Will Dodd's Legacy be Anti-Investor, Pro Broker and Insurer?

But over the past three months, it appears that the very active–and well shod–financial services lobbyists have pressed their case with Dodd and many others on the Senate Banking Committee, and seem to have big wins in store for their broker, bank and insurance clients. And it’s no wonder when you look at the dollars that pour in to Senators on this committee from these industries.

According to a report, “Financial Sector Investments In Congress and the Senate Banking Committee,” from the group Consumer Watchdog, Dodd received, from 2005 to 2009, “$9 million from the financial sector, 51% of his fundraising over the five-year period. Ranking member Richard Shelby (R-AL) raised $2.5 million, 28% of his total money raised, from the financial sector.” The report says that in the first nine months of 2009 alone, 2567 lobbyists for the Financial Sector spent $ 336,005,436. to lobby Congress.

The report studied four ways the industry exerts its influence on Congress, “campaign contributions, fundraising, lobbying and the revolving door between financial firms and the Senate Banking committee that may determine the fate of financial reform legislation.” The report notes that “Senate Banking committee members have received $41.9 million in campaign contributions from PACs and individuals in the financial sector since 2005.”

Perhaps it shouldn’t be so surprising that the Banking Committee did such an about face since last November, turning from important financial reforms and investor protections to protecting the interests of those banks, brokers and insurance companies that pay them so well. The Consumer Watchdog report explains: “Last November, Chairman Dodd tasked himself and seven other Banking committee members with re-drafting the major sections of financial reform legislation. These eight senators-Dodd, Shelby, Corker, Crapo, Gregg, Reed, Schumer, and Warner-have received the lion’s share of financial sector contributions to the committee: a total of 26.1 million. Seven of the eight (excepting Sen. Gregg) rank among the committee’s top 10 recipients of financial sector donations.”

One thing that lobbyists havent been talking to Senators about is the fact that the majority of broker/dealer reps. believe that “all financial professionals who give investment and financial advice should be required to meet the fiduciary standard,” according to The Fiduciary Standard Survey, conducted in November by SEI and The Committee for the Fiduciary Standard. This editor is a member of that Committee. In addition, the study found that the majority of brokers believe “advisors should not be permitted to ask clients to waive their right to a fiduciary standard of care from the advisor.”

It remains puzzling why the Treasury and Obama Administration, after calling for a fiduciary standard for those providing advice to investors–as well as other consumer protections–appear to have caved in to the special interests as well. They’ve been totally silent, of late, on the investor protection issue.

In fact, it’s been industry participants and regulators who have called for extending the fiduciary standard to brokers who provide advice to retail investors. Extension of the fiduciary standard to those who provide investment advice to retail investors has been endorsed by the Treasury, White House, House of Representatives in their Bill which passed in December, SEC Chairman Mary L. Schapiro, SEC Commissioner Luis Aguilar, Goldman Sachs Chairman and CEO Lloyd Blankfein and Commodities Futures Trading Commission Chairman Gary Gensler.

It’s not too late–there is still an opportunity to make a major difference for American savers, investors and retirees. It will be a shame if it is traded away because of the brokers and insurance companies–setting the stage for yet another disaster.

Comments? Please send them to [email protected]. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.