When Jim Aramanda became chief executive of The Clearing House, he wanted to make its New York headquarters more hospitable.
Refurbishing the conference room helped. So did cutting back on checkpoints for retina scans.
Over the past two years, the payments processing giant and trade association has made more fundamental efforts to raise its profile in banking industry affairs, taking its advocacy efforts far beyond the occasional comment letters or lawsuits it filed on behalf of its members. With a bigger staff and mandate to tackle policy issues vital to 20 of the biggest commercial banks, it has taken a prominent role in the fight to roll back debit interchange fee caps and other issues crucial to the set of systemically important banks.
"We're not looking for an 'A' for effort," said Paul Saltzman, president of The Clearing House's association arm. "We are not going to be happy unless there is a delay that allows all parties to address some of the unintended consequences."
Other industry advocates give TCH some of the credit for coordinating responses to Durbin, such as a letter signed by the heads of nine separate trade organizations, but its higher profile reflects that its members cannot always aggressively pursue issues such as "too big to fail" through more broad-based lobbying organizations.
Though Clearing House executives said intraindustry fault lines are the exception, TCH was the industry's preferred vehicle to object to the Federal Deposit Insurance Corp.'s asset-based deposit insurance premiums, which shifted assessments away from small banks and toward those with monster balance sheets. It has also pushed to subject more nonbank financial companies to the Dodd-Frank Act's heightened regulation of systemically important firms, a policy position that would have been untenable for the mix of bank and nonbank companies that comprise the Financial Stability Industry Council formed by the Financial Services Roundtable.
Because the 19 largest banks are grappling with living wills and other priorities of the federal Financial Stability Oversight Council, opening a separate channel to policymakers is only natural, said Chris Cole, lead regulatory counsel for the Independent Community Bankers of America.
"We're partnering with them on interchange, and appreciate their work," he said, though he does not expect his group and one representing the biggest banks will always see eye to eye.
"I think that type of organization might lead to more industry debate," he said.
The Clearing House has increased its policy staff from around five to 20, though some employees work for the clearing company and the association. It has left what Aramanda calls "boots-on-the-ground lobbying" to trade groups like the American Bankers Association and the Roundtable, focusing instead on coordinating joint industry communications with regulators. Because of its 158-year history at the center of the New York clearing universe, it has a deep relationship with the Federal Reserve.
"They've been active, not so much from a Capitol Hill standpoint — but they're very active on the legal and regulatory side," said Scott Talbott, lead lobbyist for the Roundtable, which has an overlapping membership. "They're one more voice, and, to be blunt, they bring a lot of resources to the table."
According to TCH's 2009 Internal Revenue Service filing for its association arm, it had $27 million of assets. Its budget for 2011 is $13.5 milion, Saltzman said.
The Clearing House's policy push has picked up speed since last year, when Aramanda brought in Saltzman to head the association and serve as general counsel of the payments company. The former head of the Bond Market Association (now the Securities Industry and Financial Markets Association) and an executive at investment management and bond trading platform companies, Saltzman's role is as much to align the big banks' policy positions as it is to push them.
"I had meetings with senior Fed officials, and they said they want to see the banks become better coordinated," Aramanda said.
"Paul's made a big difference in getting the members to be more active and raise their visibility and breadth," said H. Rodgin Cohen, head of Sullivan & Cromwell's banking practice and TCH's longtime attorney.
Eugene Ludwig, former comptroller of the currency and CEO of Promontory Financial Group PLC, agreed. "The Clearing House … has a particular natural area of expertise because of its nexus around payments," he said.
Given TCH's fundamental role in processing payments, it can conduct its advocacy work on top of its existing relationship with regulators. Despite Aramanda's efforts, The Clearing House's headquarters still feels less like a policy shop than a high-security caretaker for the rows of glassed-in servers it houses. Flowing through them are $2 trillion of payments every day, making TCH the effective back office to banks' own back-office operations.
"No other trade association can claim an association with a systemically important financial infrastructure," Saltzman said. "We have regulators coming through the doors all the time, which creates a certain level of empathy."
Fed officials in New York and Washington either declined to comment on their relationship with TCH or did not return calls.
Those most familiar with the organization say TCH's effectiveness would diminish if it was seen as prone to rushing the mound every time its members got dinged on a policy issue.
"It's very important that we maintain our relationship with regulators — they need help and we want them to get it right," Aramanda said.
"It takes years and years to build up credibility, and I think The Clearing House has tried to be respectful," Cohen said. "And to not wage war against the regulators on Capitol Hill or anywhere else."
