House to Vote on Bill to Leave Investors Vulnerable, Sponsored by Wall Street Favorite

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The House of Representatives is scheduled to vote Tuesday on H.R. 2374, Rep. Ann Wagner’s (R-Mo.) “Retail Investor Protection Act," which has been decried by consumer protection advocates and financial planners alike for actually threatening to leave investors more vulnerable.

The bill would make it harder for the Department of Labor (DOL) and Securities Exchange Commission (SEC) to release rules under Dodd-Frank Wall Street reform ensuring that investment advisors and brokers work as "fiduciaries," who must work solely for the benefit of their clients and not in their own self-interest.

Groups from AARP to the Investment Advisor Association to Americans for Financial Reform have publicly opposed the bill for weakening protections for ordinary investors. A letter signed by several trade groups favoring fiduciary status stated that, "Despite its name, H.R. 2374 is not an investor protection bill. To the contrary, it would leave American investors with significantly less protection."

On the other hand, Wall Street bankers and their lobbyists have mobilized against the proposed rule and in support of the bill. Traders can often sell higher-fee, lower quality investment products to small investors when their financial advisors receive a higher commission for those particular products and don't have to disclose that fact.

The bill has seen support from groups like the Independent Insurance Agents & Brokers of America, American Council of Life Insurers, Financial Services Institute—whose lobbyist was uncovered by Mother Jones as the original author of a letter supporting the bill that was signed by 32 House Democrats—and the U.S. Chamber of Commerce, which is considering adding the bill to its legislator scorecard. The bill also was lobbied on in the past three months by Wall Street giants like Charles Schwab & Co., Vanguard, Wells Fargo, New York Life Insurance, ING, and MetLife.

A New York Times story released Monday highlighted why legislators might be so receptive to Wall Street's perspective: "But simply voting on the bills generates benefits for both House lawmakers and Wall Street lobbyists, critics say. For lawmakers, it comes in the form of hundreds of thousands of dollars in campaign contributions. The banks, meanwhile, welcome the bills as a warning to regulatory agencies that they should tread carefully when drawing up new rules."

Wagner's website features a story by the St. Louis Beacon already calling RIPA "her most significant legislative achievement." It could have a good chance of passing the House if its 44-13 vote out of committee is any indication, although it could have a tougher time in the Senate and has gotten a veto threat from President Obama.

According to data from the Center for Responsive Politics and Federal Election Commission, Wall Streeters have been making their own investment in Rep. Wagner, pouring money into her re-election campaign ever since she won a spot on the plush House Financial Services Committee. Here are a few key facts about Wagner's fundraising:

  • Wall Street and financial industries dominate the list of Wagner's top campaign donors. With the exception of retirees, all of Wagner's top five donor industries for 2014 are in finance, according to date from the Center for Responsive Politics: Securities & Investment (1st, $74,800), Insurance (3rd, $28,800), Commercial Banks (4th, $27,500), and Finance/Credit Companies (5th, $26,000).
  • The Finance, Insurance, and Real Estate sector as a whole has given Wagner over $600,000 since 2011.
  • Rep. Wagner is also the second highest House recipient of money this election cycle from both the Payday Lending industry ($13,500) and Finance/Credit Companies ($26,000).
  • Wagner's most recent Federal Election Commission disclosure include evidence of multiple visits to the New York City area—likely for financial industry fundraisers—including $474 for a stay at the Montauk Yacht Club Hotel and $523 for "chauffeur service" and more than $1000 for hotel rooms at the New York Palace Hotel.
  • Americans outside the ranks of the wealthy are virtually absent on Wagner's fundraising records. Only a stunningly low 0.1 percent ($1,340) of Wagner's money for the 2014 cycle has come from donors giving less than $200. Her freshman campaign in 2012 was nearly as low, with 2 percent of her money from small donors.
  • Wagner's legislative director Brian O'Shea, is a former Wall Street employee himself, working at Morgan Stanley from 2004 to 2011 before heading through the revolving door to work in Congress.

Update: Information from the New York Times article was added 10/29.