(Bloomberg) — President Barack Obama may have to decide whether it's worth shutting down the government to protect tough rules for Wall Street.
Lobbyists for the biggest banks are trying to force the Obama administration into a game of chicken to see how far it's willing to go to maintain industry reforms and some of the sweeping changes enacted in the Dodd-Frank Act of 2010. Despite Obama's veto threats, they're pushing lawmakers to include provisions that would roll back some of those changes in the end of year spending bill that has to be passed next month.
After failing to get enough congressional support for revisions such as a delay of strict rules known as a fiduciary standard for brokers who give retirement advice, the banking industry sees the appropriations bill as its last chance to win concessions this year. Lobbyists are following last year's playbook, when they persuaded lawmakers to slip a provision that watered down rules for the $700 trillion derivatives market into a bill that funded the government.
"Issuing a veto threat of a standalone bill is a very different thing from having a large appropriations bill on your desk," said Terry Haines, head of policy analysis for Evercore ISI.
Democratic lawmakers, led by Wall Street critic Senator Elizabeth Warren, along with key Obama administration officials, are going on the offensive early to rally support and prevent a repeat of what happened with derivatives. Some Democratic backing will be necessary for any changes to financial rules that are included in the appropriations bill since Republicans control only 54 seats in the Senate and at least 60 votes are needed.
'Never Again'
Banks' 2014 victory on the swaps rule sparked a populist uprising, with Warren and other Democrats using a series of press conferences and television interviews to criticize the financial industry. Following the controversy, Obama pledged in his January State of the Union address to block any legislation that weakens Dodd-Frank.
"Never again. No one is going to be surprised this time," Warren, a Massachusetts Democrat, said in an interview. "Republicans made their move. They got an industry-written bill attached to a must pass budget bill last year."
Congressional appropriators are negotiating this week the details of a $1.1 trillion spending package that would keep the government open after Dec 11. The banks are hoping Republican control of both congressional chambers will aid them once again so the bill includes changes to Wall Street reforms. The legislation is supposed to adhere to levels set forth in the bipartisan budget deal signed by Obama earlier this week that suspends the debt limit into March 2017.
"My hope is now that they build on this agreement with spending bills that also invest in America's priorities without getting sidetracked by a whole bunch of ideological issues that have nothing to do with our budget," Obama said at the bill signing, referring to Democratic and Republican leaders.
A spokeswoman for Obama declined to comment further.
