How much market groups are spending on lobbying, political campaigns

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WASHINGTON — Municipal market and other financial industry groups active in munis have spent some $18 million to influence policy and support political candidates during the 2018 election cycle, according to data from the Center for Responsive Politics’ OpenSecrets website.

The data shows that the Securities Industry and Financial Markets Association, Bond Dealers of America, Investment Company Institute, American Bankers Association, and Financial Industry Regulatory Authority spent nearly $12 million on lobbying and nearly $6 million on contributions to political parties and candidates. While a relatively small portion of that money might have been spent lobbying muni-specific issues, federal filings show that the groups lobbied on many issues important to the muni market, including the restoration of advance refundings.

The biggest spenders on lobbying were the bank and dealer groups, according to the OpenSecrets data. ABA spent nearly $5.4 million and SIFMA totaled about $3.2 million. ICI was next at about $2.7 million, followed by $230,000 spent by FINRA and $132,000 by BDA. This includes not only direct spending on internal lobbyists, but also money paid to outside lobbying firms.

SIFMA, for example, listed 19 paid lobbyists for 2018 including its President and Chief Executive Officer Ken Bentsen as well as its Co-Head of Municipal Securities Michael Decker. BDA listed 10 lobbyists for this year, including its Chief Executive Officer, Mike Nicholas. But BDA also paid $80,000 to five lobbyists from American Continental Group, the records show, most of whom were previously congressional staffers.

FINRA hired two outside firms, Daly Consulting Group and Rich Feuer Anderson to lobby on several bills, the records show. Daly received $120,000, according to the data, while Rich Feuer Anderson was paid $60,000. Filings show that the lobbyists expressed FINRA’s support of certain aspects of the Economic Growth, Regulatory Relief, and Consumer Protection Act 2018, such as a section granting broker-dealers immunity from lawsuits for disclosure of suspected financial exploitation of senior citizens to FINRA and other regulatory agencies.

The dealers focused their lobbying efforts primarily on tax and regulatory issues, according to the filings. Records show SIFMA lobbied in support of legislation to require federal banking regulators to classify certain munis as high-quality liquid assets for bank regulators' liquidity coverage ratio requirements. That goal became a reality only a few weeks ago when the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. announced an “interim final rule” to allow investment-grade munis that are “liquid and readily marketable” to qualify as level 2B HQLA.

The change was required by the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. Although OpenSecrets records did not show specific lobbying activity for BDA, that group was also known to be pushing strongly on the HQLA issue and has said it will continue to advocate for munis to eventually be classified at an even higher level of HQLA.

The groups are also pouring money into the coffers of the Democrat and Republican parties as well as for dozens of candidates for House and Senate offices, the records show. The November midterm elections are heating up, with Democrats fighting to regain legislative control over the Republicans, which currently control both chambers of Congress. Many pundits expect Democrats to claim control of the House, while polls show Republicans as favorites to retain control of the Senate.

The outcome could be pivotal for the muni market, as Democrats have expressed an interest in revisiting the tax law changes imposed by the Republican-controlled Congress late last year. A Democrat-controlled House would mean a new chair of the powerful Ways and Means Committee, which would originate any House legislation looking to roll back the Republican tax law changes, such as one that eliminated advance refundings.

The ABA’s political action committee (PAC) has made some $2.7 million of contributions this election cycle, with about $1.6 million of that money going to Republican congressional candidates. Incumbents have gotten $1.9 million from the ABA, with challengers receiving only about $163,000, records show.

ICI’s PAC has spent about $1.8 million on the races, with about $1.1 million going to federal candidates and most of the balance going to political parties and their committees. About a third of the ICI's spending was to support House Republicans. The group spent more than $600,000 on GOP House candidates and around $300,000 on Democrats. ICI's roughly $170,000 of Senate campaign spending was nearly evenly split between the two parties, however.

SIFMA’s PAC spent approximately $677,000 on the federal elections, filings show, with House Republicans claiming $278,000 of that total. About 68% of SIFMA's spending supported Republicans, according to the records, although Rep. Kyrsten Sinema, D-Ariz., was one of SIFMA’s more strongly-backed candidates as a recipient of $6,500. Sinema is in a tight race with Rep. Martha McSally, R-Ariz., in a bid to claim the Senate seat being vacated by the retiring Republican Jeff Flake.

BDA’s PAC spent $15,400, according to records, with most of it going to congressional candidates. BDA’s top beneficiary was Sen. Dean Heller, R-Nev., whose campaign received $5,000 from the group. Rep. Randy Hultgren, R-Ill., got $2,000 for his campaign. The sole Democrat to receive money, according to the records, was Rep. Gwen Moore, D-Wisc. Moore has sometimes been outspoken on muni issues, such as money market mutual fund reform. In 2016, she released a draft bill that drafted a bill that would reorient the entire municipal securities disclosure regime by making state and local government issuers or borrowers, rather than their underwriters, responsible for the disclosure of bond-related information.

The filings do not capture all lobbying activity, as federal law only requires an organization to register as a lobbying group if its total expenses for lobbying activities exceed $13,000 during a quarterly period. Therefore, some groups are able to lobby without having to file.

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Lobbying Elections Tax reform Securities law Bond legislation Finance, investment and tax-related legislation BDA SIFMA ICI American Bankers Association FINRA Washington DC