With an Obama Victory, Wall Street Pivots to Plan B

Wall Street went long on Mitt Romney, doling out millions of dollar of donations in the hope of beating back financial regulation. After coming up short on Election Day, the industry is moving to Plan B.

With President Obama having won a second term, lobbyists are readying a varied agenda to influence the makeup of crucial Congressional committees and regulatory agencies while working to avert the so-called fiscal cliff â€" the dreaded spending cuts and tax increases set to kick in on Jan. 1 unless a deal is reached. The Dodd-Frank regulatory overhaul enacted in the wake of the financial crisis also remains a top issue as the industry continues its efforts to temper the rules.

“With the election now over, it is vital that we return to the work at hand, namely, the continued implementation of Dodd-Frank and addressing the fiscal cliff,” Tim Ryan, chief executive of the Securities Industry and Financial Markets Association, Wall Street's main lobbying group, said in a statement on Wednesday.

For the financial industry, the Obama victory is a complicated one.

Wall Street helped bankroll Mr. Obama's first presidential run. But the relationship soured as the administration championed financial regulatory changes. Some executives are still stung by Mr. Obama's unflattering portrayal of them as “fat cats.”

Now, the administration owes little to the banks that embraced his opponent's campaign. Democrats, too, retained control of the Senate, cementing a layer of protection around Dodd-Frank and emboldening the law's chief supporters.

Without a friendly face in the White House, the financial industry will, in part, have to strike a conciliatory tone. On Wednesday, a number of financial lobbying groups circulated statements calling for cooperation with the White House.

Despite their disappointment with the election results, Mr. Obama's second term is unlikely to present a doomsday situation for the nati on's biggest banks. Many executives resigned themselves weeks ago to four more years of Mr. Obama, conceding that much of Dodd-Frank was already baked into corporate strategy.

Morgan Stanley and Goldman Sachs, for example, have already shuttered their proprietary trading desks, banned under the law. Anticipating that large-scale changes to the rules were unlikely, many banks have begun to hire additional compliance officers and assemble the required infrastructure.

With the regulatory landscape unlikely to alter significantly, Wall Street is now pivoting from a broad attack on Dodd-Frank to a more targeted approach to its most contentious rules. A central goal, lobbyists say, is to tame unfinished rules that rein in derivatives trading.

“We urge the president to carefully consider the closeness of the election results as he evaluates his regulatory policy priorities for a second term,” Dale Brown, chief executive of the Financial Services Institute, sai d in a statement on Tuesday night as election returns piled in.

Lobbyists are appealing to more sympathetic members of Congress, urging them to apply pressure on the Commodity Futures Trading Commission, which has proved to be an aggressive foe of the banks. Financial trade groups are also expected to line up behind a new bill in Congress that would undercut the authority of agencies like the trading commission and the Federal Deposit Insurance Corporation. The bill, which a Senate committee is expected to vote on this month, would subject independent regulators to heightened rule-writing standards.

The second Obama term is “not a lost cause,” one lobbyist at a large financial firm said this week.

In some ways, the Obama victory provides more clarity for the banks. Even as they have pushed to delay rule-writing, banks have complained that only a third of Dodd-Frank is complete. The delay, they say, has clouded their ability to hire and arrange resources .

“The banks say, ‘Just tell us what the rules are; we'll figure out how to manage this,'” said Brian Gardner, a Washington research analyst at KBW.

On a more aggressive front, the Chamber of Commerce and other business trade groups are marshaling teams of lawyers at Gibson Dunn and other firms to file lawsuits against some of Dodd-Frank's most contentious provisions.

The courtroom battles could strike down parts of the law that regulators have already finalized. The financial industry, in particular, expects to challenge the so-called Volcker Rule, which bars banks from making many risky bets with their own money.

With the focus shifting slightly away from Dodd-Frank, banks also plan to attack the fiscal cliff and other tax policies, a chief concern among their many corporate clients.

“Sixty-one percent of JPMorgan's American clients say the fiscal cliff is affecting hiring plans,” Tim Pawlenty, the head of the Financial Services Roun dtable, said in a letter to Congress last week. Mr. Pawlenty, a former Republican governor and presidential hopeful, added that Wall Street was urging Washington “to bridge over the fiscal cliff and to do so as soon as possible.” Mr. Ryan of the Securities Industry and Financial Markets Association echoed those calls on Wednesday.

As Wall Street looks to influence policy, it is taking aim at regulatory personnel. The various financial agencies have significant sway in the direction of certain rules.

Gary Gensler, the chairman of the futures trading commission who has aggressively expanded the agency's authority, is running on an expired term. He can continue to serve through 2013 unless the White House reappoints him to another term, an outcome that lobbyists at several New York banks hope to avert.

The banks will further advise the White House and Congress to replace Mary L. Schapiro, head of the Securities and Exchange Commission, who is widely expect ed to leave early next year.

The makeup of Congressional committees poses another challenge to Wall Street. Banks anticipate leadership changes at the top financial committees in the House and Senate, with Sen. Michael Crapo, an Idaho Republican, taking over for Richard Shelby, an old hand and a friend of the banks.

Elizabeth Warren, the senator-elect from Massachusetts, is another wild card for Wall Street. Ms. Warren, a Democrat who made her name in Washington as a fierce critic of Wall Street and the chief architect of the Consumer Financial Protection Bureau, defeated the incumbent, Scott P. Brown, a Republican. Her distaste for Wall Street, bankers fear, will make the president's approach seem tame.

“Wall Street C.E.O.'s, the same ones who wrecked our economy and destroyed millions of jobs,” she said at the Democratic convention in August, “still strut around Congress, no shame, demanding favors, and acting like we should thank them.”