Bank overhaul battle pays off for Republicans

Wall Street donors shift party’s way

By Donovan Slack
Globe Staff / May 15, 2011

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WASHINGTON — Republicans fought a hard but ultimately losing battle to block the Wall Street regulatory overhaul that Barney Frank and his fellow Democrats guided through Congress last year. But now they are turning the legislation known as the Dodd-Frank law to fullest advantage.

The GOP is winning a larger share of campaign money contributed by banks and other Wall Street interests who want to roll back elements of the stricter rules.

Mitt Romney is attracting heavy support for his presumptive presidential campaign from executives who occupy office towers in downtown New York, while Republicans in Congress also are soaking up large donations as they push a flurry of bills that would unravel a new consumer protection agency, scale back derivatives regulation, and more.

Frank says the financial sector is doing everything it can to escape stricter regulation.

“Wall Street’s very grumbly, very angry,’’ he said in an interview. “They want to return to the good old days.’’

An example of the trend is represented in the campaign reports of the man who succeeded Frank as chairman of the Financial Services Committee when Republicans took over the House this year, Spencer Bachus of Alabama.

With $122,000 from financial industry political action committees during the first quarter, as tallied by a nonpartisan, nonprofit organization called the Sunlight Foundation, Bachus more than doubled what Frank took in from those sources in the first quarter of the last Congress, in 2009.

In addition to Bachus, five individual GOP members of the committee who are sponsoring bills to scale back financial regulations received an average $80,000 each from financial industry PACs in this year’s first three months, according to the Sunlight Foundation analysis.

A spokesman for Bachus did not respond to messages seeking comment. Joanna Burgos, spokeswoman for the National Republican Campaign Committee, said the party’s haul from financial sector contributors reflects a backlash against regulations imposed by Democrats.

Political analysts say the sheer scope of the financial regulatory overhaul — reaching into many aspects of banking, lending, commodities, and securities exchanges — could portend continued contribution growth for Republicans as the 2012 election looms.

“I think it’s a very potent issue,’’ said Jennifer Duffy, senior analyst with the nonpartisan Cook Political Report. “It might be a gift that keeps on giving.’’

The Financial Services Roundtable, an industry trade group, declined to discuss the campaign contributions, but said the industry, in general, is concerned about some of the provisions in the regulatory overhaul. The industry fought vigorously against the law last year, spending hundreds of millions of dollars on more than 2,500 lobbyists to challenge it.

Scott Talbott, spokesman for the trade group, said the industry isn’t seeking wholesale repeal of Dodd-Frank but some changes are needed.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law last July, is the most sweeping overhaul of financial regulations in decades and was a response to the largest US economic crisis since the Depression.

It placed new restrictions on derivatives trading, whose practices were widely seen as contributing to the virtual collapse of credit markets that helped cause the crisis. It also created the new consumer protection agency with the power to regulate how loans and other financial products are marketed and sold to the public, an effort to forestall a repeat of the massive foreclosure crisis.

Among the GOP initiatives currently under consideration are measures that would exempt large swaths of the $600 trillion derivatives market from new regulations designed to rein in risky practices. Republicans also want to roll back certain measures that are intended to introduce more transparency, accountability, and oversight of financial transactions.

Also very high on the GOP target list: restructuring the consumer protection agency by replacing its single-director position with a panel and making the agency’s budget subject to congressional approval. Currently, the agency — which is supposed to begin operating in July — is funded through the Federal Reserve.

To be sure, Democrats from President Obama on down still command heavy contributions from Wall Street. New York Senator Charles E. Schumer leads all senators in campaign support from the financial industry. Schumer and three other Democrats ranked ahead of Republican Scott Brown of Massachusetts, who was the top Republican recipient of financial industry support in the Senate in the 2010 election cycle, according to the Center for Responsive Politics, a nonprofit, nonpartisan organization that analyzes publicly available campaign data. Brown played a pivotal role last year in final passage of Dodd-Frank.

But the shift in political focus overall in donations to Congress has been clear. The industry’s contributions went from a 52-48 percent split in favor of Democrats in 2007-2008 to a 54-46 percent split in favor of the GOP in 2009-2010, according to data compiled by the center.

Shifts for some individual firms were dramatic. Political committees and executives connected to Goldman Sachs, for example, went from giving 25 percent of their contributions to Republicans in the 2008 election cycle to giving them 60 percent during the 2010 cycle. Goldman Sachs declined to comment.

Romney, the GOP presidential contender with the most money and broadest organization, has not provided any indication this year whether he supports rolling back elements of the Dodd-Frank law. Last year, he criticized Obama, saying the president was demonizing the financial industry “as if Wall Street greed is something new.’’

“It’s been there for a long time, and that is not the reason we had an economic meltdown,’’ Romney said.

The former Bain Capital executive has long garnered support from business interests. And despite his lack of a specific position on Dodd-Frank, Wall Street appears to be betting Romney would support a less restrictive agenda.

The former Massachusetts governor took well-publicized fund-raising swings through New York in recent weeks. The website Politico reported that Romney’s take from a New York trip last week, which included a stop at a University Club event heavily attended by banking executives, was about $1 million.

Romney spokeswoman Andrea Saul declined to answer questions about his position on the financial regulatory overhaul. Of his industry fund-raising, she said, “President Obama has raised more money than anyone [else] from the financial services industry.’’

Campaign finance specialists say the GOP fund-raising boom from the financial industry this year builds on a trend that started last year, when it became clear that Dodd-Frank would pass.

Frank said he worries that repeated Republican efforts could force piecemeal concessions from Democrats. As part of a budget deal with Republicans last month, Obama agreed to allow private-sector auditors and the investigative arm of Congress, the Government Accountability Office, to audit the impact of the consumer agency’s rules.

Earlier this month, 44 GOP senators sent another demand to the president, saying they would not confirm any director for the agency unless it is restructured and its powers limited.

Keeping the public’s attention on the fallout of the financial crisis could be difficult as the economy improves and people move on to other issues, Frank added.

“I’ve heard of people trying to take advantage of mass hysteria,’’ he said. The GOP is “trying to take advantage of mass attention deficit disorder.’’

Donovan Slack can be reached at Follow her on Twitter @DonovanSlack.