Trade group merger underscores big banks' lobbying shift

The Financial Services Roundtable and the Clearing House Association announced Tuesday that they plan to combine forces in the largest financial services trade group merger in more than a decade.

"These two organizations will be stronger together,” said Bank of America Chairman and CEO Brian Moynihan, who is also chairman of the Roundtable.

Greg Baer, president of the Clearing House Association and a former head of regulatory policy at JPMorgan Chase, will be CEO of the combined group, which does not yet have a name.

The move represents a shift of tactics for big-bank lobbying efforts and a recognition that a decade after the crisis, the largest institutions’ influence on Capitol Hill remains at a low point. The merged group is likely to bring a more analytical approach to dealing with lawmakers, emphasizing detailed research over simplified talking points and campaign donations.

“Let’s take the good research and let’s amplify it with more action on the Hill,” Baer said in an interview. “Let’s move this business model to the Hill as well as the banking agencies. If you take the research and data, the Hill will appreciate it. We’re taking the Clearing House model and expanding it by combining with FSR.”

Though progressive Democrats have attempted to pin the regulatory relief bill currently being debated in the Senate as proof of megabanks’ control of the Hill, the reality is far more complicated. A series of scandals by megabanks like Wells Fargo and lingering unpopularity following the crisis have served to limit big banks’ reach considerably.

The Financial Services Roundtable, in particular, has waned in prestige. It hired former Minnesota Gov. Tim Pawlenty to run the trade group in 2012, hoping that a prominent political player would help raise its profile. But the Roundtable's profile hasn't improved much. Late last year it restructured, kicking out its nonbank members, including large asset managers and insurance firms, to refocus on banking. Pawlenty, meanwhile, announced last month that he would quit; he is likely to run again for Minnesota governor.

The Clearing House Association, meanwhile, is the more bookish of the two trade organizations. It has focused not on Capitol Hill, but on influencing bank regulators by producing research in an attempt to help guide policy. The group frequently writes comment letters and detailed blogs on capital rules, stress tests and other wonkier topics. That approach has served the group well, however, as its research is used by agencies in writing new regulations and it is seen as a credible source of information.

The merger also marks another significant change. It will effectively divorce The Clearing House Association, the advocacy group, from The Clearing House, the nation’s largest payments provider. Some in the industry have seen the two as an odd fit. The merged group will not be part of The Clearing House.

The merger also benefits The Clearing House Association in other ways. The Roundtable includes its BITS technology division, with an expertise in cybersecurity and fintech. It also includes a political action committee, which The Clearing House Association did not have. Other changes are still being worked out, including personnel decisions.

The merger was pushed by the CEOs of the biggest banks, according to sources.

The broader agenda of the merged group is likely to mirror The Clearing House Association's priorities. Baer, a former Treasury Department official in the Clinton administration, testified in January on the group’s push to change anti-money-laundering regulations to make them more effective and less burdensome.

On Monday in an American Banker op-ed, Baer called for greater government involvement in preventing cyberattacks, arguing that it is being left to bank regulators to handle a national security threat.

“Consider that if a major U.S. bank suffered an anthrax or missile attack, no one would ask its regulators to testify about the attack, and no one would expect them to write more regulations to prevent a recurrence,” Baer wrote. “But if a major U.S. bank were to suffer a cyberattack, that is precisely what would happen — even though the most serious attacks now generally come from foreign actors, including nation states and foreign crime syndicates.”