WASHINGTON (Reuters) - With financial reform heading for a final Senate vote in the coming days, Wall Street lobbyists are already shifting their focus to the next stage of the battle.
Lobbyists say the election-year atmosphere now dominating Capitol Hill has allowed the Senate to attach increasingly radical amendments to its version of the bill.
But the financial industry still hopes its hired guns can exploit key differences in the Senate and House versions of the legislation to water down provisions threatening to squeeze Wall Street profits.
In recent days, the Senate has delivered a series of blows to lobbyist efforts and is looking increasingly likely to adopt some form of the Volcker rule, which banks oppose because it could prevent them from pursuing lucrative, even if risky, trades on their own accounts.
“The chances of it getting fully removed are probably down to zero by now,” said one lobbyist who spoke on condition of anonymity because of the delicacy of Senate negotiations.
Wall Street and other corporate interests are also likely to see new unwelcome Senate restrictions on credit cards and financial derivatives, even if the most stringent language demanding that banks spin off their swap desks is ultimately cast aside.
All that is prompting Wall Street’s hired lobbyist guns to target how best to navigate an expected debate between Senate and House of Representatives members working to reconcile a Senate bill with the reform measure that passed the House last year. That would happen in a House-Senate conference committee.
“We’re about to move from the big picture to the incremental,” said Ethan Siegel, an analyst with the Washington Exchange research group.
“The conference committee is always a great place for corporate interests to try to massage a word here and there in order to provide relief,” he said.
Wall Street hopes to avoid the prospect of harsher Senate derivatives restrictions by pushing for adoption of softer House language that allows more end-users of the arcane financial products to avoid scrutiny.
Financial lobbyists can also be expected to protect banks and credit card companies from a Democratic Senate proposal that could allow states to limit interest rates on credit cards.
Analysts say House Financial Services Committee Chairman Barney Frank, normally a tough critic of Wall Street, may have already helped banks on that front by postponing House action on a similar measure until next year.
At the same time, lobbyists would likely press to retain the Senate’s rejection of an industry-financed multibillion-dollar liquidation fund for troubled banks in order to kill a similar provision in the House.
“I see the House adopting a lot of what the Senate puts forward,” said an attorney with a lobby firm that has represented Wall Street.
“Lobbyists will attempt some changes. But they’ll probably be pushing to keep the Senate language instead of the House language,” she said.
But not even final enactment of legislation and President Barack Obama’s signature are likely to mark the end of the road for Wall Street’s lobbying force, which sees post-passage rule writing as a way to contain new powers for U.S. agencies.
Some lobbyists are beginning to forecast what the economic climate might look like with regulators such as the Federal Reserve and Securities Exchange Commission exercising the enhanced authority contained in the Senate legislation.
Peter Wallison, analyst at the American Enterprise Institute, warned that new Fed powers over consumer protection and non-bank financial institutions envisioned in the Senate language could become particularly difficult for businesses.
“The Fed ends up controlling, in a very real way, about one-sixth of the financial system,” Wallison said. “And that’s a problem because this agency is independent of Congress and the executive branch. So who, ultimately, has control?”
Reporting by David Morgan; Editing by Steve Orlofsky