COLUMN-Election gamble backfires for banks, energy firms: Kemp

LONDON, Nov 7 (Reuters) - "Elections have consequences, and

Eric, I won," President Barack Obama famously told House

Republican Whip Eric Cantor shortly after his first inauguration

in January 2009.

Four years later, Wall Street as well as the oil and gas

industry will return to work today knowing that they heavily

backed the losing side and now have very little political

capital with the re-elected Obama administration and the

Democratic majority in the U.S. Senate.

Some urgent bridge-building will be required in the coming

days if they are to influence financial regulation and energy

policy over the next four years.

VOTES HAVE CONSEQUENCES

President Barak Obama's re-election ensures the Democrats

will retain their 3-2 majorities on the Securities and Exchange

Commission (SEC) and the Commodity Futures Trading Commission

(CFTC), the agencies charged with implementing the controversial

derivatives portions of the 2010 Wall Street Reform and Consumer

Protection Act.

Senate Democrats and the president will block any attempt to

re-write the Dodd-Frank Act, and the continuing Democratic

majority in the Senate will leave the president with a

relatively free hand to nominate regulators committed to a

fairly aggressive interpretation of the landmark financial law.

On energy and the environment, the Department of Energy and

the Environmental Protection Agency (EPA) will remain in the

hands of conservation-minded policymakers, who want to tilt the

energy market in favour of clean technologies, back strict

controls on greenhouse emissions and vehicle efficiency and are

somewhat sceptical about drilling for oil and gas.

BACKING THE LOSING SIDE

In the past 18 months, the financial services and fossil

energy industries moved into outright opposition to the Obama

administration and the Democratic Party, making little secret of

their desire to see a Republican takeover in Washington.

Employees of banks such as Goldman Sachs and JPMorgan

Chase and Co, as well as many brokerages and derivatives

dealers poured millions of dollars into political action

committees that supported Romney for president and backed other

Republicans in a bid to seize control of the Senate.

The American Petroleum Institute (API), which lobbies on

behalf of the oil and gas industry, created and funded

Vote4Energy to campaign for oil- and gas-friendly policies in

battleground states. The organisation was nominally independent,

but its positions and advocacy closely mirrored the views of the

Romney campaign.

In return, Romney's campaign promised to repeal the hated

Dodd-Frank law and ease restrictions on the development of

fossil energy.

MORE GUERRILLA WARFARE?

Wall Street and the fossil energy industry now must decide

how to cope with the new reality that the White House and the

executive branch will remain under Democratic control for the

next four years, while Democrats will control the Senate until

the start of 2015.

One option is to maintain a strong oppositional stance. The

U.S. House of Representatives remains in the hands of a solid

Republican majority and can be counted on to block any attempts

to pass fresh legislation on energy or financial services that

the industries do not like.

The U.S. District Court and Court of Appeals for the

District of Columbia, which review most financial and

environmental regulations, remain in the hands of conservative

judges, most appointed by Republican presidents, and will

continue to review regulations critically.

Lobbying groups such as the Securities Industries and

Financial Markets Association (SIFMA), the International Swaps

and Derivatives Association (ISDA), the API and the U.S.

Chambers of Commerce have mounted a series of legal challenges

to regulations implementing Dodd-Frank and in some cases have

won the first round.

It is part of a broader coordinated effort to roll back

financial, energy and environmental regulations by citing

cost-benefit concerns.

The two industries could continue to mount a guerrilla

campaign against the new regulations in the courts and the

House, harrying regulators with legal challenges, cuts to agency

budgets and congressional hearings.

But most of the legal victories that the industries have won

so far have been on peripheral issues, such as lack of adequate

cost-benefit analysis. They have been unable to prevail on the

substance of the new laws and regulations. And regulators now

have four more years to redraft any regulations that the courts

find deficient.

BURYING THE HATCHET?

In 2012, business lobby groups and the Republican Party made

some headway among voters with their argument that the Obama

administration was over-regulating the economy and harming the

recovery, but it was not enough. By 2016, Dodd-Frank and the

administration's energy policies will be well entrenched and the

argument may not have so much resonance with the electorate.

So industry leaders will come under intense pressure in the

weeks and months ahead to bury the hatchet and take a more

conciliatory approach to the administration and Senate

Democrats.

Banks and energy companies have spent record amounts on

lobbying in Washington in the past four years. Goldman Sachs,

for example, spent almost $3.3 million lobbying senators and

representatives in the 12 months to September, according to

filings with the congressional lobbying database, on issues

connected with derivatives reform and tax policy.

But however much money they pour into lobbying efforts, the

perception that energy companies, banks and brokerages, as well

as most of their employees, are solidly behind the Republican

Party will limit their future influence on a range of issues

that are vital for both industries.

Pressure to rebuild a constructive relationship with the

White House and at least part of the Senate Democratic Caucus

will therefore be intense.

In fact there are a variety of issues on which the two sides

could reset the relationship. Fiscal reform is one area in which

there could be scope for compromise. Business and financial

leaders have been signalling for weeks that they are ready to

support moderate tax increases as part of an overall tax and

spending package to avert the fiscal cliff.

The Keystone XL pipeline is another early decision where the

president could reach out to the industry and appear to back the

development of fossil fuel resources, albeit with strict safety

and environmental safeguards.

But it will take a spirit of compromise on both sides. After

a resounding defeat, the energy and financial services

industries would be wise to repair relationships.

Source: http://news.yahoo.com/column-election-gamble-backfires-banks-energy-firms-kemp-104406744--sector.html

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