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Election Gamble Backfires for Banks, Energy Firms

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

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 organization 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.


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.

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