A K Street How-To, Courtesy of Wall Street
Lobbyists around Washington have more than a handful of tactics to combat legislative threats to their clients. Some are as basic as meeting with lawmakers to explain their position. Others involve mustering seven-figure efforts that include a full deployment of public relations, consulting, grassroots, and legal pros.
But what happens when an industry's revenues unexpectedly come under fire in a piece of legislation that is likely just months away from the president's desk? The banking industry just laid out the lobbying roadmap.
At issue is a mechanism to help fund the must-pass highway bill. Lawmakers targeted the dividends that the Federal Reserve pays out to banks for holding their cash at the central bank. Currently, the dividend sits at 6 percent. Lawmakers proposed reducing it to 1.5 percent for banks with more than $1 billion in assets—a move that would raise around $17 billion over 10 years to help finance the bill. It would also cut about $1.7 billion each year from the banking industry's revenues. That, banking lobbyists decided, was not acceptable. Here's a look at what happened next:
Step 1: Lay the groundwork
Shortly after the proposal showed up in the Senate as a possible funding mechanism, the industry's most powerful trade groups registered their public opposition in a joint letter.
These groups, which represent a mix of the largest Wall Street banks to the smallest community banks, aren't always on the same page policy-wise, so the joint letter has added meaning. Behind the scenes, the industry's dozens of top tier lobbyists started to engage. There were in-person meetings with lawmakers, side conversations at fundraisers, and regular back-and-forths with Capitol Hill staff in an effort to get the provisions stripped. The crux of the industry's message formed: using the revenues of an entirely unrelated industry to help finance federal infrastructure sets bad precedent. That effort failed, but the opposition was now registered.
“There was just an inherent unfairness to that policy and an inherent unfairness to that precedent,” says Rob Nichols, the president and CEO of the American Bankers Association, one of the leading industry groups that opposed the provision.
Step 2: Doorstep
While banks including Bank of America Corp. and Wells Fargo & Co. would've taken the largest hit under the provision, it's well known on Capitol Hill that it's the smaller banks that make the most potent arguments to lawmakers. They represent their districts and states, are often big players back home and can't be tagged as “Wall Street.” That's why they were deployed, with very specific talking points, to let their representatives know their problems with the provision.
Nichols: “We worked with the states, about 50 state associations, all across the United States, and all of our member banks to inform them of the bad piece of public policy and suggest a rebuttal and a course of action to lean against it.”
Step 3: Secure the lawmaker letter
A primary goal of any lobbying effort is to lock in public support of an influential lawmaker—and then rely on that lawmaker and his or her staff to collect support (and signatures) from colleagues. In this case, the industry got the best kind of support: the bipartisan variety. Michigan Representative Bill Huizenga, a Republican, and Illinois Representative Bill Foster, a Democrat, spearheaded a letter of opposition to House and Senate leaders. The two secured the support of 148 of their colleagues—a very big number for a policy letter.
All the while, industry lobbyists were trading compromise ideas back and forth with receptive congressional staff members. It had been made clear that the provision would never be stripped unless another funding mechanism of an equal or greater number emerged.
Step 4: Spread the word
As the behind the scenes work played out, a more public fight began in (where else?) the opinion pages of Capitol Hill publications. There were op-eds from industry leaders like Camden Fine, the powerful CEO of the Independent Community Bankers of America, and from respected policy minds on opposite sides of the ideological spectrum.
At the same time, the industry reminded lawmakers and staff on a daily basis that none other than Federal Reserve Chair Janet Yellen stated in a July public hearing that the provision “could conceivably have unintended consequences.”
Step 5: Make it official
With all of the groundwork laid, it was time to coalesce around the compromise. That was unveiled Friday night, when Huizenga and Texas Representative Randy Neugebauer officially introduced an amendment that freed the banks from taking the revenue hit. Both Neugebauer, a senior Republican, and Huizenga are subcommittee chairmen on the House Financial Services Committee. Those leadership positions on that committee are no small thing as Republican leaders consider amendments to any bill. Sure enough, the compromise—stripping the dividend language and replacing it with Fed surplus funds—was put into play for consideration by the full House.
Step 6: Take it to the floor
Just a few days later, all the work in the previous three months paid off. The Huizenga-Neugebauer amendment was approved 354-72, a huge vote in favor. The size of the victory even surprised many of the lobbyists who were closest to the fight. And it was a very good sign for the future. The victory in the House wasn't the final word. Now that bill needs to be reconciled with a Senate version. The sizable vote in favor of stripping the dividend language is something House negotiators (and banking industry lobbyists) will be pointing out with regularity during the conference. And if the provision comes up again?
“We will re-engage on this issue by working closely with the state associations and ABA members all across the United States to make sure we can shoot it down,” Nichols says.