Wells Fargo: No. 4 in assets, No. 1 in lobbying

Published: May. 9, 2015 at 10:38 PM EDT|Updated: Jun. 8, 2015 at 10:38 PM EDT
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CHARLOTTE, NC (Deon Roberts/The Charlotte Observer) - Wells Fargo is the fourth-largest U.S. bank by assets, but it's No. 1 among big banks in another category: federal lobbying.

The San Francisco-based lender, which maintains its largest employment base in Charlotte, spent $6.4 million on lobbying in 2014, more than any other big bank, according to data from the Center for Responsive Politics. It was the second year in a row the bank's spending eclipsed that of its larger peers. So far this year it's on track to retain the top spot.

Wells and other banks are spending heavily on lobbying as they seek to influence the writing of rules connected to the 2010 Dodd-Frank financial reform law. Banks and other financial firms were the second-biggest spender on lobbying from 2013 to 2014, behind a catch-all category of "miscellaneous business," according to the nonprofit Americans for Financial Reform.

During that period, the financial industry reported spending more than $1.4 billion to influence decision-making in Washington, the report says. That's more than $1.9 million a day.

Documents show Wells Fargo's lobbying has targeted a wide variety of legislation and issues. But a recurring focus has been Dodd-Frank, designed to reform the financial system in the wake of the 2008 financial crisis – and prevent the kind of risky behavior that caused it.

Wells' lobbying disclosures don't usually spell out its position on legislation. But the bank's governmental affairs spokeswoman, Jennifer Dunn, told The Charlotte Observer that the bank's lobbying around Dodd-Frank is designed to explain to lawmakers and regulators how proposed rules might affect the bank and its customers.

"Wells Fargo has long had a commitment to engage with policymakers on issues important to its customers, the financial services industry and the U.S. economy," she said in an email.

When asked for more details on the bank's lobbying, Dunn referred the Observer to lobbying disclosure forms and industry trade groups.

The Financial Services Roundtable, one of the largest industry groups, wrote to the Federal Reserve last month expressing concerns about proposed Dodd-Frank rules that would require large U.S. banks to set aside more capital to protect themselves from potential losses – and better withstand a severe downturn.

The industry group argued that the rule could require banks to concentrate on certain business lines just to avoid the higher capital requirements, which could result in "systemic disruptions if those business lines turn out to be a primary source of problems in a subsequent financial crisis."

Banks are eager to reduce their regulatory burden and compliance costs at a time when low interest rates are making it a challenge to grow their revenues. Much is at stake, with 40 percent of the rules required by Dodd-Frank not yet finalized, according to New York law firm Davis Polk & Wardwell, which issues widely cited progress reports on the act's implementation.

The act has resulted in sweeping rules, from those governing mortgage underwriting to requirements that banks have "living wills," plans for how banks would dismantle themselves if they get into financial distress.

Nearly five years after the act was signed into law, the financial sector has kept up its push to win exemptions from new rules or repeal them, according to Americans for Financial Reform's report. In other cases, the report says, the industry has tried to weaken rules before they are implemented.

"The fight is up and running. It is still very much ongoing," Lisa Donner, executive director for the nonprofit, said in an interview.

Charlotte-based Bank of America, the second-largest U.S. bank by assets, ranked fourth among large banks for lobbying spending last year. It spent $2.7 million in 2014, down from $3.1 million the year before. The bank declined to comment.

Mortgages, cybersecurity

Wells Fargo, the nation's biggest home lender, has also lobbied for legislation that would phase out mortgage giants Fannie Mae and Freddie Mac, which were seized by the U.S. government in 2008. The mortgage industry says winding down the government-controlled companies would foster more competition in the housing market.

Cybersecurity is another focus. Wells says it has had to spend more on cybersecurity to better protect consumer data. It has joined other banks in asking Congress to make it easier for companies and the government to share information on cybersecurity.

Rep. Robert Pittenger, a Charlotte Republican who sits on the House Financial Services Committee, said his commitment to ease the regulatory burden on banks has been reinforced, thanks to concerns Wells Fargo and other banks have shared with his office.

"Regulation is necessary," he said, "but the current environment of over-regulation is slowing economic growth, making it difficult for businesses to access capital necessary to create jobs and killing competition and choice in the financial industry."

Banks have notched some wins in their efforts to influence Dodd-Frank, said Donner of Americans for Financial Reform.

"They've succeeded in weakening or slowing down countless of the rules or finding loopholes in them," she said.

Last year, President Barack Obama signed a spending bill that included a rare outright repeal of a Dodd-Frank rule. The measure eliminated a requirement that banks keep risky trading in certain types of complex instruments separate from their business units that are backed by federal deposit insurance.

CFPB funding targeted

Donner sees another Dodd-Frank creation under "steady attack": the Consumer Financial Protection Bureau, established to enforce federal consumer financial laws. Funding for the bureau is one area lawmakers have targeted.

Earlier this year, Pittenger re-introduced a bill that would establish panels he says would give small businesses, community banks and credit unions more of a voice at the bureau. Texas Republican Jeb Hensarling, chairman of the House Financial Services Committee, added an amendment to the bill lowering the cap on the CFPB's funding.

The Obama administration says the lower cap is intended solely to impede the bureau's mission of protecting consumers. Pittenger's office said the move is needed to fund the panels and would reduce the bureau's funding by less than 1 percent, which would not hinder its mission.

The bureau has also written rules that affect large mortgage lenders like Wells Fargo by requiring them to make sure consumers have the ability to repay the loans. Lobbying disclosures filed last year for Wells Fargo mention one of those rules.

Sen. Elizabeth Warren, a Massachusetts Democrat credited as an architect of the bureau, is skeptical of banks' claims that regulations have hurt their profits. She told the Senate Banking Committee in February that the banking industry posted profits of almost $40 billion in the third quarter of last year, up 7 percent from the same period the previous year.

"In other words, the banking industry did substantially better after the mortgage rules took effect," Warren said.

Proponents of post-crisis banking regulations sometimes point to the large bailouts that taxpayers provided lenders during the financial crisis.

Wells Fargo accepted $25 billion in a bailout, which it has since repaid.

Washington insiders

Wells Fargo has been adding to its in-house lobbying staff over the years, arming itself in some cases with former Washington insiders.

In 2008, the company reported three in-house lobbyists. It now reports having seven. Some of those are former congressional staff members.

The bank also boosted its presence in Washington when it hired Dunn last year as the bank's first ever governmental affairs spokesperson. Dunn said her main job is working with reporters, but she also helps the bank's lobbyists craft their messages for lawmakers and regulators.

Wells Fargo's lobbying expansion also comes as the company itself has grown – closing in on rival Citigroup. By the end of last year, Wells Fargo's total assets were about 92 percent of those at Citigroup, the third-largest U.S. bank.

Bert Ely, an independent banking consultant, said Wells Fargo's growth has required it to step up its lobbying. Its 2008 acquisition of Charlotte's Wachovia Corp. boosted its U.S. footprint significantly. The deal also gave it a presence in new lines of business such as investment banking – an area where the bank has been increasing its market share.

"The more different things you get into, the more different issues affect the bank," Ely said. "Wells is now bigger. It has, for better or worse … a more complex business model than it did 10 years ago."