“(Reuters) – The Obama administration is battling Wall Street to win the support of dozens of Democrat lawmakers over rules that could rein in brokers who handle trillions of dollars in retirement accounts.
“President Barack Obama on Monday called on the Department of Labor to write new rules for brokers that seek to reduce conflicts of interest and “hidden fees” the White House says cost Americans $17 billion from their retirement plans every year. He portrayed the reform as a central tenet of middle-class economics that would help Americans “retire with dignity.”
“What Obama didn’t mention is that more than 100 current and former Democrats in the U.S. House of Representative and Senate have raised concerns in the past about attempts to draft such rules, either through comment letters or by voting for legislation that would delay such a reform.
“They’ve warned that overly strict rules could limit retirement products available to investors because fewer brokerages would be prepared to offer individual retirement accounts, or advise lower-income Americans on them.
“Wall Street’s argument is that the new rules mean that more investors would pay fees based on a percentage of their assets, instead of commissions. That would hurt profits on such products and as a result brokers would pull back from offering accounts and advice, financial industry groups say.
“The Department of Labor has been trying for about four years to adopt rules designed to rein in conflicts that may lead brokers to steer investors into more expensive retirement investments and charge higher commissions or fees.
“But fierce lobbying forced the department to scrap its first draft in 2011 and start from scratch.
“Three of the leading trade groups – the National Association of Insurance and Financial Advisors, the Securities Industry and Financial Markets Association and the FSI – have collectively spent about $16.4 million over the past two years lobbying on this and other issues, according to Senate lobbying records.
“Democrats who wrote comment letters to the department often cited the same arguments with strikingly similar language.
“Dennis Kelleher, the head of the pro-regulatory reform group Better Markets, said many of the letters “appear to have been drafted by Wall Street lobbyists.”
“The financial services lobbyist said the industry fears a revised plan may not alleviate its concerns.
“For instance, the Financial Services Roundtable on Feb. 17 circulated a paper drafted by the law firm Debevoise and Plimpton which laid out counterarguments, after a memo drafted by White House economists was leaked to the media.”
Read the full Reuters article by Sarah N. Lynch and Suzanne Barlyn here.