How Financial Reform Produced an Army of New Lobbyists

This might come as a shock to anyone who isn't a Washington insider: the big, broad financial reform bill will actually increase the presence of lobbyists on Capital Hill going forward. The New York Times reports that the lobbyists are already starting to swarm. Whenever Congress has more to say about business, firms have more to say to Washington. But the financial reform bill provides the industry even more reason to try to sway regulators than most other legislative efforts.

Here's the Times on the influx:

Nearly 150 lobbyists registered since last year used to work in the executive branch at financial agencies, from lawyers for the Securities and Exchange Commission to Federal Reserve bankers, according to data analyzed for The New York Times by the Center for Responsive Politics, a nonpartisan research group.

In addition, dozens of former lawyers for the government, who are not registered as lobbyists, are now scouring the financial regulations on behalf of corporate clients.

It goes on to say that, even though the legislation has been signed into law, firms are continuing to aggressively hire more lobbyists. As mentioned, this is normal. Whenever businesses are stricken with additional regulatory measures, they have new reason to enhance their presence in Washington, as a means to try to influence both lawmakers and regulators.

But in this case, the new bill left even more decisions than usual up to regulators and future rulemaking. The Times explains a little of this:

Federal agencies will decide the details of at least 243 financial rules and conduct 67 studies, according to an assessment by the Davis Polk law firm.

How will the agencies decide how to hash out the details for all those new rules? Of course, they will consult with those who understand and care about the issues. The financial industry fits that description better than anyone, which means lobbyists will have the opportunity to weigh in. Regulators will also need experts to consult with as they conduct the many studies the Dodd-Frank bill requires. Again, the lobbyists will be happy to help.

Whether or not this is good or bad obviously depends on your perspective. If you believe that the business community will work to institute rules that are best for the overall economy, then the presence of more lobbyists would be better than Congress using its relatively weak understanding of finance to provide more concrete rules to regulators. If you think that financial firms will merely work to pad their own pockets at the cost of the average American, then you might be suspicious of the lobbyists' influence.

In this case, however, the members of Congress must have understood their limits and preferred the aggressive input of the financial industry. Otherwise, they wouldn't have provided regulators with so much discretion. They had to know that heavier lobbying would result.