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What Tim Pawlenty accomplished in five years as Wall Street’s man in Washington

In the sea — or swamp — of D.C. interests, some stand out more than others.

As Tim Pawlenty begins to seriously explore a repeat run for the governor’s mansion, his work at the FSR will be a point of focus for his supporters.
REUTERS/Mike Segar

Washington lobbying is a $3.3 billion-a-year industry that employs over 11,000 registered lobbyists, who represent just about every conceivable interest you could think of in the U.S., from oil and gas mega-companies to sugar beet growers to office furniture vendors.

But in that sea — or swamp — of interests, some stand out more than others. There are the small-potatoes lobbiers, and then there are the titans —  “the platinum card guys,” as one lobbyist put it to MinnPost.

For over five years, Tim Pawlenty was among the most prominent of Washington’s platinum card guys: after two terms as governor of Minnesota and a brief run for the Republican nomination for president in 2012, Pawlenty became the CEO of the Financial Services Roundtable, the organization that lobbies in D.C. on behalf of the country’s largest and most powerful banks and financial institutions.

With an annual budget of around $20 million, the FSR serves as the most influential D.C.-based group pushing for policy friendly to Wall Street. Its political action committee doles out hundreds of thousands of dollars worth of campaign contributions each cycle to support lawmakers who support its agenda of deregulating the financial sector and lowering taxes for banks and businesses.

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If the last year has been any indication, Pawlenty’s efforts have paid off: as he exits the FSR to possibly prepare for another run at governor of Minnesota, Wall Street is celebrating passage of a sweeping GOP tax cut, as well as efforts from President Donald Trump’s White House and the Republican-led Congress to repeal or undermine regulations put into place by Democrats.

Those efforts have also paid off for Pawlenty: as CEO, he earned a salary of over $2.7 million in 2016 — his best compensation yet — and was paid an average of $2.2 million per year during his prior three years at FSR.

As Pawlenty begins to seriously explore a repeat run for the governor’s mansion, his work at the FSR will be a point of focus for his supporters — as well as his rivals in the GOP and Democratic camps.

Too big to fail — but not too big

The FSR, which was founded a century ago, bills itself as the “leading advocacy organization for America’s financial services industry,” and for most of Pawlenty’s term as CEO, the group of companies represented by the FSR totaled around 80.

Those companies included the country’s largest banks, like JPMorgan Chase and Wells Fargo, payment companies like MasterCard and Visa, and insurance companies like State Farm. The current chairman of the FSR’s Board of Directors is Bank of America CEO Brian Moynihan.

At the end of last year, the board voted to restrict membership in the group to banks with assets over $25 billion and the biggest credit processors, a move that cut the FSR’s member rolls in half. Remaining are about 45 corporations that, together, account for more than $11 trillion in assets and process payments for nearly all U.S. credit cards; others are U.S. subsidiaries of the highest-valued banks of Canada, Spain, and France.

Even before that consolidating move, however, the FSR still represented a small group of the most elite financial institutions, distinguishing it from other D.C. financial advocacy groups like the American Banking Association, which represents a large and diverse group of banks, and The Clearing House, which engages in issue advocacy but functions more as a think tank for financial industry research.

FSR, then, occupies a unique place in Washington: to advocate policy that benefits the very top sliver of the country’s financial institutions. For its mission statement required in its federal tax filings, the FSR says it “promotes the business of banking and financial services and encourages the development of sound banking and financial policies and practices.”

Particularly during Pawlenty’s term, the FSR has viewed as “sound” policies that eliminate, as much as possible, federal regulations on banking and financial activity — something the group calls “regulatory modernization.”

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Central to that advocacy has been promoting policy that would free banks from regulatory restrictions related to asset size and arguing that large banks — or “too big to fail” banks, in the language of the 2009 financial crisis — are not necessarily risky ones.

FSR has frequently criticized the Dodd-Frank law, which passed in 2010 to overhaul federal oversight of Wall Street after the financial crisis exposed systemic flaws. (In a 2014 post, the FSR broke down Dodd-Frank’s effects into two categories: things “working poorly” or things that “have flat-out flopped.”)

The Consumer Financial Protection Bureau, the federal watchdog agency established by Dodd-Frank, has been a frequent enemy of the FSR in recent years. The bureau — which established a relatively aggressive reputation under Barack Obama — has slapped million-dollar fines on FSR members, like Wells Fargo, and proposed reining in tools banks use to pad their bottom lines, like overdraft fees.

FSR has fought against the CFPB in particular over forced arbitration, which banks use to limit legal options of customers. FSR has also proposed replacing the bureau’s director, which the industry and its GOP allies in Congress often frame as an unaccountable power-mad bureaucrat, with a board of directors that wields diluted authority. It has worked to stifle the CFPB’s research activities, writing to the bureau in 2015 asking to delay a planned study on the effects of bank overdraft fees on consumers.

Beyond financial regulation, the FSR is supportive of big tax cuts, like the kind put into law by Trump and the GOP last year, and it advocates on cybersecurity, as well as policy on housing, given that many of its members are major mortgage lenders.

Not ‘the Washington insider’

When Pawlenty was named CEO of the FSR in September 2012, out of a pool of some 100 candidates, it raised eyebrows in Wall Street and in Washington. The Republican governor of Minnesota from 2003 to 2011, Pawlenty had just come off a fizzled bid for the White House, as well as a stint as co-chair of Mitt Romney’s presidential campaign, a post he left just a few weeks before Election Day.

Pawlenty brought no specific expertise on financial issues, or any experience working in the industry or in Washington. (His predecessor, former U.S. Rep. Steve Bartlett, had served on the House Banking Committee.) Upon Pawlenty’s hiring, Bartlett touted his experience as governor and said he “can help take us to the next level. His efforts to bridge political and policy divides will serve to enhance the reputation of the financial services industry with customers and policy makers.”

A story from The Hill newspaper about Pawlenty’s hire revealed a different attitude: Washington lobbyists “were scratching their heads” over the move: “the choice of a former governor without a background in finance seemed a risky move for an industry facing the most sweeping regulatory overhaul since the Great Depression,” the story reads.

Speaking with The Hill, Pawlenty said “This is an industry that got their butt kicked. To the extent that they need something new and different and fresh, I think I bring that to the table… They could go back to the old model, which is ‘Go get some Washington insider to run a trade association,’ but candidly, how was that working for them?”

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Steven Mnuchin, Tim Pawlenty
Financial Services Roundtable
Tim Pawlenty, right, speaking with Treasury Secretary Steve Mnuchin.

To be sure, Pawlenty took the reins at FSR following a disastrous stretch for the financial industry: battered by the late-2000s crisis in nearly every respect, from falling bottom lines to bottomed-out public opinion of the industry, Wall Street was also confronted with navigating the new regulatory environment put into place by Dodd-Frank.

In Pawlenty, the financial services industry got a polished, photogenic advocate in D.C., someone comfortable making the rounds on TV and radio to press for their priorities. Behind the scenes, however, the former governor also brought to the group a sharp-elbowed political mentality that, at times, ran against the more reserved sensibilities of the FSR’s members.

In 2014, Bloomberg reported that Pawlenty was planning an “election-style” campaign against the CFPB, replete with billboards and online ads hammering the agency for the way it solicited complaints against financial institutions, which the FSR had criticized.

Before planning the campaign, Pawlenty reportedly did not consult member banks, who “did not want to needlessly antagonize an agency that polices them,” per Bloomberg’s Carter Dougherty. “Some members had anxiety,” Pawlenty conceded to Bloomberg. “It involved some risks.”

Nevertheless, Pawlenty’s pay increased from $1.6 million in 2013 to $2.77 million in 2016, reflecting satisfaction in his performance — and perhaps the rising fortunes of the industry as it rebounded from the financial crisis in recent years. (The FSR did not respond to requests for comment for this story.)

Pawlenty’s final quarter as CEO of the FSR reflected how complete Wall Street’s turnaround had been: the last three months of 2017 saw U.S. banking institutions with their best single quarter ever, pulling in $48.3 billion in profit.

Knights of the Roundtable

Behind the scenes of Pawlenty’s TV appearances and the organization’s sharp press releases, the FSR went to work bankrolling campaigns to fight for Wall Street-friendly policy.

In Pawlenty’s years at the FSR, the group spent $27 million in lobbying expenses. Last year, it spent $5 million, largely in efforts to shape the GOP’s tax legislation. According to the group’s 2017 in review, they successfully advocated for “immediately lowering the corporate tax rate, eliminating the corporate [alternative minimum tax], and ensuring everyday investors were protected from being hit with higher taxes through a first-in first-out requirement.”

The group also continued to lobby on provisions related to Dodd-Frank, including the GOP-backed CHOICE Act, which would roll back large portions of the law. It also lobbied on cybersecurity policy and to delay implementation of Department of Labor’s fiduciary rule, which legally requires retirement account advisers to act in their clients’ best interests.

FSR has also expended a considerable amount of its own resources to support the campaigns of supportive and/or influential members of Congress. In 2014 and 2016, the FSR’s PAC gave $331,000 and $302,000, respectively, to congressional campaigns.

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The records show FSR has strongly favored Republicans: in both of those cycles, two-thirds of contributions went to GOP candidates, while one-third went to Democrats. In this election cycle, the FSR has contributed $174,000, with three-quarters of that money going to Republicans.

Sixth District Rep. Tom Emmer, who serves on the Financial Services Committee, has received $6,000 from FSR’s PAC while Pawlenty has been at the helm of the group. Third District Rep. Erik Paulsen has received $5,000, while 2nd District Rep. Jason Lewis has received $2,500. (In total, the FSR gave $24,500 to Minnesota Republicans, and $0 to Minnesota Democrats, in the 2014, 2016 and 2018 cycles.)

Democrats from other states did receive contributions from the FSR, but they tended to be moderates, or lawmakers with positions on relevant committees, like Banking and Financial Services.

Those expensive campaigns to influence policy and policymakers paid off, as did the efforts of fellow trade groups like the American Banking Association and the banks themselves, who invest millions into running their own sophisticated D.C. government affairs operations.

In the years since Dodd-Frank’s passage, the financial industry has gradually notched significant policy wins. In particular, pro-Wall Street lobbiers succeeded in easing the impact of the Dodd-Frank law and ensuring it would be implemented in a way that better reflected the industry’s priorities.

A retrospective from the Wall Street Journal on the fourth anniversary of the law’s passage polled experts, several of whom agreed that Wall Street, not Washington, won out in influencing key parts of the law, particularly reform of derivatives and on the so-called Volcker Rule, which prohibits banks from using customers’ deposit funds for investing.

Pawlenty’s final year at the FSR, 2017, put an exclamation point on Wall Street’s recent gains, as the financial industry worked with Republicans to secure long-desired political goals, from the tax legislation to striking CFPB’s arbitration rule to the passage of the CHOICE Act.

Who would complain?

When Pawlenty announced his departure from the FSR, Politico reported that his exit “raised questions in the banking industry about the future of the Financial Services Roundtable at a time when the group is undergoing a major overhaul,” referring to its decision to limit membership to a small group of high-value banks.

In a statement announcing his exit, Pawlenty said “FSR is now poised to provide even more focused and effective service for our members going forward… Over the past five years, I have enjoyed leading FSR’s efforts to improve cybersecurity, retirement savings, consumer-friendly financial service technology and financial literacy.”

Through his longtime adviser Brian McClung, the former governor — who is in discussions this week with advisers and supporters about his political future — declined to speak with MinnPost for this article.

But McClung provided this statement about Pawlenty’s time in Washington: “Leading FSR gave Tim Pawlenty a much deeper perspective regarding job creation, the American economy, emerging technology and the need to invest in cybersecurity. Financial services is an important sector in our state, with nearly 200,000 hardworking Minnesotans directly employed in the industry.”

“Only a petty partisan,” McClung said, “would complain about someone leaving a private sector job for public service.”