A daily look at legal news and the business of law:
Senate's Finance Bill Gets Tougher and Tougher on Banks
When congressional efforts on financial reform began in earnest, many observers viewed the Senate as the place where banks would have the most clout. The general thinking was that the reform bill it passed would be weak relative to the version coming out of the House of Representatives, resulting in a weaker overall bill. But that's not how it looks these days.
As The New York Times explains, a watershed moment came last month when Sen. Blanche Lincoln (D-Ark.) added language that would force banks to choose between trading derivatives and remaining under federal protection, such as participation in the Federal Deposit Insurance Corporation. Being under the government's wing enables banks to borrow at cheap rates. Sen. Lincoln explained that prohibiting derivatives trading for such institutions would ensure that the cheap money was plowed into lending.
Whether that provision will survive the legislative process is unclear. However, by forcing banks to spend so much of their lobbying effort fighting against it, Lincoln's maneuver provides the senators with the cover they need to enact strong versions of other provisions that were previously under heavy assault from the financial industry, such as getting derivatives traded publicly on exchanges. America's five biggest banks have the most to lose from this provision since they dominate the derivatives business. Accordingly, they've unleashed a swarm of lobbyists on Capitol Hill: 130 people backed by $6.1 million in this quarter alone.
Of course, those 130 comprise only the five big banks' platoon. All sorts of financial institutions have been fighting long and hard since reform proposals started moving forward. During the first nine months of 2009, the financial industry spent over $340 million on lobbying against reform. President Obama raised the stakes in January with a series of proposals that the banks found unpalatable, prompting even more lobbying. In April, Obama advisor Lawrence Summers noted that $1 million was being spent by the financial industry on lobbying each congressman, and there were four industry lobbyists per member of Congress. And yet they're losing, because Wall Street has made itself so toxic that the senators -- at least, the Democratic senators -- just aren't very receptive to their requests anymore.
One of the seamier segments of the banking industry is payday lending: Its predatory interest rates and abusive loan terms make it a perennial target of consumer groups. So far, the industry is still facing wide new restrictions under the pending reform bill, and it's pulling out all the stops to try to escape, last week conducting a "Hill Blitz" to lobby Congress. But if even the big players on Wall Street can't get what they want, it's hard to see payday lenders making headway on their agenda.
And in the Business of Law...
So much for old notion of The Paper Chase: California law firm Best, Best & Krieger is ditching paper for pdfs.
Take the first steps to building your portfolio.View Course »