WASHINGTON — As Jefferson County, Ala., teetered on the edge of bankruptcy for much of this year, a financial industry group plowed more than $4 million into lobbying Washington lawmakers and regulators to dilute provisions of the reform law enacted last year to curb the kinds of abuses that helped trigger the municipality’s fiscal distress.

The Securities Industry and Financial Markets Association spent $3.96 million on lobbying during the first three quarters of 2011, slightly outpacing its efforts for the same periods in 2008 and 2009, according to reports filed with the clerk of the U.S. House that contain information for both houses of Congress.

In the third quarter alone, SIFMA poured $1.3 million, its highest third-quarter tally since 2008, into lobbying by outside firms and an in-house team of 14 lobbyists.

Overall, the industry group is on track to spend roughly $5 million on lobbying this year — as it has every year since 2008. SIFMA spends far more on lobbying than on political contributions, which it spreads around to key lawmakers.

The group has already distributed $185,000 in campaign contributions to lawmakers through the end of October, according to disclosure reports.

“Five million-plus is definitely a significant amount of money,” said Kenneth Gross, a partner at Skadden, Arps, Slate, Meagher & Flom LLP in Washington. And 14 lobbyists “is a very significant in-house lobbying shop,” he added.

SIFMA’s lobbying push coincides with regulators’ efforts to write rules on derivatives and for swap and other advisors who counsel state and local governments on muni transactions.

Democratic lawmakers and officials have criticized Republican lawmakers for seeking to dismantle the Dodd-Frank Wall Street Reform and Consumer Protection Act, or at least slow the pace of rulemaking until after the 2012 election, when Republicans hope to capture control of the Senate and the White House.

Disclosure reports provide grist for some of their concerns.

“We knew when Dodd-Frank was signed into law that the big battles were still to come because every important issue would ultimately be decided in the rulemaking process,” said Barbara Roper, director of investor protection for the Consumer Federation of America.

“The regulations are being written in an environment that is incredibly antagonistic to regulation,” she said.

SIFMA’s recent spending, which encompasses Dodd-Frank and other financial and legislative issues, is also notable because many lobbying stalwarts slashed third-quarter expenditures amid a pro-business agenda among Republicans.

Nineteen of the nation’s 50 biggest spenders for lobbyists, including perennials such as the U.S. Chamber of Commerce, General Electric, AARP, Boeing Co. and Verizon Communications, trimmed third-quarter lobbying budgets in 2011, according to a recent report by Politico.

SIFMA, through a spokesman, declined to comment on its lobbying and political action committee contributions.

But since Republicans regained the House in January, SIFMA’s Washington lobbyists, both outside firms and the in-house team, have focused on Dodd-Frank, including a range of issues that would affect the muni market, disclosure reports show.

Federal disclosure and campaign reports filed after Dodd-Frank’s enactment in July 2010 illustrate the breadth of SIFMA’s efforts.

In the third quarter, for example, nine of SIFMA’s registered in-house lobbyists, including Tim Ryan, president and chief executive officer, Ken Bentsen, executive vice president for public policy and advocacy, and Michael Decker, managing director and co-head of the municipal securities division, reported lobbying activities on “financial institutions, investments, and sec[urities]” in the House, the Senate, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, disclosure reports show.

In the muni bond arena, the disclosure reports show SIFMA generally lobbied on muni advisor regulation, accounting standards for municipalities, bankruptcy reform for municipalities, and funding for the Governmental Accounting Standards Board.

More specifically, SIFMA lobbied about a series of bills that would amend or curtail Dodd-Frank, disclosure reports show. And several lawmakers who introduced some of these bills also received contributions from SIFMA’s political action committee, SIFMA-PAC.

For example, in its third-quarter disclosure report, SIFMA reported lobbying on H.R. 2827, a bill introduced in August by Rep. Robert Dold, R-Ill., a freshman who sits on the House Financial Services Committee.

That bill would eliminate a key Dodd-Frank requirement subjecting muni advisors to a federal fiduciary duty that would require them to put their clients’ interests ahead of their own.

The legislation also would provide that certain already-regulated parties, including broker-dealers and swap dealers, are not municipal advisors under Dodd-Frank.

Dold received a $1,000 contribution from SIFMA-PAC in May, according to Federal Election Commission reports.

Five of the 10 freshman Republicans on the House Financial Services Committee have received contributions from SIFMA-PAC so far this year, FEC reports show.

One of the other freshman committee members who accepted a $1,000 SIFMA-PAC contribution this year, Rep. Steve Stivers of Ohio, also introduced a bill that would modify certain Dodd-Frank provisions.

In August, Stivers and two Democrats co-sponsored H.R. 2779, a bill that would exempt inter-affiliate swaps from certain Dodd-Frank reporting requirements for security-based swaps.

Under Dodd-Frank, the CFTC regulates most swaps, including most muni-based swaps, and the SEC regulates security-based swaps.

While SIFMA-PAC’s contributions to Dold and Stivers fall well within the $5,000 maximum a PAC may contribute to a candidate per election — primary or general — under federal election laws, they serve as a lens into some of the PAC’s activities, and how the committee evaluates potential recipients.

The $185,000 that the SIFMA-PAC funneled to federal political candidates through October of this year is only about two-thirds of the $286,000 in federal campaign contributions the committee logged last year, which coincided with the 2010 elections, according to federal election reports.

Collectively, SIFMA-PAC’s donations amount to a fraction of its lobbying budget — roughly 4.7% of its lobbying expenses this year and 5% of them last year.

Such a ratio is not surprising, Gross said, given restrictions on how PACs raise and distribute money to candidates, including the $5,000-per-candidate ceiling on donations per election.

“Once they get the money in the door, there are limits,” Gross said.

Lobbying expenditures, by contrast, do not fall under similar limitations governing how such funding is raised and spent, Gross noted. As a result, many industry groups with government relations operations in Washington use PAC contributions as a supplement to their efforts, while lobbying serves as more of a driving factor, he said.

“You’ll see that in almost every operation,” he said.

Still, SIFMA-PAC “has proven to be an effective mechanism to advancing the interests of the financial services industry on Capitol Hill,” the group boasted on its website.

PAC money “goes toward educating policymakers, promoting our advocacy efforts, and supporting those members of Congress who understand the importance of a healthy, vigorous, and robust financial services industry,” SIFMA said on its website.

“Worthy candidates” are selected based on “strict review” of the following criteria: alignment with SIFMA’s legislative agenda and priorities; platform and voting records on issues important to the industry; leadership on key committees important to SIFMA’s member firms; financial need; and potential for election success, according to the website.

SIFMA’s third-quarter lobbying also spanned efforts to delay Dodd-Frank derivatives rulemaking, according to disclosure reports.

Specifically, SIFMA lobbied for H.R. 1573, a bill that would grant the SEC and the CFTC an 18-month reprieve — until as late as December 2012 — to issue Dodd-Frank derivatives rules, disclosure reports show.

The legislation also would require the SEC and the CFTC, before issuing final regulations, to hold hearings about the compliance burdens of any proposed rules and weigh this testimony in their cost-benefit analyses.

Four Republican congressmen introduced the bill in April — Rep. Spencer Bachus of Alabama, chairman of the House Financial Services Committee; Rep. Frank Lucas of Oklahoma, chairman of the House Agriculture Committee; Rep. K. Michael Conaway of Texas, chairman of the House Agriculture subcommittee on general farm commodities and risk management; and Rep. Scott Garrett of New Jersey, chairman of the House Financial Services capital markets subcommittee.

SIFMA-PAC made campaign contributions to each of the bill’s sponsors this year, FEC reports show, including $6,500 to Lucas, spread out over five contributions between February and October; $5,000 to Bachus in June; $5,000 to Garrett, spread out in four donations between February and July; and $3,000 to Conaway, spaced across two donations in May and October.

SIFMA-PAC has given contributions to Democrats this year as well, including a total of $15,000 to eight of the 27 Democrats on the House Financial Services Committee. Rep. Barney Frank, the former committee chairman who is a namesake of the financial reform law, received $5,000. The others, including Reps. Gary Ackerman, Gregory Meeks and Carolyn McCarthy, all of New York, received $1,000 or $2,000 apiece.

Fourteen, or 41%, of the 34 Republicans on the Financial Services Committee and 18, or 67%, of the Democrats did not receive any SIFMA-PAC contributions this year, including Rep. Maxine Waters of California, the committee’s second most senior Democrat, according to the FEC reports.

SIFMA-PAC has contributed to members of both parties who sit on the Senate Banking Committee.

In the Senate, where Democrats are in the majority, the PAC has steered a total of $5,500 to two of the committee’s 12 Democrats — $1,000 to Sen. Kay Hagan of North Carolina and $4,500 to Sen. John Tester of Montana.

Meanwhile, the PAC has made only a $1,000 contribution to of one of the committee’s 10 Republicans, Sen. Jerry Moran of Kansas. The ranking Republican, Sen. Richard Shelby of Alabama, has not reported any SIFMA-PAC contributions this year.

Separately, SIFMA’s outside lobbyists, who received roughly $835,000 from the group in the first three quarters of 2011, tackled a host of Dodd-Frank issues, disclosure reports show.

While the topics they broached with lawmakers are not muni specific, at least based on their generic disclosures, the issues they tackled fall within a broader focus on Dodd-Frank.

Those issues include “financial services regulatory reform,” issues related to implementing Title VII of Dodd-Frank, which regulates swaps, “Dodd-Frank implementation,” and “financial regulatory reform legislation.”

Disclosure reports for outside lobbyists, like those filed by SIFMA, generally provide single-phrase or generic summaries of lobbying issues and do not reveal the amount of time devoted to lobbying on a particular subject by a particular person. Nor do they indicate when the activities occurred, other than within the quarterly reporting period.

But to a consumer advocate, lobbying and campaign contributions by SIFMA and other industry groups cause concern, especially with so many Dodd-Frank rules unwritten.

“One of the things that money buys is the ability to get members of Congress to pay attention to your concerns,” Roper said. “Even if the bills don’t pass, it intimidates the regulators.”

SIFMA is a trade association, based in New York and Washington, that represents hundreds of securities firms, banks, and asset managers, according to its website.

The group’s mission is “to support a strong financial industry, investor opportunity, capital formation, job creation, and economic growth, while building trust and confidence in the financial markets,” the website says.

Joan Quigley writes for The Bond Buyer.


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