March 27, 2012
Report: Lawmakers Seeking to Weaken Volcker Rule Receive More Than Four Times as Much From Industry as Those Asking for Stronger Measure
Public Citizen Study Analyzes Contributions to Members of Congress Who Submitted Comments to Agencies
WASHINGTON, D.C. – Members of Congress who submitted comments asking federal agencies to weaken the proposed regulations for the Volcker Rule have on average received more than four times as much in campaign contributions from the financial sector as those who asked agencies to strengthen the rule, a Public Citizen study released today shows.
The study, “Industry’s Messengers,” found that those seeking a weaker rule have received an average of $388,010 from the financial sector since the 2010 election cycle, compared to an average of $96,897 received by those seeking a stronger rule. Cumulatively, members asking for a weaker rule have received more than 35 times as much ($66.7 million) from the sector as those seeking a stronger rule ($1.9 million).
The Volcker Rule was one of the most important reforms of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. It prohibits federally insured banks from engaging in proprietary trading, participating in complex securitizations, owning hedge funds or private equity funds, or engaging in any other high-risk activities. It also prohibits banks from taking actions that conflict with the interests of their customers.
The public comment window for the rule ended on Feb. 13. The Securities and Exchange Commission alone received more than 18,000 comments, more than 15,700 of which came from Public Citizen members and supporters. Legislators submitted 17 separate letters signed by 172 members asking for changes that would weaken the rule. Three letters signed by 20 members recommended steps to strengthen it.
“Members of Congress should not serve as megaphones for industry’s claims,” said Negah Mouzoon, researcher for Public Citizen’s Congress Watch division and co-author of the report. “They should amplify the public’s call to prohibit banks from engaging in the same risky financial activities that contributed to the financial meltdown of 2008.”
Lawmakers seeking to weaken the rule claimed it would diminish liquidity in markets, result in an “exodus” in business from the United States and hinder investment in venture capital funds. These claims echoed those of the financial industry and the U.S. Chamber of Commerce. Public Citizen believes other financial institutions will engage in the activities that the Volcker Rule prohibits taxpayer-subsidized banks from performing.
Among those asking for stricter regulations, Sens. Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.), the co-authors of the Volcker Rule, criticized regulators for failing to honor the statute’s intent to prevent high-risk banking activity.
“The industry should focus on prudential banking instead of trying to persuade Congress to protect its license to gamble,” said Bartlett Naylor, financial policy advocate for Public Citizen’s Congress Watch division.
Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.