Wall Street is suiting up for a battle to protect one of its richest business lines, the $592 trillion over-the-counter derivatives market, which is facing the biggest overhaul since its creation 30 years ago.

Five U.S. commercial banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp., are on track to earn more than $35 billion this year trading unregulated derivatives contracts. At stake is how much of that business they and other dealers will be able to keep.

"Business models of the larger dealers have such a paucity of opportunities for profit that they have to defend the last great frontier for double-digit, even triple-digit returns," said Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, Calif., firm that analyzes banks for investors.

The Washington fight, conducted mostly behind closed doors, has been overshadowed by the noisy debate over health care. That's fine with investment bankers, who for years quietly wielded their financial and lobbying clout on Capitol Hill to kill efforts to regulate derivatives.

This time could be different. The reason: widespread public and congressional anger over the role that derivatives such as credit-default swaps played in the worst financial crisis since the Great Depression.

The Obama proposal an effort to gain oversight and control of the market for derivatives traded over the counter. The so-called OTC market consists of privately negotiated contracts that enable companies or investors to hedge against or bet on swings in the value of bonds, interest rates, currencies, commodities or stocks. Unlike exchanges, the business is unregulated and prices are not public.

In recent months Wall Street firms have embarked on a lobbying campaign to influence the media and legislators.

Goldman Sachs held an off-the-record seminar for reporters in April to explain how credit-default swaps work. Deutsche Bank has offered to put clients in touch with media to discuss concerns about increased capital and margin requirements.

JPMorgan Chase has mobilized some corporate clients, advising them that the proposed changes could hurt their ability to hedge against losses, according to a person familiar with the matter.

The banks "are saying everyone thinks we're biased, so you have to go out there and talk about it," said Paul Zubulake, a senior analyst at Aite Group LLC, a research and consulting firm based in Boston.

On Aug. 24, while lawmakers were on recess, the U.S. Chamber of Commerce organized a briefing for congressional staffers aimed at explaining how companies use derivatives to manage risk. The session, "Derivatives 101," featured speakers from Cargill Inc. and Devon Energy Corp., so-called end users that do not represent banks, said Jason Matthews, who leads the group's lobbying efforts on financial services issues.

The organization called the briefing because "some proposals would make it very difficult for many companies, including manufacturers, energy companies and commercial real estate owners and developers to use over-the-counter derivatives to manage the risks of their day-to-day business," Matthews said in his e-mail invitation to the staffers.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.