Big banks helped cause the worst financial crisis since the Great Depression by trading financial derivatives that went sour when the real estate market declined. In 2009, the nationwide unemployment rate rose above 10 percent—the highest level in more than 25 years. Banks foreclosed on millions of homes. And workers’ retirement savings suffered from a decade of stock price declines since 2000.

The banks that created the financial crisis also benefited from being bailed out by U.S. taxpayers. The Troubled Asset Relief Program (TARP) loaned $700 billion to financial institutions. Many banks benefited from government guarantees of their assets. The Federal Reserve System also purchased more than $1 trillion in securities to provide liquidity to the credit markets. Had the government not taken these steps, many more banks would have collapsed.

As the financial system started to recover, banks went back to business as usual—by paying their executives big pay packages. On Wall Street, the securities industry bonus pool increased 17 percent to more than $20 billion in 2009.[1] Overall, financial companies gave out a record $145 billion in total compensation.[2] Even though bank executive pay was up, bank lending fell 7.4 percent in 2009, the steepest drop since 1942.[3]

Now banks are lobbying on legislation that will reform financial regulations. The banking industry spent a total of $50.4 million to lobby in 2009, a 5.4 percent increase from the previous year.[4] Nearly half of this was spent by the six largest banks. Their lobbying reports show lobbying activity on a wide range of financial regulatory issues.[5] Much of the increase occurred in the last quarter of 2009, as Congress voted on financial overhaul proposals in the U.S. House of Representatives.[6]

2009 Lobbying Expenditures by Bank
JPMorgan Chase	$6.2 million
Citigroup	$5.5 million
Bank of America	$3.6 million
Wells Fargo	$2.9 million
Morgan Stanley	$2.9 million
Goldman Sachs	$2.8 million

Source: Center for Responsive Politics

The proposed financial reform legislation will help prevent another financial crisis by regulating derivatives. In response to these proposed regulations, the nine biggest participants in the derivatives market, including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America, created an organization called the CDS Dealers Consortium, which lobbies on the regulation of credit default swaps.[7] At stake is whether derivatives trading should be made more transparent.

These proposed reforms also will protect bank customers by creating an independent Consumer Financial Protection Agency (CFPA). This agency would regulate numerous consumer financial products, including mortgages and credit cards. In September 2009, the U.S. Chamber of Commerce launched a $2 million advertising campaign to defeat the CFPA.[8]

The American Bankers Association expressed concerns about the creation of a Consumer Financial Protection Agency. “It would simply complicate our existing financial regulatory structure by adding another extensive layer of regulation,” said Edward L. Yingling, the president of the American Bankers Association, when testifying before the U.S. Senate Banking, Housing and Urban Affairs Committee.[9]