Republicans picked up at least 8 seats in the Senate and at least a dozen seats in the House, taking control of the both chambers and surpassing most GOP expectations. Assuming Congress completes work on a multi-year reauthorization of TRIA before year end, the top financial services issues facing the 114th Congress are expected to be GSE Reform and Dodd Frank Reform. As they take control of the Senate, Republicans will be short of the 60 votes needed to break Democratic filibusters. Plus, the President is unlikely to support efforts to scale back Dodd Frank financial reforms enacted during his first term. So, the legislative path forward will involve dexterity and compromise, despite Republican control of both chambers.
Lame Duck Session Begins November 12
Congress will reconvene on November 12, but the “lame-duck” session is scheduled to adjourn by December 12th, with only 15 legislative days remaining in the year. A number of items remain on the legislative agenda, but there are concerns that less will be done in the few remaining weeks if House Republicans decide to wait until the next Congress to strike a better deal on some of the outstanding issues.
- Final Push for TRIA Reauthorization: An extension of the Terrorism Risk Insurance Act (TRIA) could be scheduled for possible consideration if consensus can be reached between House and Senate leaders. Republicans have yet to resolve internal disagreements and pass a House Financial Services Committee-approved bill. It is not clear what the next steps are for Financial Services Committee Chairman Jeb Hensarling (R-TX) in terms of adapting the House bill to something that will garner adequate votes to pass the House. In July, the Senate voted 93 to 4 to reauthorize TRIA for seven years, while making significant reforms to the program. However, House Republicans have been at odds over how much to increase insurers’ potential financial exposure to terrorism risks. Nonetheless, there is broad bipartisan support in the House for an extension should an acceptable bill be brought to the floor. House Speaker John Boehner (R-OH) supports enactment of a long-term TRIA extension, but he recently warned that, “Without action on such a measure, a short-term extension may be necessary.” The Roundtable continues to encourage lawmakers to take action on a multi-year extension before year-end. Our broad based, multi-industry policyholder coalition (CIAT) is planning a “fly-in” on November 19th to press lawmakers on this issue. We welcome your participation.
- In addition, Congress must pass an extension of the continuing resolution (CR) or an omnibus appropriations bill to keep the federal government operating beyond December 11th.
- As for banking matters, there are at least ten Dodd-Frank regulatory reform bills that have passed the House with strong bipartisan votes. It is not clear what action may be taken on these measures in the lame-duck.
Senate Banking Committee Changes
In addition to the return of Sen. Richard Shelby (R-AL) as chairman, there will be a number of changes in the make-up of the Senate Banking Committee. Current Chairman Tim Johnson (D-SD), Sens. Tom Coburn (R-OK) and Mike Johanns (R-NE) are retiring. Sen. Kay Hagan (D-NC) was defeated. Although there are elections still to be determined, the Republicans are expected to have at least a two-vote margin on the Committee. Sen. Shelby has in the past expressed concern over the onerous regulations that banks face and has presented legislation that would require a cost-benefit analysis be done before federal regulators put rules in effect. Sen. Sherrod Brown (D-OH) and Sen. Jack Reed (D-RI) are in contention to become the Ranking Member of the Committee to assume the position. ABA expects Sen. Brown to be selected for that position. Importantly, Sen. Shelby voted for the bi-partisan Senate TRIA extension bill (S.2244) twice — once in Committee and once on the Senate floor. He also made a speech at the mark up endorsing the Senate bill.
House Financial Services Committee
The current leadership of the House Financial Services Committee is expected to remain in place, although outgoing Agriculture Committee Chairman Frank Lucas (R-OK) has indicated that he will challenge Chairman Jeb Hensarling (R-TX). Subcommittee leadership will change with the departure of regulatory relief champion House Financial Institutions Subcommittee Chairman Shelley Moore Capito (R-WV), who successfully won a Senate seat. Most observers
expect Rep. Blaine Leutkemeyer (R-MO), a former community banker and a champion of many regulatory relief bills, to pursue this important subcommittee assignment. This subcommittee assignment will be made by Hensarling in December. There will also be change on the full Committee as nine members will leave the committee because they retired, sought higher office or were defeated. In a statement issued today, Chairman Hensarling vowed to work “with Republicans and Democrats alike to promote economic growth by fostering the deepest, most liquid, competitive, efficient, innovative and transparent capital markets the world has ever seen.”
Key Issues for the 114th Congress
- GSE REFORM: Six years after Fannie Mae and Freddie Mac were put into conservatorship, the housing finance system has still not been reformed — although the Senate Banking and House Financial Services Committees have reported out GSE reform bills. While there is broad recognition that GSE reform is needed, there is still no consensus on how to reform the GSEs. GSE reform is expected to remain a priority issue for Chairman Hensarling next Congress, but it is uncertain how the Senate will address this issue as the champions for GSE reform—Sen. Johnson and Sen. Crapo—will no longer be serving in leadership roles on the Committee. Sen. Richard Shelby (R-AL) — who is expected to return as chairman of the Senate Banking Committee next year — voted against the Johnson-Crapo measure earlier this year that would have established a new government agency to guarantee losses on certain mortgage backed securities.
- DODD-FRANK REFORM: Many of the statutory provisions of the Dodd-Frank Act are now in the regulatory implementation stage and under the control of the financial services regulators. Lawmakers on both sides of the aisle acknowledge that there are numerous unintended consequences associated with the pervasive Dodd-Frank Act. While House Republicans have passed a number of Dodd-Frank reform measures over the past four years, the Senate Banking Committee has been unable to move any legislation—including eight bills that passed the House with overwhelming bipartisan support. With Republicans in charge of the Senate Banking Committee, lawmakers are expected to be more aggressive in pushing for regulatory relief changes to Dodd-Frank, as well as enhanced Congressional oversight of regulatory action.
- FEDERAL RESERVE: As chairman, Sen. Shelby is expected to introduce a number of legislative proposals aimed at exerting more Congressional oversight over the Federal Reserve. He may endeavor to enact measures that would create a more rules-based approach, limit the expansion of the Consumer Financial Protection Bureau (CFPB) and Financial Stability Oversight Council (FSOC), audit the Fed, and establish a monetary commission. However, given the clout of the Federal Reserve, most don't expect major new Fed-related oversight or much impact on Fed policy from the legislative process. In addition, there will be some turnover in the Federal Reserve governors and in the presidents of the regional Federal Reserve banks — all of which require Senate confirmation.