The Senate's approval of financial reform is the starting gun for a new intensive Wall Street lobbying campaign aimed at regulators who must now translate the legislation into hard and fast rules.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, set for Senate passage after a key procedural vote on Thursday, is the most sweeping overhaul of U.S. financial regulation since the Great Depression.
But how onerous the industry finds its provisions will depend importantly on actions by the Federal Reserve, Securities and Exchange Commission, Federal Deposit Insurance Corporation and other agencies that will have to write hundreds of new rules and regulations to implement the legislation.
"The legislation leaves many policy issues to the regulators to decide, almost turning the regulatory process into a virtual extension of the legislative process," said Micah Green, a partner at leading lobbying firm Patton Boggs.
That has revived the financial industry's battered hopes of weakening a range of key provisions in the arcane regulatory world, where the deliberations are largely divorced from the intense public scrutiny and election-year pressures that worked against Wall Street in Congress.
Financial lobbyists hope to persuade regulators to adopt rules that define and clarify ambiguous legislative language in a manner that could soften proprietary trading restrictions on banks, broaden end-user exemptions for derivatives central clearing requirements, and provide greater flexibility on risk retention by mortgage lenders.
"The legislative phase was only the first leg in the marathon. This is where the speed really begins to pick up," said Tom Quaadman, vice president of the Center for Capital Markets at the U.S. Chamber of Commerce.
Wall Street's opponents agree.
Americans for Financial Reform, a coalition of consumer advocacy and labor groups, says nearly two-thirds of the law's provisions are subject to the sway of rule-writing.
"The bill's going to be shaped largely by that process," said the coalition's chief lobbyist, Nancy Zirkin.
Financial interests will also get a shot at making smaller changes when Congress turns to a technical corrections bill to sort out unavoidable errors and contradictions in the 2,300-page reform package. Some think a corrections bill could surface before lawmakers recess for August.
But while some lobbyists say rule-writing could lead to fundamental change in areas such as the Volcker rule, where key terms such as "proprietary trading" lack definition, others believe many victories will be more limited.
And there is still margin for defeat, particularly in the area of consumer protection. Both lobbyists and government officials worry that an aggressive new Consumer Financial Protection Bureau could tangle consumer credit in a Gordian knot of prescriptive regulations and penalties.
"While there are things that could be tempered and clarified in the rule-making process, there are also things that could be hardened," Green said.
The looming battle, pitting Wall Street against consumer groups, is likely to last years and spawn protracted courtroom fights as business interests strive to preserve billions of dollars in revenues and profits they say are endangered by reform.
It could last longer and take place on more fronts than the lobbying battle over Congress' last major financial reform -- the Sarbanes-Oxley Act, a far narrower law enacted in 2002 to protect investors against corporate fraud following the Enron and WorldCom accounting scandals.
Legal challenges to Sarbanes-Oxley went to the Supreme Court, which decided only last month to keep the bulk of the eight-year-old law intact.
After the legislative push for reform began in earnest last summer, securities firms, commercial banks, insurers, mortgage brokers, credit companies and other financial firms poured hundreds of millions of dollars into lobbying and spent tens of millions more on lawmaker election campaigns in a bid to derail or dilute legislation.
But Wall Street mainly saw reform provisions grow more stringent as debate shifted from the House of Representatives to the Senate and debate fell increasingly under the shadow of congressional elections to be held this November.
"As we move into the regulatory phase, it will still be hard-fought, hand-to-hand combat among the interest groups and the players, but not as much on the front page as when it was in Congress and not as subject to the rhetoric we've seen," said one lobbyist, who spoke on condition of anonymity.
But being off the front page won't mean out of sight.
Lobbyists expect House and Senate leaders to use committee hearings to keep a public spotlight on regulatory proceedings, and some regulators are considering steps to enhance the transparency of the rule-writing process.
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