Bull Bear Report Nov 04 2009

The Next 100 Years: Finance Lobbyists on the Front Line

By kyle stock

While legislators on Capitol Hill overhaul the nation's rusty regulatory infrastructure, a small army of industry lobbyists is scrambling to try to ensure that lawmakers strike a healthy balance between smart, safe and stifling. These journeymen and women have inherited much of the power once held by the innovation wizards of Wall Street, at least for the time being.

"Washington is making changes that will affect the industry for the next 100 years, so we're seeing a lot more interest from the C-suite," said Scott Talbott, the top lobbyist for Financial Services Roundtable, a nonprofit group that represents the interests of 100 of the biggest firms in finance. "And our role is now more important than ever, because we're in uncharted territory."

As finance lobbyists gird for one of their biggest battles, their ranks are growing thin. Slightly fewer than 2,600 people are now making the case for U.S. banks, insurers and investment shops -- 300 fewer than last year.

So what does the job entail? Despite what Hollywood might have you believe, there is very little time spent in swanky steakhouses and cigar bars. Whispered deals and backroom horse-trading are rare as well.

Basically, it's all Blackberry, all the time.

On a typical day, Talbott's thumbs start tapping away at four in the morning, as he rides his stationary bike and catches up on the news.

He is in the office at 8 a.m. and out again to meet a reporter for breakfast at the Old Ebitt Grill a few minutes later. Throughout the day Talbott takes calls from the press and the group's members, meets with his own staff of 10 lobbyists and spokesmen, drafts position papers for three separate bills and prepares testimony for a House of Representatives hearing scheduled for later in the week.

In the mid-afternoon, Talbott heads to the Hill for a handshake and that precious commodity in Washington: face-time.

"We always say: there's no replacement for gumshoe lobbying," he said. "I've submitted plenty of receipts for new shoe-soles over the years."

Talbott hits a company-sponsored happy hour at 6:30 p.m. and gets home around 8. He finally puts the Blackberry down at 10:30, though it keeps buzzing until almost midnight.

The daily tally: more than 1,000 incoming emails.

"I would say the worst part of the job is the hours, but I don't really mind," Talbott said. "It's never a day. It's never over."

In the past 10 years, the so-called FIRE lobby -- finance, insurance and real estate -- has upped its lobbying spend by 8.3% a year on average and added 1,100 jobs. It has spent $3.81 billion to influence policy over that 10-year period, more than any other business sector. In comparison, agribusinesses, which are often maligned for using political pressure to gain favorable trade regulations, spent $1.19 billion in the same period.

For Talbott, and others like him, the past year has been a blur. He says the volume of policy issues being debated is 10 times greater than in 2002 when the massive Sarbanes-Oxley bill was pushed through in the wake of the Enron and WorldCom debacles.

But the number of people making the case for finance in Washington is at its lowers point in five years. Through October, FIRE companies are on track to spend about 10% less on lobbying this year, in part because of the stagnant economy and in part because some of the biggest players in the business have disappeared.

Still, 2009 will likely be the third most expensive year in history for finance lobbying with a projected $414 million spent and, like the rest of Wall Street, there are pockets of growth.

Hedge funds have been particularly aggressive in Washington this year, as a bevy of bills were filed that aim to change the way that they operate. The Hedge Fund Association, which represents thousands of firms of all sizes, has traditionally used only letter campaigns to makes its case in Washington.

But Mitch Ackles, the group's spokesman, has recently taken on an additional title: chief lobbyist. Ackles, the group's president and two board members started flying to Washington regularly to meet with legislators to prove that hedge funds "are not evil" and that onerous regulation of smaller funds will suffocate growth, innovation and job creation. Most of their time in D.C., however, has been spent explaining the basics.

"This staffer turned to me and said 'Mitch...would you mind spending a few minutes and explaining what a fund of hedge funds is?'" Ackles recalled. "That shocked me. If you are going to regulate an industry, you should certainly understand what it is."

The best lobbyists are either friendly and patient facilitators or bullies -- think Jimmy Stewart in "It's a Wonderful Life" vs. Rahm Emanuel in the White House.

"I won't call them type-A; I'll call them type-AAA," Talbott said. They are "either revered or feared."

Most have more experience in the halls of government than on trading floors or in road shows. Though, many big finance firms rotate workers from different segments of their business into their DC lobbying arms.

"We always say that you need to either know the substance [of finance] or the procedure of government," Talbott said. "It's very hard to teach both."

Leigh Ann Pusey, CEO and head lobbyist of the American Insurance Association, an insurance industry trade association, said the most effective lobbying professionals have a mix of government know-how and industry needs.

"There's an awful lot of folks in this town that you can hire for access," Pusey said. "But I think access is sometimes overrated. I put a lot of emphasis on people who can think and handle themselves strategically."

Pusey has been adding to her stable of eight federal lobbyists in the past year in order to better deal with the crisis and the new administration. Lobbyists generally make between $60,000 and $500,000 a year, depending on their experience and access. The median annual paycheck for D.C. lobbyists is $97,000, according to Salary.com.

One downside to the job: there is no such thing as "trading hours" in Washington. Talbott, who has competed in an Ironman triathalon and runs a few marathons a year, has come to understand well the pace that the 24-hour news-cycle sets for his business. Bills on compensation, systemic risk and hedge-fund registration are being hotly debated around the clock. Though, Talbott seldom goes into the office on Saturday and Sunday anymore, as he did virtually every weekend last fall.

"Let's just say my wife got a very, very nice Christmas present in 2008," he said. "Tiffany's goes a long way."

A Day in the Life*
3:30 -- 7:30 a.m.: Work out, start emailing and read the newspapers.

8 a.m. -- 12 p.m.: Staff strategy meetings.

12 -- 3 p.m.: lunch at desk, emails and phone calls with congressmen, congressional staffers, internal staff, members and media. Edit testimony for an upcoming hearing and draft the group's position on three bills.

3 -- 4 p.m.: Meeting on Capitol Hill.

4 -- 6:15 p.m.: More emails and phone calls. Coordination of a new hire.

6:30 -- 8 p.m.: Company happy hour.

10:30 p.m.: Last email of the day sent.

11:34 p.m.: Last e-mail of the day received.

* from the Blackberry of Scott Talbott, Financial Services Roundtable

By the Numbers: Lobbying spending by the finance, insurance and real-estate companies
1998: $208,842,518

1999: $216,375,103

2000: $233,744,026

2001: $237,833,098

2002: $270,526,549

2003: $328,335,992

2004: $341,330,774

2005: $375,484,673

2006: $378,934,353

2007: $422,206,589

2008: $458,562,304

2009: $414,081,760**

**2009 is a projection