An already busy year for bank lobbying intensified this week with the rush to approve a Wall Street rescue plan.
Charlotte's big banks, Bank of America Corp. and Wachovia Corp., are among the players in the frenzy to hammer out legislation that would help banks offload troubled mortgage-related assets that are bogging down their balance sheets. Lawmakers were working toward an agreement Thursday, and lobbyists are expected to continue pressing their case until a bill is approved.
The biggest fight is likely to be over whether to include a provision that would allow judges to restructure troubled home loans in bankruptcy court. The Center for Responsible Lending in Durham, which favors the proposal, and the American Bankers Association, which opposes it, both sent e-mail alerts Thursday urging their constituents to express their views to members of Congress.
Consumer advocates argue this measure would provide relief to struggling borrowers who have been unable to get loan modifications from their lenders. Earlier this week, Martin Eakes of the Center for Responsible Lending said the bankruptcy proposal would prove to be “the only significant, direct benefit to the middle class in the $700 billion bailout program.”
The banking industry, however, argues this change would mean more uncertainty and risk to lenders, who wouldn't be able to count on the terms of the loans they make. “In my opinion, it's the line-in-the-sand issue for the industry,” said Don Lampe, an attorney for Womble Carlyle Sandridge & Rice, who is involved in the legislative process, representing financial services industry clients.
Charlotte's banks would not comment Thursday on their lobbying and the legislation, details of which were still emerging. Bank of America spokesman Scott Silvestri said the company is “very gratified that the government is looking at an overarching solution and is moving past dealing with the problem on an incident-by-incident basis.”
Wachovia spokeswoman Christy Phillips-Brown said the plan, initially crafted by the U.S. Treasury Department, is “a constructive and important step toward restoring confidence and stability in our financial system.”
Bank of America and Wachovia have long been active on Capitol Hill and have been cranking up efforts even further this year.
According to disclosure forms, Bank of America spent $2.3 million on lobbying in the first half of this year, up 65 percent over the same period last year. Wachovia shelled out $925,000 in the first half, up 54 percent from last year.
Earlier this year, Congress passed legislation that will allow banks to refinance troubled loans into the Federal Housing Administration program, which provides insurance to lenders in case of default. Bank of America, now the biggest mortgage lender after buying Countrywide Financial Corp., was particularly involved in developing that legislation.
With the nation mired in its deepest financial crisis since the Great Depression, bank chief executives are also playing a role in providing counsel to top policymakers. Bank of America CEO Ken Lewis, who is buying investment bank Merrill Lynch & Co., said last week that he had had a number of conversations with Treasury Secretary Henry Paulson in recent days, but declined to give details. And Wachovia CEO Bob Steel, a former Treasury official and Goldman Sachs Group Inc. executive, is a longtime friend and colleague of Paulson's.
BB&T Corp. CEO John Allison, whose Winston-Salem-based bank has fared better than most in the credit crunch, also got into the act this week when he sent a missive to key members of Congress with his thoughts on the proposed bailout.
In a 14-point list, Allison, known for his free-market views, outlined his opposition to assistance for “high-risk” investment banks, argued against caps on CEO pay and criticized any attempt to add credit card or auto loans to a rescue plan.
“This is primarily a bailout of poorly run financial institutions,” he wrote. “It is extremely important that the bailout not damage well-run institutions.”