Finance Industry Falls Short in Wish List for U.S. Spending Billby
Wall Street sought measures on broker rules, bank oversight
Senator Warren and White House pushed back on lender lobbying
Financial industry lobbyists were stymied in their efforts to slip measures helping banks, insurers and private-equity firms into the $1.1 trillion bill funding the U.S. government.
The failures are a stark contrast to 2014, when Wall Street successfully got a provision in the year-end spending legislation that watered down a requirement that banks move swaps trading out of entities that benefit from federal backstops.
This time, the White House and Wall Street critics, such as U.S. Senator Elizabeth Warren, held the line. Warren said she and other Democrats were ready for any surprises in the spending legislation, while President Barack Obama repeatedly warned this year that he would veto any changes to the 2010 Dodd-Frank Act, the landmark financial regulation bill that toughened oversight of banks.
Here are some of the key wish list items where Wall Street came up short:
Financial firms couldn’t derail rules championed by the White House that would have put tighter restrictions on brokers who advise Americans on saving for retirement.
A provision that had some bipartisan support and would have forced the Obama administration to give brokers, insurers and other companies that sell investment products more time to weigh in on the new rule was excluded from the spending bill.
The proposal could have complicated the administration’s goal of completing the rules and making them enforceable before Obama leaves office in January 2017.
An earlier version of the bill had also tried to withhold funding for the effort underway at the Labor Department, which oversees rules for U.S. retirement plans. If the Labor Department moves forward, brokers will now have to act in their customers’ best interests rather than just selling retirement products that meet an investors’ goals or risk tolerance.
Threshold for Banks Deemed Systemically Important
Senate Banking Committee Chairman Richard Shelby, an Alabama Republican, proposed legislation earlier this year boosting to $500 billion from $50 billion the asset threshold for banks to be regarded as systemically important financial institutions, or SIFIs.
Opponents including U.S. Treasury Secretary Jacob J. Lew and Warren fought back, cautioning against rolling back core protections that they said had made the financial system safer. Under Dodd-Frank, banks with more than $50 billion of assets receive “enhanced supervision” that includes capital, leverage and liquidity requirements, and annual stress tests. If the threshold had been raised, banks that would have received less oversight include SunTrust Banks Inc. and BB&T Corp.
Investor Protections for Bond Holders
Private-equity owned companies Caesars Entertainment Corp. and Education Management Corp. were urging lawmakers to change a Depression-era law that puts limits on what firms can do to modify their debt without bond holders being able to demand payment. The proposed revisions were important to Caesars, which is fending off investor lawsuits.
The highway bill passed earlier this month took some of the money that banks receive in dividends from the Federal Reserve to help pay for fixing the U.S.’s deteriorating roads.
Wall Street was furious over the precedent of having financial firms pay for infrastructure projects and lobbied to get a provision in the spending bill that would have given banks more flexibility to sell their shares in the Fed’s regional banks. Lawmakers rejected the provision.