‘Titans’ out as banks build new lobby group

Bloomberg

An effort by the nation’s largest banks to boost their lobbying clout in Washington is leaving three industry titans on the sidelines: Goldman Sachs Group Inc, Morgan Stanley and Credit Suisse Group AG.
Though the three firms were initially slated to be included in a newly merged trade association, they were blocked after some executives argued that adding more mega-banks would highlight the stigma that Wall Street still carries from the 2008 financial crisis. Others said that members should be limited to consumer-oriented lenders.
The decision is part of a sometimes fractious debate playing out as high-profile CEOs, including Bank of America Corp.’s Brian Moynihan and JPMorgan Chase & Co.’s Jamie Dimon, work to combine the Financial Services Roundtable and the Clearing House Association. The tie-up, which comes at a time when banks are eager to capitalise on the Trump
administration’s business-friendly agenda, has dredged up long-standing fissures
over how to improve the industry’s image and rebuild its political standing.
While the deal is still expected to go forward, disagreements have bogged down the launch of the new entity, according to people with direct knowledge of the negotiations. The tensions have even prompted some regional banks to discuss dropping out, the people added.
“Such is the nature of mergers,” said Steve Bartlett, a
former Texas Republican congressman who ran the roundtable from 1999 to 2012 and vastly increased its membership. “Mergers are hard.”
PNC Financial Services Group Inc. Chief Executive Officer William Demchak, who is helping put the associations together, said in an interview that he was “a bit surprised” to hear about any disputes. “From where I sit, in talking with the CEOs every week, this has gone well,” he said.
Demchak attributed any unhappiness to employees at banks who participate in”sub-groups” at the two organizations and are worried their work might be curtailed. The combination has been slowed, he added, mostly by logistical issues like changing payroll systems and choosing office space. While he confirmed Goldman Sachs, Morgan Stanley and Credit Suisse won’t be part of the new organisation when it opens its doors, he said no final decision has been made to exclude them.

SLOW PROCESS
This account is drawn from interviews with more than a dozen people who have been closely involved in the talks and merger planning. They asked for anonymity to discuss more freely the sensitive and high-level discussions.
Much of the deliberations are being handled by the bank CEOs themselves, the people said — perhaps the main reason that the process has been slow. Moynihan, the roundtable’s chairman, is leading the effort. He has also brought in a team of Bank of America mergers and acquisitions specialists to help push things along, the people said.
Other key players are SunTrust Banks Inc. CEO Bill Rogers, Demchak and Dimon. Rogers is the chairman-elect of the roundtable and Demchak heads the Clearing House board of directors.
Dimon has taken great interest in Washington in recent years and has agitated to apply some of the rigor that is common on Wall Street for evaluating performance and fostering accountability to the numerous bank trade associations, the people said. He also brings some experience with shake-ups, having spent the past 18 months overhauling the Business Roundtable, a trade group for CEOs from many different industries, where he is chairman of the board.

‘PRO-GROWTH POLICIES’
Spokesmen for JPMorgan and SunTrust declined to comment on the private deliberations. Moynihan, in a stat- ement, said: “The CEOs of the member companies agree that we’re creating an organisation that will produce high quality research and be an important advocate for pro-growth
policies and a safe, sound banking system.”
On the membership question, Dimon aligned with Rogers in contending that Goldman Sachs, Morgan Stanley and Credit Suisse should be kept out, the people said. Greg Baer, who runs the Clearing House and will head the new association, was amenable to their inclusion and Moynihan was agnostic, according to the people.
Dimon thought the three firms wouldn’t necessarily fit because they are mostly known for underwriting and trading securities, rather than retail banking. He also noted that none had been a member of the roundtable or the Clearing House. The new group should figure out its mission before adding any other companies, he argued.