Off Wall Street, Worries Over Financial Bill Abound
Mars, the maker of M&M’s and Snickers, wants to make sure it can continue dabbling in the derivatives market to protect the price of sugar and chocolate for its candies.
Harley-Davidson is worried that its dealer-financed loans to bikers will fall victim to new federal financing regulations. And eBay is concerned about possible restrictions on PayPal, a subsidiary, in moving money in the Internet marketplace.
Far afield from Wall Street, the intense debate over the overhaul of financial regulations by Congress is attracting some unlikely but powerful players. More than 130 companies from the manufacturing, retail and service sectors have retained high-powered lobbyists to weigh in on, and often oppose, the regulatory system being debated this week in Washington, according to an analysis of lobbying records by The New York Times.
The companies bear little resemblance to Goldman Sachs and the other Wall Street financial giants that have become the main targets of the legislation. The lobbying push by these other industries shows just how broadly the legislation could affect businesses.
It also illustrates what some critics say is legislation so loosely drawn that it may inadvertently cover a variety of companies that are involved in lending or moving money, even if they operate far from Wall Street and had little to do with the financial crisis. Some industries, like payday lenders, fear that the financial overhaul may be a backdoor way for Congress to regulate them, something they have successfully fought for years.
Steve Adamske, communications director of the House Financial Services Committee, acknowledges that some House legislation would regulate payday lenders, which make short-term, high-interest loans to people who promise to pay in full with their next check.
“There is a fair amount of caution any time the federal government proposes new oversight,” said Christopher Colwell, a lobbyist for Check ’n Go, a payday lender. “We are trying to determine what impacts these proposals will have on business, intentionally or unintentionally.”
While the legislation’s backers in Congress insist that most nonfinancial companies have little to worry about, many of these businesses say they are deeply concerned that the sweeping provisions in the 1,400-page Senate bill, particularly the regulation of the derivatives market, the creation of a consumer protection board and rules on corporate government, could draw them in and affect their bottom lines.
For instance, auto dealers from 35 states are converging on their senators’ offices this week to seek an exemption from legislation that would treat them as financial lending institutions subject to new federal regulations.
“I don’t think the level of concern could be any higher,” David Hyatt, vice president for the National Automobile Dealers Association, said Monday. “There’s a sense of urgency. And we’ve got to raise awareness about why this doesn’t make sense and why it’s anticonsumer.”
Like the automobile industry, many financial sectors unrelated to Wall Street are seeking exemptions — or “carve-outs” as their Washington lobbyists call them — to shield themselves from the impact of the new regulations. Unless a bipartisan deal is reached first, those exemptions are likely to be considered as amendments once the legislation reaches the Senate floor for a final vote, probably this week.
As Mr. Colwell, the Check ’n Go lobbyist, suggested, much of the concern from the private sector has focused on what the legislation could do, and disagreement is wide over what it actually would do.
Senator Christopher J. Dodd, the Connecticut Democrat who is chairman of the Banking Committee, said Sunday on “Meet the Press” on NBC that it was a “red herring” for opponents to suggest that the legislation would harm ordinary businesses and reduce the number of jobs.
Most Congressional Democrats and administration officials would not comment on the record on Monday on the concerns of nonfinancial companies, partly because they said many parts of the legislative proposals were still under discussion in an effort to garner Republican support in the Senate.
“The bill doesn’t target those companies,” said Kirstin Brost, a spokeswoman for the Senate financial services committee. “It targets the financial companies, and it changes things for financial companies.”
She said that opponents of the legislation from the Chamber of Commerce and elsewhere have sought to stir concerns and “gin up everybody” over what are often unfounded concerns about wider implications for businesses across the country.
Legitimate or not, those concerns have taken hold across a wide swath of private companies, interviews show. From the Chamber of Commerce down to retail outlets and small manufacturers, the businesses have adopted a similar rallying cry: we didn’t get the country into this mess, and we should not be penalized for it.
Typical was a missive last week from the head of USAA, the military-based insurance company, imploring its customers to contact their senators with their concerns about the legislation.
“Rarely in our 87-year history have we turned to USAA members to weigh in with elected representatives on an issue of great importance,” wrote Joe Robles Jr., a retired general who is president and chief executive of USAA. “But, we are now.” He said the inclusion in the Senate bill of the Volcker Rule, proposed by the former Federal Reserve chief Paul A. Volcker, prohibiting financial institutions from engaging in proprietary trading, would unfairly harm the company’s finances. “USAA is not like the banks and other companies that helped bring down our economy,” he wrote. “We do not engage in the harmful practices this legislation seeks to resolve.”
Besides the Volcker Rule, nonfinancial companies say they are particularly concerned about the creation of the consumer protection board, which they contend could subject many businesses to increased federal regulations.
Some colleges and universities, for instance, say that the broad definition of financial companies would mean new regulations and, ultimately, greater costs on some types of student loans. The National Association of Independent Colleges and Universities, in an update on its Web site, warned of the potential financial impact.
“We just don’t know what all the implications are or how far, if any, the bills would go into institutions operations if they are defined that way,” said Maureen Budetti, director of student aid policy for the association. “We don’t know anything about how a bank is regulated and wouldn’t want to be grouped in with them.”
Generating almost as much opposition in the private sector is the proposed regulation of derivatives, which are used by many manufacturers and producers, in areas including natural gas, food products and agriculture, to hedge their investments against losses. Business lobbyists are seeking to exempt more “end users,” manufacturers and others who invest in derivatives on assets they own, as part of the final Senate package so they will not have to post large amounts of collateral on their investments.
Some publicly traded companies are concerned about a section of the Senate bill that would allow “proxy access” to corporate boards and, critics say, would make it easier for unions, hostile investors and others to gain seats on a company’s board.
Thomas Quaadman, a senior official with the United States Chamber of Commerce, which has led efforts to scale back the legislation, said, “We are engaged in a full-court press in terms of lobbying and education on Capitol Hill” to make lawmakers aware of what the chamber sees as the dangers of the legislation.
“If you take a look at the overall bill, there are significant impacts on nonfinancial companies,” he said. “We agree there needs to be increased consumer protection, but we think Congress needs to go about a different way.”
On the regulation of derivatives, for instance, he said that “end user” manufacturers, who he said make up about 10 percent of the derivatives market, would face increased costs for investing in commodities essential to their products, whether it is chocolate for a candy maker or hops and aluminum for a brewer. “And those costs,” he said, “are going to be passed on to consumers.”