Small players best Wall St. in shaping overhaul bill

By Ylan Q. Mui and Brady Dennis
Washington Post Staff Writer
Thursday, June 10, 2010

John Blum knows there's more money at stake for the big banks in the heated debate over the financial overhaul bill than for his relatively tiny 200,000-member credit union in Virginia Beach.

But on Wednesday, Blum joined forces with some of the country's smallest financial institutions to protest a "swipe fee" amendment for credit and debit cards that they called discriminatory, arbitrary and anti-consumer. Credit union members have submitted 375,000 e-mails, letters and phone calls over the past two weeks, and about a thousand credit union executives are swarming Capitol Hill this week in hopes of cutting it from the final version of the bill.

"I have a very small piece" of the pie, said Blum, vice president of operations for Chartway Federal Credit Union. "That doesn't mean I'm not going to fight."

On Thursday, lawmakers will begin the process of reconciling the versions of the bill passed by the House and Senate. House Speaker Nancy Pelosi late Tuesday appointed 10 Democrats, all members of the Financial Services Committee, to serve as conferees. Republicans appointed six of their members from the same committee. In addition, lawmakers from a handful of other committees, such as agriculture, judiciary and small business, will participate as conferees on specific portions of the legislation over which their committees have jurisdiction.

Although President Obama has repeatedly called out Wall Street for trying to defeat or scale back far-reaching new financial rules, the reality is more complicated. For all of Wall Street's money and power, it has been a different army of lobbyists that has proven most effective over the past year in shaping the financial overhaul legislation on Capitol Hill. Again and again, big banks have been outpaced by small-town interests, proving that even when it comes to overhauling financial regulation, politics really is local.

Community bankers, auto dealers and other Main Street businesses have won exemptions from proposed new regulations by repeating a mantra not available to big Wall Street firms: We didn't cause the crisis. That was one reason lobbyists for community banks were able to persuade lawmakers to excuse institutions with less than $10 billion in assets from oversight by a new regulator designed to protect consumers from abusive or deceptive lending practices. The exemption covers about 98 percent of the banking industry.

"The major influence has been legitimate grass-roots networks -- credit unions, auto dealers," said Rep. Barney Frank (D-Mass.). "They are the kinds of operations that have members in every district. People who get sponsored by big institutions have had very little impact."

The White House has marked the Office of Thrift Supervision for the chopping block in the overhaul bill for lax regulation of several large financial institutions that collapsed during the crisis. But Frank blocked the administration's attempt to do away with thrift charters altogether after intense lobbying from the small savings and loans in his home state.

That is part of the little guys' advantage: They are everywhere. Community banks, for example, are in every congressional district in every corner of the United States. Their top executives often are among the most influential and deep-pocketed people in town, frequently contributing to politicians' earliest local campaigns.

Auto dealers made headway by launching a grass-roots campaign to call members of Congress from every state and plead for their own exception from oversight by the new consumer regulator. The House granted their request, despite opposition from the Obama administration. The Senate version, however, does not exempt auto dealers from new consumer rules, leaving the conference to reconcile the matter.

The amendment by Sen. Richard J. Durbin (D-Ill.) to limit the swipe, or interchange, fees charged to merchants for every debit or credit card purchase includes last-minute, handwritten changes that would prohibit merchants from discouraging use of cards from credit unions and small banks. It also would exempt financial institutions with assets of less than $10 billion from any new interchange regulations; originally, the cap was set at $1 billion.

But credit unions and community banks say that isn't enough in this case, arguing that they will be indirectly affected by any government efforts to curtail the lucrative fees. And they have not been shy in letting lawmakers know.

"We're really trying to ramp up the noise this week," said Michele Johnson, director of legislative affairs for the Credit Union National Association. "We are hopeful that credit unions are making their voices heard . . . that something needs to be done."

Staff writer David Cho contributed to this report.

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