In my last post, I discussed the public comment letters. Now, I want to talk about the agency meeting logs. As part of the new transparency efforts associated with Dodd-Frank implementation, the Federal Reserve, the CFTC, the SEC, and the FDIC began disclosing their contacts regarding Dodd-Frank shortly after the bill was signed into law last July. These logs give some insight into the work of statutory interpretation and implementation that goes on behind closed doors: who is meeting with the regulators that will ultimately determine the scope of the Volcker Rule? What interests do they represent? What are the topics on which they are meeting? What questions are being asked and answered and what sort of information is being conveyed?
Table 1 shows the federal agency meetings with financial institutions to discuss the Volcker Rule posted between July 26, 2010, and July 5, 2011. To save space in this post, I have included only the top 10 institutions individually, as well as the total number of financial institution meetings.
As you can see from Table 1, JP Morgan Chase, Morgan Stanley, and Goldman Sachs met with federal agencies most frequently on the Volcker Rule, with 27, 13, and 12 meetings, respectively. In total, 216 financial institutions met with federal regulators regarding the Volcker Rule during this time period.
Table 2 shows federal agency meetings to discuss the Volcker Rule with law firms representing financial institutions. In total, these law firms met with agencies 24 times during the relevant time period. Davis, Polk; Sullivan & Cromwell; and Debevoise met most frequently with federal regulators, with 8, 6, and 5 meetings each.
Table 3 shows financial industry trade associations, lobbyist, and policy advisor meetings with federal agencies to discuss the Volcker Rule – a total of 25. SIFMA (The Securities Industry and Financial Markets Association), the Financial Services Roundtable, and the Managed Funds Association met most frequently with federal agencies -- 8, 5, and 2 times, respectively.
Table 4 shows public interest group and research or advocacy organization meetings with federal agencies to discuss the Volcker Rule -- a total of 9 meetings, primarily with labor union representatives. Finally, Table 5 shows a total of 9 meetings by other persons and organizations: namely, Senators Merkley and Levin and their staffs, and Paul Volcker and his staff.
In sum, whereas financial industry representatives met with federal agencies on the Volcker Rule a total of 265 times, “public interest groups” -- by which I mean nothing more technical than an entity or group that might reasonably be expected to act as a counterweight to industry representatives in terms of the information provided and the types of interpretations pressed – met only 18 times, even if we include the Merkley, Levin, and Volcker meetings under the heading of “public interest group” meetings. This is roughly the same number of times that a single financial institution -- JP Morgan Chase – met with federal agencies on Volcker Rule interpretation and implementation, and a total meeting ratio of almost 15 to 1.
A few notes here. First, July 5, 2011 is our cut-off date for collecting meeting logs. But because different agencies have different lag times for updating their logs after meetings take place, there were agency meetings prior to July 5 that were not yet posted by that date.
Second, for these purposes, I have defined “financial institution” broadly to include not only commercial and investment banks, but also asset managers and investment advisors, as well as insurance companies. This does not mean that these different types of institutions raised identical concerns at every meeting. But, although the exact subject matter of the meetings differed according to the particular regulatory concern faced by each group, the important point for these purposes is that nearly all of the industry representatives to meet with federal agencies on Volcker were seeking clarifications on the rule’s application to their activities -- most often, a clarification that the Volcker Rule would not prohibit the activities in question.
Finally, I should emphasize that not all meetings are created equal. Many of the meetings in Table 1 are group meetings, often as part of an industry trade association meeting. For example, 27 separate financial institution representatives were listed in attendance at an April 7, 2011, SIFMA-SEC meeting with Chairman Schapiro.
Perhaps more tellingly, nearly all of the public interest group meetings in Table 4 are of this nature. For example, representatives of AFL-CIO, Laborer's International Union of America, AFSCME, and SEIU are logged for an October 13, 2010, SEC meeting with Kayla J. Gillan and Jim Burns. These are 4 of the 5 meetings by public interest groups with the SEC (Americans for Financial Reform met separately with the SEC on April 13, 2011). And all of the public interest group meetings with the CFTC on Volcker took place together, on March 16, 2011.
And the identity (or number) of agency representatives at certain meetings may signal something about the importance of the event. For example, the log for an August 3, 2010, CFTC meeting with SIFMA and ISDA at which the Volcker Rule was discussed (along with other Dodd-Frank provisions) lists 53 SEC and CFTC staff members in attendance. But Goldman Sachs CEO, Lloyd Blankfein, is logged as meeting alone with SEC Chairman Mary Shapiro (along with Chief of Staff Didem Nisanci, and Robert Cook, Director of Trading & Markets) on March 9, 2011. Mr. Blankfein met with Ms. Shapiro again on Oct. 8, 2010, at an SEC-Financial Services Roundtable meeting, at which Jamie Dimon of J.P. Morgan, Robert H. Benmosche (President and CEO of AIG), Richard K. Davis (President and CEO) of U.S. Bancorp, and other major financial institution CEOs are logged as being in attendance.
What to make of this data? For me, it suggests that those worried that Dodd-Frank left too many details to be filled in my regulators, giving industry a second chance to lobby for important exemptions and interpretations, were at least barking up the right tree. Federal agency contacts with industry representatives significantly outpace those of any potential countervailing voices in terms of both quantity and quality.
Does this prove that regulatory agencies are captured or not regulating in the public interest? No, of course not. But regulators are only human. They have limited time, expertise, personnel, and budgets. Although comment letters and meetings are not by any means the only source of information and persuasion to which regulators are subjected, the meeting logs (particularly when combined with the data on the public comment letters) paint a very one-sided picture of influence, information, and pressure – influence, information, and pressure that largely take place in the absence of meaningful public scrutiny.
In my next, and final, post, I’ll be back to address some of Brett McDonnell’s always-thoughtful comments, and will wrap up with some concluding thoughts.
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