Wall St woos Washington at Democratic convention

By Kevin Drawbaugh - Analysis

DENVER (Reuters) - Away from the podium and platform rhetoric, lobbyists and politicians this week at the Democratic convention were at work shaping the future relationship of Washington and Wall Street.

At receptions and parties in Denver's busy clubs, both big banks and financial firms hosted Capitol Hill decision makers to try to influence a reform effort expected to gain momentum next year on how the government oversees high finance.

The Denver lobbying scene -- scheduled for a repeat at the Republican convention next week in St. Paul, Minnesota -- highlighted how businesses today use political conventions to build relationships and curry favor.

"There is a hugely beneficial extortion system going on here. The party needs these companies to sponsor these events to contribute to the festive atmosphere ... and the companies can't afford to say no since they're looking at big issues coming up against them next year," said Sheila Krumholz, executive director of the Center for Responsive Politics, a Washington-based campaign finance and influence watchdog.

"It is an opportunity for them to build relationships, or just to confirm good relationships with members of Congress."

Bankers, brokers and others in finance fear what Congress and the next administration -- whether Democrat Barack Obama's or Republican John McCain's -- will do in reaction to the deepest U.S. housing slump since the Great Depression and credit market turmoil.

"A tidal wave is coming," said David Sampson, president of the Property Casualty Insurers Association of America, a major industry group that represents insurance companies.

Like other chiefs of industry associations, Sampson said he met with lawmakers "to help position the industry to not be swept along on that tidal wave."

Segments of the financial system likely to face challenges in 2009 include investment banks, hedge funds, private equity firms, mortgage servicers, credit card companies, student loan firms, credit rating firms and possibly insurers.

"No matter who gets elected, I think we're going to have some moderate and very useful and very important reform," said Thomas Donohue, president of the U.S. Chamber of Commerce, the nation's largest business lobbying group, at a press briefing.

EASY ACCESS

Lobbying occurs day and night in Washington, but conventions offer easy access to important people in a politically super-charged atmosphere.

Whether throwing a convention party and inviting lawmakers makes an impact on policy is debatable. Some good-government activists say corporations do advance their agenda this way.

Former Clinton administration Commerce Secretary Bill Daly questioned that premise, however. "I don't think there's anybody who's serious about life who would think that buying somebody a hot dog or a Coke or a beer is going to somehow have them owing the future to you. That's ridiculous," he said.

Corporate events at conventions have to follow ethics rules, including some adopted last year. To comply, many groups promote events as being focused on worthy causes.