6 key Senate races for bankers this fall

Published
  • August 05 2018, 10:00pm EDT
WASHINGTON — The midterm elections are shaping up to have a significant impact on the Senate’s banking policy agenda in the next Congress.

Five of the most contested races involve an incumbent who sits on the Senate Banking Committee, and a sixth race — for the Arizona seat being vacated by Republican Jeff Flake — includes a Democrat with industry support for her financial services positions in the House.

In three of the six races, the Democratic incumbents have touted their moderate views and support for the recent bill rolling back certain provisions of the Dodd-Frank Act, which became law in May. All three of those Democrats — Jon Tester of Montana, Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana — are fighting to keep their seats in states that President Trump won in 2016.

The Cook Political Report currently calls the North Dakota and Indiana races toss-ups, but is more favorable to Tester in Montana.

These races are key for bankers to watch. Tester, Heitkamp and Donnelly spent years negotiating a regulatory relief compromise with Banking Committee Chairman Mike Crapo, R-Idaho.

Geoffrey Skelley, associate editor of Sabato’s Crystal Ball, an elections newsletter published by the University of Virginia’s Center for Politics, said that those seats are “going to be tough to hold” but that “historically, the nonpresidential party incumbents have done a very good job in re-election.”

While he does not see the support from moderate Democrats on the regulatory relief bill as having much of an impact on their elections, he did say the incumbents could sell it as showing willingness to work across the aisle.

“That legislation could be used as an example of bipartisan policy, common-sense legislation,” Skelley said.

Brandon Barford, a partner at Beacon Policy Advisors, said banks’ support for incumbents will largely depend on the regions they represent.

“Usually if a member is reasonably cooperative, you’d rather have the devil you know than the devil you don’t,” Barford said.

But for the biggest banks that tend to dominate coastal states, Barford said, they “wouldn’t be too sad to see those incumbents go,” particularly if they have been critical of the banking industry.

Here is a breakdown of the six Senate races for bankers to watch:

Montana

Tester is defending his seat as a moderate Democrat in a state that Trump won by a sizable margin in 2016. He is running against Matt Rosendale, a state auditor who describes himself on his campaign website as a “Trump conservative, straight shooter, and a fighter for Montana.”

Rosendale has several high-profile endorsements, including Sens. Rand Paul, R-Ky., Ted Cruz, R-Texas, and Mike Lee, R-Utah. But the race is being labeled “Likely D” by the Cook Political Report. In addition to compromising with Republicans on bank regulatory issues, Tester has also been willing to support several of Trump’s appointees.

Tester’s support for banking industry causes did not start with the recent legislative debate over rolling back Dodd-Frank. In 2011, he spearheaded legislation to delay a Dodd-Frank provision — known as the Durbin amendment — that imposed a cap on debit swipe fees.

Tester more recently sided with fellow Democrats when they criticized Kathy Kraninger, the Trump administration’s nominee to run the Consumer Financial Protection Bureau, for not being direct enough in answering senators’ questions at her confirmation hearing. "You are going to be the head of this agency, your recommendations are going to count for something, so it would be really helpful for me to know where you're at," he said the hearing.

But bankers seem to approve of Tester. He was the first senator the American Bankers Association endorsed in its television advertisements for the upcoming midterms. And he’s the first Democrat to get an endorsement from the super-PAC Friends of Traditional Banking.

North Dakota

Heitkamp faces a tough re-election campaign in North Dakota, another state Trump took easily.

She was another key Democratic supporter of Crapo’s reg relief bill and was notably the only Democratic senator to attend the White House ceremony in which Trump signed the bill into law in May.

Vice President Mike Pence was on the campaign trail in North Dakota recently to support her Republican opponent, Rep. Kevin Cramer. But Trump has been hesitant to criticize the moderate senator, likely in the hope that she will support his legislative goals. Her name was also floated as a possible agriculture secretary in the Trump administration.

Heitkamp appeared to get an unlikely reprieve when the conservative billionaire Koch brothers reportedly said they were not endorsing Cramer in the race. (Americans for Prosperity, which is funded by the Koch brothers, had previously thanked Heitkamp for supporting reg relief.)

Meanwhile, although many of the Senate’s Democrats who supported the regulatory relief package warned Republicans that further regulatory relief measures would likely be a dead end, Heitkamp seemed open to voting for the third iteration of the Jumpstart Our Business Startups Act, or JOBS Act 3.0, which is mostly focused on capital markets but includes some banking provisions.

“It’s encouraging to see an overwhelming bipartisan package of financial reform bills come out of the House, and I intend to fully review it,” Heitkamp said in a statement after the JOBS Act 3.0 passed the House easily.

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Indiana

Like Heitkamp, Donnelly is one of the more moderate Democrats sitting on the Senate Banking Committee up for reelection in November. He also supported the regulatory relief package. Donnelly is considered a swing vote in the Senate and on banking-related issues.

After the Equifax data breach that potentially compromised the personal information of roughly 148 million Americans, Donnelly pushed to include two measures in the Senate regulatory relief bill aimed at protecting consumers in the credit reporting process. One was a bill to enable consumers to freeze and unfreeze their credit in a timely manner.

The other would prohibit medical debt from services received through the Choice Program and other Veterans Affairs community care programs from being reported to credit reporting agencies for one year. In addition it would establish a dispute process for veterans seeking to remove adverse actions already on their reports.

Donnelly also lauded the legislation’s easing of regulatory burdens on community banks.

Donnelly’s Republican opponent is Mike Braun, a businessman and former member of the state legislature, who beat two sitting members of Congress in the primary. Braun has run as an outsider in a state that has been supportive of Trump’s job in the Oval Office. Braun has made claims that Donnelly has profited from “outsourcing.”

Ohio

Brown, the committee’s ranking Democrat who some speculate may run for president in 2020, is defending his seat as a progressive Democrat running in a state that Trump won, but Cook Political Report views his contest as "Lean D." He would likely chair the committee if the Democrats were to win control of the Senate.

Brown is a strong proponent of the Dodd-Frank post-financial-crisis reforms and opposed the regulatory relief bill that Trump signed into law in May. A strong supporter of the Consumer Financial Protection Bureau under former Director Richard Cordray, Brown has called on acting CFPB Director Mick Mulvaney to resign.

Skelley notes that Brown is a “relatively popular incumbent,” and said Trump’s 2016 victory in Ohio doesn’t hurt him as much.

Brown’s opponent is Jim Renacci, a Republican member of the House. The two will likely spar over tax reform, which Brown has ardently opposed and Renacci supported.

"As a chief architect of the Tax Cuts and Jobs Act, I would like nothing more than to devote an entire debate to talking about all the ways this important legislation has helped Ohio families and small businesses," Renacci said, according to Cleveland.com.

Nevada

Sen. Dean Heller, R-Nev., also a member of the Banking Committee, is considered by many as the most vulnerable Republican incumbent in the Senate, as the only member of the majority party defending his seat in a state that Hillary Clinton won in 2016.

“Heller’s got a very difficult contest ahead and that would be expected in a state that Clinton carried, albeit narrowly,” Skelley said. “The polling there hasn’t been great for Heller. It looking like it’s going to be a tough competitive race.”

Like with Heitkamp and Donnelly, Heller’s race is viewed as a “toss-up” by the Cook Political Report.

Heller’s challenger, Rep. Jacky Rosen, voted against the regulatory relief bill signed into law in May, so a victory for her would give the Senate another Democrat who could be tough on the industry.

“While I support providing relief and flexibility for small community banks and credit unions that lend to small businesses, our focus should be strengthening Wall Street reform and holding big financial institutions accountable — not eroding that progress,” Rosen said in a statement after the bill passed the House in May.

But Rosen only joined the House in 2016. “The one thing that Heller might have going for him is that Rosen is still fairly unvetted,” Skelley said.

Observers noted that Heller has been criticized for being inconsistent on issues other than banking policy.

“I think for Heller it’s a lot less to do with his financial services record and much more to do with his record on healthcare and tax reform,” Barford of Beacon Policy Advisors said.

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Arizona

The Senate could gain another moderate Democrat, which might benefit the math in advancing further legislation benefiting the industry, in the race to fill Flake’s seat in Arizona.

The Democrat in the race, Rep. Kyrsten Sinema, currently sits on the House Financial Services Committee.

Sinema was a supporter of the Senate’s regulatory relief package. She also notably supported a bill from Rep. Blaine Luetkemeyer, R-Mo., that would have eliminated the asset threshold for banks to be considered “systemically important financial institutions,” which went too far for Democrats in the Senate to support.

Arizona hasn’t had a Democratic senator since the 1990s, but Nate Silver’s FiveThirtyEight posted a headline in June saying, “The Democrat Is Up Big In Arizona’s Senate Race — For Now.”

“I think the main thing there is that she is raking in campaign contributions from the banking sector,” Barford said. “She is trying to paint herself as very moderate. Her ability to fundraise I think has been aided dramatically by her centrism on banking issues.”

When put up against the top three Republicans running for the seat — Rep. Martha McSally, former state Sen. Kelli Ward, and former Maricopa County Sheriff Joe Arpaio, who was pardoned last year by Trump over racial profiling charges — a CBS News/YouGov poll had Sinema in the lead in all three scenarios.

But the polls could change if the Republican Party can rally itself around a single candidate.