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Why Lobbyists Win. The Case of Dodd-Frank

David Callahan

Imagine that you're trying to make an extremely complicated decision. You want to understand the facts and do the right thing. At one ear, you have someone -- perhaps a former colleague -- who whispers you highly detailed advice six times a day, cajoling and pleading. At the other ear, is someone who whispers you advice only once or twice a week.

Who are you more likely to listen to? 

The power of lobbyists derives not just from the fact that they speak for moneyed interests who can make campaign contributions at election time. It also stems from their enormous persistence, their formidable expertise, and the fact that many lobbyists have personal ties to the public officials they are lobbying.

The Dodd-Frank law, which has been suffering death by a thousands cuts, shows all these dynamics in action. Nearly three years after President Obama signed the legislation, only 38 percent of the 398 rules needed to fully implement it have been written. Wall Street lobbyists have fought every rule every inch of the way, deluging regulators with detailed counter-arguments -- often without any consumer or reform groups offering another side. 

Consider the imbalanced lobbying around just one rule, the proposed Volcker Rule. A new analysis by USA Today of meetings between regulators and outside parties shows the extent to wish Wall Street's lobbyists have dominated this conversation:

banks, financial firms, financial industry groups or representatives accounted for more than 85% of the 253 meetings in USA TODAY's study. The rest involved consumer watchdog groups, labor groups and members of the public.

Remember, that's just one rule (albeit an important, high-profile one). Now multiple this lobbying deluge by a scores of other rules being written.

And the lobbyists showing up at the Commodities Future Trading Commission or the Securities and Exchange Commission aren't just any random K-Street types. Many are former regulators who used to work at these places themselves or they are former Hill staffers who got to know these issues well working on key committees. As Gary Rivlin wrote earlier this spring in a long investigation of the war against Dodd-Frank:

fully three-quarters of those who had served as CFTC commissioners over the past decade are among the noisy crowd of lobbyists beseeching him every day to soften the proposed derivatives rules, delay their implementation or simply chuck them out altogether.

I've never been a regulator on the receiving end of a lobbying campaign, but surely one reason that lobbyists are so influential is that they play to the fear that any well-meaning public official has of getting things wrong and making harmful laws. 

Lobbyists say: Look, Mr. Regulator, you just don't understand this business. If you make X law,Y is going to happen, and that will have a very negative effect. So you really don't want to make X law after all.

The more complicated the business, the more influence that lobbyists have because they are always likely to know much more about the business than regulators or elected officials. 

Now, if it's a fair and balanced debate, dire warnings about the implementation problems or unintended consequences of proposed regulations will be countered by other expert arguments. But, as USA Today found, debate over Dodd-Frank rules as been anything but fair and balanced.