dollars to help offset costs at the Fed. Banks lost an estimated $6 billion over a decade in the policy tweak, which they were unable to roll back in the omnibus legislation.

Banks are regrouping and gearing up to push those priorities again when lawmakers return in 2016.

“Our economy is still recovering and Congress should enhance economic growth by addressing recent Fed dividend changes in a way that will encourage, not discourage, more lending,” said Tim Pawlenty, president and CEO of the Financial Services Roundtable. 

Tags Dodd–Frank Wall Street Reform and Consumer Protection Act Elizabeth Warren Federal Reserve System

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