Bloomberg this morning takes a hard look on the Wall Street lobby, writing that it’s “suiting up for a battle to protect one of its richest fiefdoms, the $592 trillion over-the-counter derivatives market.”

This is one of the most important battles to be fought and it’s being waged with surprising agility by the Obama administration so far, something Bloomberg calls a “bad omen” for the industry. It reports that the administration kept its derivatives-reform plan under wraps until just before it released it last month in order to get a head start on the inevitable Brooks Brothers-clad zombie horde staggering down from K Street.

Robert Pickel, head of the International Swaps and Derivatives Association, and Scott DeFife, chief lobbyist for the Securities Industry and Financial Markets Association, were meeting with Deputy Treasury Secretary Neal Wolin on Aug. 11, when Wolin mentioned that the proposals would be sent to Congress in 60 minutes, according to a person familiar with the meeting. The sudden notice was not what they were used to.

Bloomberg does a good job of explaining why Wall Street is so opposed to reform. Obviously, it wants to be left alone to run amok at will, but it’s revealing to look at the specifics. Putting derivatives on an exchange will bring about a more efficient market and that’s bad for Wall Street, which makes billions of dollars a year off the information advantage they have in the derivatives market.

When a company or investor wants to enter into a swap, the bank checks internal pricing sources to determine the cost of making the opposite trade with another bank, which would enable it to eliminate any exposure on the trade. Armed with that information, it then offers a higher swap price to the client, allowing the bank to pocket a profit.

That information asymmetry would be sharply curtailed by introducing exchanges, something Bloomberg notes has already happened in the bond markets.

This is a really well-reported story with lots of context and detail, with a Bear Stearns refugee dishing on the industry (“often these products are sold, not bought”) and a caveat that the administration’s plans are viewed as insufficient by some big investors who think credit-default swaps should be sharply restricted. And it reminds us of past lobbying victories like the infamous 2000 Commodity Futures Modernization Act.

And a special nod to Bloomberg for reporting on the reporting. It lets a little light in on the way the powerful influence the media:

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.

And it reports on other lobbying efforts:

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, called “Derivatives 101,” featured speakers from Cargill Inc. and Devon Energy Corp., so-called end-users that don’t 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.

One wonders how businesses ever managed to manage their day-to-day risks before the advent of financial derivatives.

And it ends on a pessimistic, or should I say—realistic—note.

For Wall Street, the longer it takes to get legislation passed the better. As stock market values and the economy improve, anger at banks is likely to subside.

“If we don’t pass it by early 2010, we get into the congressional election period where this is just too controversial an issue,” Peabody said. “You’ve got too many different financial interests with opposing views that Congress just isn’t going to go out on a limb and pass it and put their re-election in jeopardy. We don’t think we’re going to see legislation until 2011.”

Nice work by Bloomberg.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.