WASHINGTON - Once the industry had just one lobbying behemoth, and its name was Citigroup.
Nearly single-handedly, the New York company persuaded Congress to pull the trigger on legislation that had languished for decades to permit common ownership of banks, brokers, and insurers. Without passage of the Gramm-Leach-Bliley Act of 1999, the previous year's merger of Citicorp and Travelers Group would have required massive divestitures.
"Citi, they are in a class by themselves," said a veteran lobbyist at another financial institution. "They are big risk-takers. Who else would have bought Travelers and then said, 'We're going to change the law' ?"
But Citigroup's class is growing. Today there are two other companies with more than $1 trillion of assets: J.P. Morgan Chase & Co. and Bank of America Corp.
JPMorgan Chase is already taking steps to build its lobbying prowess to rival Citi's, while B of A is reportedly weighing such a move.
Asset size and deep pockets are not all that set the Big Three apart. All three, particularly B of A, have a broad geographic reach that puts them, their employees, and their customers in hundreds of congressional districts and makes them important constituents of most governors.
What's more, ever-expanding business lines are moving these companies into larger areas of congressional jurisdiction - far beyond the banking committees.
"The biggest three might not have more weight on a particular issue, but they will influence more issues," said one congressional aide.
Take Citi. It is registered to lobby on dozens more bills than any other banking company. The issues range from traditional banking, financial, and tax legislation to trade, immigration, and outsourcing, reflecting its international operations.
Still, it may not be until the Big Three differ with the rest of the industry on public policy that their clout is truly tested. A possible example could be the federal law barring any one bank from holding more than 10% of the nation's deposits. When that cap constrains their growth, the trio could band together for change.
But such a must-win fight is not on the immediate horizon.
There are lobbyists and congressional staff members who say they do not think the companies have any outsized leverage.
"When you go into meetings with lobbyists, you don't think to yourself, 'Oh my gosh, this is a trillion-dollar bank.' You lump all larger banks together," said another aide to a lawmaker active on banking issues.
In fact, some said that consolidation may actually have weakened the largest banks' power.
"Now that there are fewer big banks, they may have less influence, because instead of six or eight large banks saying they want something, now there are only three," a House staff member said. "That creates a lot less noise."
It is surprising how many people here - from congressional aides to private-sector lobbyists to trade group officials - have not grasped how the Big Three overshadow the rest of the industry.
"We tend to think of the top 10 banks as being all the same players," said a veteran lobbyist. "Wachovia is the same as Wamu, and that's the same as U.S. Bancorp."
Not exactly. The biggest of that threesome is Wachovia Corp., and with $471 billion of assets, it's about $1 trillion smaller than Citi.
The power of the Big Three lies in their potential. Today none has either the reason or the infrastructure to fully flex the muscle that could be applied at both ends of Pennsylvania Avenue.
First Among Equals
Few play the lobbying game better than Citi.
"There is not a weakness that you could point to at Citi like you can at the others," said one of the roughly dozen congressional aides interviewed for this story. "Plus, they have really nice offices," he said half-jokingly, referring to Citi's expansive suite on Pennsylvania Avenue, halfway between the White House and Capitol Hill.
Citi has always devoted more resources to government relations than other large banks, and it has had an even higher profile since it hired the White House lobbyist Nick Calio nearly two years ago. As the senior vice president for global government affairs, Mr. Calio has a seat on Citi's management committee and reports to Charles O. Prince, its chief executive, and Robert B. Willumstad, its president and chief operating officer.
Mr. Calio brought with him a number of well-connected lobbyists from the Bush White House, including Heather Wingate as the deputy director, Michael Conway as the chief of staff, and Christine Burgeson as a lobbyist.
The lead Democrat in Citi's GOP-heavy lobbying shop is James Ryan, a former senior aide to Senate Minority Whip Harry Reid, D-Nev. Mr. Calio hired Mr. Ryan in May 2003.
"Rarely does a week go by when I don't hear from Citi," said an aide to a senior lawmaker with jurisdiction over financial services issues. "They have so many people, you hear from them more and see them more, so I always know what they want."
Citi has an equally impressive state lobbying operation, headed by Colin Dowling, who has 12 regional and local lobbyists covering nine regions.
It has a nationwide credit card operation, but it has the most limited retail network of the Big Three, with branches in nine states and the District of Columbia. Still, it spends more than any other banking company on lobbying, according to the Center for Responsive Politics, a nonpartisan campaign finance watchdog.
Last year Citi reported nine federal lobbyists and $7.8 million of lobbying expenses. During the first half it also had on retainer seven law and lobbying firms that it paid just over $650,000, according to federal reports.
Outside lawyers and lobbyists advise Citi on matters that include government-sponsored enterprise and class action reform, federal preemption for national banks, mutual fund regulation, the Basel II capital accords, Internet gambling, privacy, predatory lending, and financial literacy.
Many of the outsiders have ties to the Bush administration. They include Brian Conklin and Anne Phelps, both former special assistants to the President, who are now with Washington Council Ernst & Young; Jonathan Talisman, a former Treasury assistant secretary for tax policy, now with Capitol Tax Partners LLP; and J. Patrick Cave, a former Treasury deputy assistant secretary, now with Federalist Group LLC.
Citi also influences Washington through political contributions. Its employees have given $1.7 million this election cycle, with 55% going to Democrats and 45% to Republicans, according to the Center for Responsive Politics.
It joins some industry coalitions but generally does not work with its counterparts on policy issues, because, as one insider said, "half the time the other banks are wrong."
"I don't think … [Mr. Calio] goes it alone for the sake of going it alone," this source said. "I think he goes it alone because he knows he is right. He's got incredible connections; he's a great legislative strategist. He's not going to get bogged down with everyone else. He doesn't need them."
A case in point: Last year the industry was mulling whether to lobby Congress to use a bill reauthorizing the national credit reporting system to prohibit states from setting their own customer privacy rules. Citi was perhaps the first to decide not to go for a broad bill, while other big banks were considering following the Financial Services Roundtable, which was pushing for a new preemption - despite signals from the administration that it favored a narrow approach. Most of the rest of the industry ended up going with Citi.
It already had a large Washington operation when it hired Mr. Calio in late 2002. But the shop had lost some luster after pulling off the lobbying coup of the century with the enactment of Gramm-Leach-Bliley. By 2000, Citigroup was paying less attention to federal affairs and donating less money to politicians. It spent $4.1 million on lobbying that year, less than half its outlay in 1997, according to the Center for Responsive Politics.
In the months before hiring Mr. Calio, Citi was taking a public relations licking for its equity analysts' practices, its allocations of initial public offerings, and the off-balance-sheet financing it arranged for Enron Corp. It needed a lobbyist with sterling GOP credentials to offset the outspoken Democrats at the bank, like then-CEO Sanford I. Weill and Robert Rubin, a Treasury Secretary under President Clinton.
Roger Levy, the lead lobbyist at the time and a 25-year veteran of Citi, got much of the internal blame for the hits it took, though many said he was unfairly made a scapegoat. A month after Mr. Calio began working at Citi, Mr. Levy left to become the director of the legislative financial services group at Piper Rudnick LLP.
A Citi spokeswoman would not comment for this story.
In Transition
Now that its $58 billion purchase of Bank One Corp. has put it into the trillion-dollar-club, JPMorgan Chase is upgrading its lobbying operation along the lines of Citi's.
Its new geography puts it in touch with far more policymakers: JPMorgan Chase now operates 2,300 branches in 17 states and services 87 million credit cards.
On Oct. 1 it hired its own big-name Republican lobbyist, the former New York congressman Rick Lazio. He had been running the Financial Services Forum since leaving the House to make his unsuccessful run for a U.S. Senate seat against Hillary Rodham Clinton in 2000.
As Mr. Calio's does for Citi, Mr. Lazio's party ties balance the Democratic ones of JPMorgan Chase's president, James Dimon.
As the executive vice president of global government relations and public policy and a member of the executive committee, Mr. Lazio reports directly to JPMorgan Chase's chairman and chief executive, William B. Harrison Jr. In two years his boss will be Mr. Dimon, who supported Sen. Clinton in her race against Mr. Lazio.
While Mr. Calio is based here, Mr. Lazio is based in New York. Both travel frequently and share a goal of providing their companies with big-picture strategy across the country and around the world.
Mr. Lazio would not discuss his agenda for this story. "I'm still in the stage where I'm meeting with people and doing assessments," he said. A JPMorgan Chase spokesman also would not comment.
Mr. Lazio faces a hefty task.
A number of people on and off Capitol Hill described his company's operation as having some talented staff in Washington but as being weakly led by the top lobbyist, Tom Block, from its New York headquarters.
After the veteran lobbyist Cory Strupp - who shuttled between Washington and New York - retired from the company last year, it hired Stephen Ruhlen in D.C., who had worked for Vice President Cheney. With the Bank One purchase, JPMorgan Chase inherited Bank One's lead lobbyist, Penny Rostow; today she and Mr. Ruhlen are co-heads of federal government relations here. They are assisted by Gayle Jennings and Alan Keller.
As soon as JPMorgan Chase announced Sept. 23 that it was hiring Mr. Lazio, he went under the microscope on Capitol Hill and on the K Street lobbying corridor.
Some criticize him as a lightweight on policy issues who avoided tough votes as a member of the House Banking Committee. Others say that he will bring JPMorgan Chase the access and prestige that only a former congressman can provide, and that his reputation for being friendly, down-to-earth, and accessible will serve his company well.
Still, many question whether there are too many chiefs in this lobbying shop.
"It's going to be really interesting to see who sticks around, because you have all sorts of people there below the head of government affairs who could be running a major financial institution's Washington office," said a lobbyist for another large financial company.
Mr. Block is widely expected to retire soon. But a JPMorgan Chase spokeswoman said Wednesday, "Tom Block is part of Rick's new team, and he has no plans to retire."
JPMorgan Chase reported $6.7 million of lobbying expenditures last year. In the first half of this year it had one outside lobbying firm, Clark & Weinstock, on retainer for $160,000 to work on matters related to the Bank One purchase, trade and international tax issues, and class action and patent reform.
Two of the firm's lobbyists who are registered to work on JPMorgan Chase's behalf are Vin Weber, a former Republican congressman from Minnesota, and Dirksen Lehman, who had worked for President Bush as a special assistant for legislative affairs.
JPMorgan Chase's political involvement includes $1.6 million of employee contributions to federal candidates and parties - 51% to Democrats and 49% to Republicans. Bank One employees gave $868,000, split the same way.
LESS SPLASHY
B of A's lobbying shop is disproportionately small for the size and scope of its network: branches in 29 states and the District of Columbia.
The Charlotte company, which has just two registered lobbyists, reported $656,000 of lobbying expenditures last year. It spent less than $40,000 on outside expertise in the first half, according to federal reports. One of the three firms it engaged was Reed Smith LLP, which worked on unspecified claims against the former government of Iraq.
Still, B of A's approximately 185,000 employees are the industry's most generous contributors to political campaigns. So far this election cycle they have given $1.85 million to federal candidates - 53% to Republicans and 47% to Democrats.
But the company has definitely downplayed government relations under CEO Kenneth D. Lewis, who is considered to be much more low-key politically than his predecessor, Hugh L. McColl Jr., an active Democrat.
B of A appears to be considering expanding its lobbying operations in Washington. Executives have been soliciting advice about how to develop the operation, sources say, but it is not clear if they have decided to do so.
"They aren't playing in Washington at the level they used to. They have a very small office, and they do not retain a lot of outsider help," a lobbyist for another firm said. "They need to decide if they want to be a serious player."
A spokeswoman would not comment on its plans.
If B of A does decide to pump up its shop, it is not clear if it will hire a lobbyist with star power, as Citi and JPMorgan Chase did, or expand its tiny stable with more shoe-leather lobbyists, or both.
"You don't have to have a brand-name personality," a veteran lobbyist said. "If I had to pick between a $2 million show horse or a $250,000 workhorse, I'd pick the workhorse. If you have a flashy kind of lobbyist, it gives you entree to people and places the workhorse may not have, but if the workhorse is willing to work long and hard enough," the same result can be achieved.
Many observers praise B of A's two lobbyists, Jeanne-Marie Murphy and Edward J. Hill, as talented and effective. "They cover as much ground as the larger shops," said a lobbyist for another major financial company. "They are really engaged, going to coalition meetings all the time and really putting in a big effort."
But Ms. Murphy's background as a credit union lobbyist hardly puts her in the same league as Mr. Calio and Mr. Lazio.
Ms. Murphy reports to the director of public policy, Jim Mahoney, who had been a spokesman for FleetBoston before B of A bought it in April.
B of A did not retain Fleet's senior vice president and director federal government relations, Deirdre B. Phillips.
