With bailout passed, lobbyists look to get in the game

Lobbyists, who had little influence in the development of the $700 billion economic bailout, are angling to play a greater role as Treasury implements the plan and Congress debates how best to strengthen financial market oversight. 

“This is going to be a big trend, in all honesty, for the next three to five years,” said Rich Gold, the head of Holland and Knight’s government relations and regulatory practice.

{mosads}“This one is very, very big,” said Patrick Oxford, chairman of Bracewell & Giuliani.

House Financial Services Chairman Barney Frank (D-Mass.) has already declared the financial services sector in need of “serious surgery next year.”

The goal for lobbyists is to have their clients to survive the operation intact. There are likely to be few issues that will be left untouched by the broad regulatory reforms to follow, or the practical budget impacts of such a massive bailout.

“This will ripple through every piece of major legislation we are looking at next Congress,” Gold said. “This is a paradigm shift.”

For example, Gold believes that the crisis on Wall Street will even affect the debate over the highway bill next year. Some advocates have argued that projected highway fund shortfalls should be made up through a greater reliance on private sources of funds, but that position is likely to be viewed with a much more skeptical eye after the credit crunch.

“That’s over,” Gold said.

Banks, insurers and other financial institutions will feel the effects more directly, as Congress moves to implement a tougher regulatory regime.

“Congress isn’t going to be done with this, once they pass the [rescue] bill,” said Scott Sinder, the chair of Steptoe & Johnson’s government affairs and public policy practice.

Accounting rules, bankruptcy reform, the need for a federal insurance regulator, and corporate executive compensation are just a few of the issues Congress will likely examine starting next year as a result of the financial crisis.

K Street is already scrambling to react to the public policy ramifications. Firms sent out legislative alerts often several times a day to keep clients abreast of the developments. Akin Gump Strauss Hauer & Feld, for example, set up a Finance Markets Crisis Resource Center. Click the button and a scrolling list of press stories about the plan’s progress on Capitol Hill comes up. To the right, Akin lists five of its lawyers and lobbyists clients or potential clients could contact for the latest.

Lobbyists describe their role the past two weeks more as providing intelligence to clients about the progress of the bailout bill, which the administration insisted be put on a legislative fast track, than in trying to shape the measure. But with the bailout passed, lobbyists representing a variety of special interests are looking to play a much larger role in debate. Holland and Knight, K & L Gates, Patton Boggs, Steptoe & Johnson, Bracewell & Giuliani and several law firms announced the creation of financial services task forces that they are marketing to clients and potential clients as multi-disciplinary, one-stop shops for legislative, regulatory and legal advice. The task force press releases note former top officials at the Securities and Exchange Commission or the Office of the Comptroller of the Currency who may be employed at the firm.

An alert from Gibson, Dunn & Crutcher was typical: "As the administration and Congress move forward to address the liquidity crisis and related problems, we are positioned to keep our clients apprised of key developments and to ensure that their voices are heard in the debate about how to repair our financial infrastructure."

Lobbyists’ immediate focus is influencing how Treasury implements the massive bailout bill, a process that could be make or break for some financial institutions struggling under the weight of bad debts.

“Treasury can do pretty much whatever it wants, whenever it wants and however it wants,” said Steptoe’s Sinder.

Already, lobbyists are working to push their clients out front to ensure they are covered by the $700 billion program.

"The first debate is, ‘Who is going to be covered?’," said Oxford of Bracewell & Giuliani.”The front edge of this battle is what is going to trigger coverage.”

The next debate is how Treasury will value the bad debts clogging the credit markets, and who the department will rely on from the private sector to help them manage this massive program.

“There is no understanding of how the value will be determined,” Sinder said. “The question is going to be, how the Treasury process addresses that? … They are going to need help.”