WASHINTON – A battle over the heart and soul of the Senate Banking Committee is brewing if Democrats succeed in winning back control of the chamber in the election.
Such a victory would likely give the reins of the banking panel to Sen. Sherrod Brown, D-Ohio, and add momentum to efforts to add more progressives like he and Sen. Elizabeth Warren, D-Mass., to the committee.
Liberal groups have already sent a letter to Sen. Chuck Schumer, who is expected to become Majority Leader if Democrats win, warning him to appoint senators to the panel who favor Wall Street reform.
"The committee already conspicuously harbors several of the Democratic Caucus's most conservative, Wall Street-friendly members," said the letter, which was signed by several progressive groups, including Rootstrikers, a Wall Street reform wing of online activist group Demand Progress. "For the party to live up to the promise of its new platform, which demands a stronger financial regulatory framework, the Senate Banking Committee next session must include more members with a demonstrated commitment to the work of financial reform."
But such demands are not easily granted, and other factors, including the 2018 midterm elections, are expected to play an outsized role in who joins the panel.
At issue is the membership of the 22-member committee, one of the most prominent panels in the Senate which serves as a hugely influential voice in banking policy, not only for its legislative activities, but also its oversight and confirmation powers. Most key banking policy nominations will have to be cleared by the committee, including the heads of the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. when their leaders' terms expire over the next few years.
Currently, Republicans hold a two-seat majority on the panel, 12 to 10, reflecting the divide in control in the chamber at large. But the GOP is bracing for several potential losses in the election, particularly as Republican presidential candidate Donald Trump's poll numbers have dropped in key battleground states like Pennsylvania, where GOP Sen. Pat Toomey, a banking panel member, is waging a challenging reelection campaign.
Many political analysts are predicting that Democrats are likely to pick up enough seats to win the chamber, but the final division is liable to be close. Democrats will probably hold just a one-member majority on the Senate Banking Committee.
"If the Democrats do win the Senate, there's going to be a lot of pressure on them to get things done," said Geoff Bacino, a former NCUA board member and now a partner at Bacino & Associates in Washington. "For the most part, this country is tired of the way things are going and wants to see things happen. But if the Democrats want to maintain a majority, they're going to have to be sure they get things done – it can't just be 'We dedicated this museum or this post office or this road.'"
One area where the left side of the aisle would be unlikely to make too many changes, however, said Bacino, is the CFPB. Not only are Brown and CFPB Director Richard Cordray both from Ohio, but one of Brown's chief allies in the Senate is Elizabeth Warren, the Massachusetts senator who helped create the bureau.
"So put those things together and I don't think you see any real action taken to limit the authority and the power of the CFPB," said Bacino.
With Brown in charge, "it would be very difficult in a Democrat-controlled Senate banking Committee to see much in the way of legislative changes directed at the Consumer Financial Protection Bureau that would in any way lessen their authority," opined John McKechnie, a partner at Washington-based consulting firm Total Spectrum and a former official at CUNA and NCUA. And while a recent court ruling challenged the bureau's leadership structure, McKechnie pointed out that based on Brown's previous public statements, once CFPB's appeals process is exhausted, "If there are some legislative attempts to change the structure of the CFPB, I would doubt that Sherrod Brown would look on those changes favorably."
Tricky Balance
As it stands, Brown would likely find it tricky to balance the calls from progressives like Warren and Sen. Jeff Merkley, D-Ore., on the one hand and moderates like Sens. Heidi Heitkamp, D-N.D., and Mark Warner, D-Va., on the other.
"I could imagine a world in which the chair is just trying to keep his own caucus members in line for the next two years," said Kurt Walters, campaign director at Rootstrikers.
Schumer and Brown must also keep an eye on the 2018 campaign, which is not as favorable to Senate Democrats. Five Democratic members of the current panel are up for reelection. That could make them eager to deliver something to constituents, particularly credit unions and community bankers back home who are anxious for regulatory relief.
"Next cycle, a lot of moderate Democrats will be up for reelection and I am sure they will be looking to get something done in the short-term on regulatory relief to show that they can get some things done," said Paul Merski, executive vice president of congressional relations at the Independent Community Bankers of America.
And though Brown is a progressive, he also may seek to help the large regional banks that have big presences in his state, including Fifth Third Bank, Keycorp and Huntington.
"It is not like he is from some true-blue state," said Walters. "Ohio is a swing-state that is trending red, if anything, and still, he is one of the strongest voices on being tough on Wall Street and standing up to the big banks."
Dealmaker
But who gets added to the committee is shaping up to be a significant challenge for Schumer. A spot on the banking committee is excellent for fundraising, something vulnerable Democrats will need ahead of the next election cycle.
"As soon as the election is over, they will turn their sights to, 'Okay, we just won back the majority, but how do we retain it two years from now?'" said Timothy Jenkins, a partner at Nossaman. "The Democratic Leaders are going to want to reward the new members who won the battleground races with good committee assignments, including the Banking Committee. But this could be tempered by the laser-focus on protecting the most vulnerable members up for re-election in 2018, including by preserving and enhancing their committee slots."
Progressives would like to see senators like Tammy Baldwin, D-Wisc., who has been critical of the "revolving door" from Wall Street or Kamala Harris, who is running for Senate in California, be appointed to the committee.
But the banking industry favors policymakers like Sen. Gary Peters D-Mich., a moderate who isn't up for election until 2020 and was previously an active member on the House Financial Services Committee when he was in that chamber. Likewise, Rep. Patrick Murphy, D-Fla., is running against Sen. Marco Rubio, R-Fla., and has banking experience on the financial services panel. Additionally, Evan Bayh, another moderate who is running for Senate in Indiana, was on the Banking Committee before stepping down several years ago.
Progressives are also wary of Schumer himself, who has tight ties with banks given that his district includes Wall Street. Some argue that he would be unlikely to appoint more policymakers that want to break up the big banks to the panel.
A more moderate panel could also benefit Hillary Clinton if she wins the presidency, helping her to resist efforts by Warren and others to push her to the left, particularly on appointments.
But Bacino said that Scumer may be "a little bit more of a horsetrader and dealer than some of the folks that have been in leadership positions in the past. It wouldn't surprise me if he understand very explicitly that Democrats are going to have to show something for their two years in control and they work to cut some deals across the aisle."
But CUs looking for reg relief may find it in short supply.
"As of now, I haven't seen a lot on the Democratic side in terms of reg relief that if I were a credit union that would tell me 'There's help on the horizon,'" added Bacino. The movement "may need to work a little harder on the committee level to get them to understand the importance of how overregulation and increased burden and cost really does impact credit unions of all sizes."
Regardless of which party controls the Senate, said McKechnie, CUs will "have an opportunity to push the case that we are the pro-consumer alternative to banks – and we have a lot of reasons to feel confident that that message is going to resonate, especially on the Democratic side."
Even if reg relief is harder to come by should Democrats control the Senate banking panel, he added, there are "plenty of opportunities to work with members on both sides to persuade them that credit unions can and should do more in the marketplace to help consumers, small businesses and minorities. Those things should all resonate especially well on the Democratic side, but there's got to be room on the Republican side for that message, too."
