By Jeffrey H. Birnbaum
Monday, November 27, 2006
The organization's acronym, SIFMA, sounds like a terrible skin condition.
But the group, created through the recent merger of associations that represent the sellers of stocks and bonds, is one of Washington's most powerful lobbies.
The Securities Industry and Financial Markets Association, with a budget of $80 million, is the main mouthpiece for the financial services industry, the biggest corporate player in national politics. Only organized labor donates more to candidates for federal offices.
When added together, SIFMA's political action committees gave more than $1 million during the 2006 election season, putting the organization in the top 25 of all PACs. Its combined $8.5 million in spending on federal lobbying last year placed it in the top 30.
The association will need all that and more. It's already at the center of some of the most heated, high-stakes battles on Capitol Hill. It has begun to question the regulatory requirements under the Sarbanes-Oxley Act and wants to extend the temporary, multibillion-dollar tax breaks for profits garnered from stocks and bonds.
To take on such monumental tasks, SIFMA was designed to be large, though not quite as large as it is today. For example, it has two chief executives. (Not exactly the model of corporate efficiency.) The heads of the two groups that merged -- the Securities Industry Association and the Bond Market Association -- are now co-chief executives of the combined organization.
Marc Lackritz of the Securities Industry Association and Micah S. Green of Bond Market Association said in an interview that they are happy with the arrangement. And why wouldn't they be? Headhunters have been trying all year to recruit a "big name" from Wall Street or Capitol Hill to take over SIFMA but couldn't settle on one, industry insiders said. Among the early contenders was apparently soon-to-retire Rep. Michael G. Oxley (R-Ohio), chairman of the House Financial Services Committee.
Instead, SIFMA is sticking with Lackritz and Green, a duo that may not have much star power but who have worked together well for two decades. "We finish each other's sentences," Lackritz said.
Lackritz hired Green as a lobbyist in 1987 when Lackritz headed the Washington office of the Public Securities Association, a predecessor of the Bond Market Association. When Lackritz took over the Washington office of the Securities Industry Association in 1990, Green took his job at Public Securities.
Lackritz went on to become chief executive of the Securities Industry Association in 1992, and Green became chief executive of the Bond Market Association in 2001. Clearly there is a pattern here. No one would be surprised if Green, 49, is named SIFMA's sole chief executive when Lackritz, 60, retires.
Then again, keeping up with changing times is what the SIFMA merger is all about. Recent federal laws and market forces have all but erased the old distinctions between the companies that deal in stocks and those that deal in bonds. Lots of companies now sell both instruments thanks to serial consolidations on Wall Street. By the time SIFMA was created this year, 80 major companies, including Citigroup and Merrill Lynch, belonged to both the Securities Industry Association and the Bond Market Association.
That didn't make much economic sense, of course, so negotiations were initiated to blend the two organizations. Or to be more precise, to reblend them.
The Securities Industry Association was formed in 1972 after a merger between Investment Bankers Association of America and the Association of Stock Exchange Firms. The organization that later became the Bond Market Association split off from the Securities Industry Association four years later.
Lackritz and Green said talks about reuniting the two entities started as early as the 1980s. "You saw the process beginning to chip away at the distinctions between us," Green said.
Merger negotiations were reattempted in the late 1990s and again 3 1/2 years ago. They finally clicked this year. The main driver behind the effort, financial services denizens said, was Goldman Sachs, with an assist from fellow investment banking heavyweight Morgan Stanley. Both companies wanted to wield more influence over the groups and saw the combination as a way to make that happen.
Advocates for the merger wanted to increase their influence in Washington. They wanted to establish "a large, exciting and hopefully powerful organization," Green said. They also intend to save some dues money (by paying just one organization rather than two).
By all accounts, their ambition to accumulate more clout has begun to take hold. "The two of them have been very effective working together representing the securities industry, and I think they'll be even more effective now," said Edward L. Yingling, president of the American Bankers Association.
"By forming this new organization, this sector of the financial services industry will speak with a single, shared voice, and their influence in policymaking can only grow," agreed Robert S. Nichols, president of the Financial Services Forum, a group of 22 chief executives of the largest financial services companies.
The cost savings haven't happened yet. Lackritz and Green, who are both million-dollar executives, are keeping their jobs. They also have not yet shrunk the two staffs (which now total 250 people) or begun to consolidate office space. This will happen eventually, the chief executives said, and is a considerable source of stress for them and their employees. Trade reports indicate that the combined organization will produce savings of $14 million or more a year.
SIFMA has offices in Washington, New York, London and Hong Kong. Its members are more than 650 securities firms, banks and asset managers. And they have a lot of scratch. Last year, the securities industry raised a record $5.8 trillion of debt and equity capital in the United States and $11.4 trillion around the world.
Although stocks and bonds are very different instruments -- one tends to go up when the other goes down -- the companies that underwrite or sell them rarely diverge on matters of public policy. SIFMA's goals are to expand markets generally, to foster the development of new financial instruments and to cut costs for the industry, partly through regulatory relief.
None of that will be easy. But with a new high-octane lobby in Washington behind it, the industry clearly will have a better shot.
"The merger simplifies things and simple is always better," said Steve Bartlett, chief executive of the Financial Services Roundtable, yet another of the dozen or so financial-services lobbying groups. "It presents an opportunity for the companies to develop stronger and more coherent policy positions and articulate them with one voice."Lobbyists' Holiday Cheer
It's that time of year again. Please e-mail examples of pro bono lobbying that you've done or that you know about for a special holiday column. Send examples early and often, and no later than mid-December, please. Thanks and cheers!