Banking on the ballot: The midterm races to watch

October 6, 2022 3:40 PM

WASHINGTON — In 33 days, Republicans will try to wrest control of Congress from Democrats, an Election
Day that could have massive consequences for the way that financial services are regulated.

The coming Congress is primed to tackle everything from cryptocurrency regulation to fiscal policy to address inflation and even regulatory oversight on bedrock questions of bank capital and mergers. And all that's happening under the looming threat of a recession.

Rep. Pat McHenry, who would likely become chairman of the House Financial Services Committee in the event of a Republican victory, has suggested that he would prioritize legislation that would allow fintechs to grow, clarify rules for crypto companies and even crack down on Consumer Financial Protection Bureau Director Rohit Chopra. Democrats would continue their focus on housing and consumer protection, supporting a more aggressive CFPB, and pressing bank regulators to increasingly consider climate risk in their evaluations.

Most signs point to it being a close one: Banking issues aren't the same political flashpoint they were after the 2008 financial crisis, but economic concerns such as inflation are striking against strong opinions on women's reproductive rights. Former President Donald Trump's influence looms over the elections as well, with many smaller races turning into a de facto contest between Trump's faction and President Biden's popularity.

Many races that could have a big impact on the committees that govern financial services typify these dynamics. What follows is a rundown of close races that involve current or potential future members of these committees.

Senator Raphael Warnock, Democrat from Georgia and member of the Senate Banking Committee, is running ahead of Republican challenger Herschel Walker, but the race remains close.

Bloomberg News

Georgia Senate

Senate Banking Committee member Sen. Raphael Warnock, D-Ga., is embroiled in one of the most headline-snatching races in the 2022 midterm elections, facing off against the scandal-ridden Herschel Walker.

Georgia is essential to Republicans' hopes of gaining a Senate majority, but the chances of Republicans grabbing a new seat in the state has diminished with allegations that Walker, a former football star who's running on a pro-life platform, paid for his girlfriend's abortion in 2009.

Recent polling out of Georgia shows Warnock ahead with a double-digit lead. Warnock also has more funding than Walker, raising about $90 million since winning one of the two 2021 runoffs and cinching the Senate for Democrats. Walker has raised nearly $33 million since he began his campaign.

Still, Walker has the backing of President Donald Trump, will likely garner most Republican votes, and other polls have shown a much tighter race. The race could still be a runoff once the initial dip in popularity for Walker's scandals wears off.

In the Senate Banking Committee, Warnock has concentrated largely on consumer protection issues, and has chaired the subcommittee on financial institutions and consumer protection. He signed on to the Fair Access to Financial Services Act, a bill led by Senate Banking Committee Chairman Sen. Sherrod Brown, D-Ohio, that would prohibit banks and other financial institutions from discriminating on the base of race, color, religion, national origin, sex, gender identity or sexual orientation. He was also part of the group that pushed the head of the largest banks in the country to lower or eliminate overdraft fees.

North Carolina Senate

Rep. Ted Budd, R-N.C., is leaving his seat, and his spot on the House Financial Services Committee, to run for Senate in North Carolina, replacing the retiring Sen. Richard Burr. He's up against former state Supreme Court Chief Justice Cheri Beasley.

Budd is currently in a tight race, leading Beasley by 1 percentage point. North Carolina Senate races are typically close — Sen. Thom Tillis, R-N.C., beat challenger Cal Cunningham, after news broke of him having an affair, by less than 2 percentage points in 2020 in what was the most expensive Senate race in history before the 2021 Georgia Senate runoff elections. Nonetheless, Democrats haven't managed a Senate victory in the state since 2008 with the election of Sen. Kay Hagan.

The Budd-Beasley race, like many in battleground states around the country, will likely be decided by suburban women's opinions on abortion rights, as well as the extent to which Democrats can get Black voters to turn out in gerrymandered areas. Budd is strongly backed by former President Donald Trump, and is a staunch conservative, but Beasley has outraised him and has shown no signs of the kind of scandal that tanked Cunningham's election in 2020.

And the growing reality in North Carolina for state-wide races is that tallying up all the votes in growing urban (and financial) centers like Charlotte, Winston-Salem/Greensboro and the Research Triangle typically outweighs those in more conservative, more rural areas.

Given his place on the House Financial Services Committee, it's likely Senate Republican leadership will consider Budd for the Senate Banking or Financial Services committee if he wins. A gun store owner in Rural Hall, North Carolina, he's expressed interest in the past in the kinds of arguments that Sen. Pat Toomey, R-Pa., has made about regulators discouraging banks from lending to politically disfavored industries.

Nevada Senate

Another Senate Banking Committee Democrat facing down a Trump-backed Republican is Sen. Catherine Cortez Masto, D-Nev. The first Latina elected to the Senate, Cortez Masto won former majority leader Harry Reid's seat in 2016. She's running against Republican Adam Laxalt, a conservative former attorney general for the state.

Like many close races throughout the country, the Nevada contest is largely between concerns about women's reproductive rights, compared with President Biden's low ratings on inflation and the economy.

On the campaign trail, Cortez Masto has sought to highlight her role in pandemic-era spending that she said has helped support Nevada's tourism industry throughout the economic shutdowns. She also pointed to the role she played as attorney general of the state when it received $1.9 billion from the National Mortgage Settlement following the 2008 financial crisis. She characterizes this on her website as having "held the Big Banks accountable."

Cortez Masto is currently polling behind the challenger Laxalt, although the margins remain narrow.

Last month, Cortez Masto joined Sens. Elizabeth Warren, D-Mass., and Jack Reed, D-R.I., in introducing a bill that would require the country's largest private companies to file public reports with the Securities and Exchange Commission. She's also introduced a bill that would require the 11 government-sponsored Federal Home Loan banks to boost their investments in affordable housing and community development, and another to incentivize whistleblowers to report consumer fraud to the Consumer Financial Protection Bureau.

Iowa 3rd District

Rep. Cindy Axne of Iowa, the state's lone Democrat in Congress, is facing Iowa state Sen. Zach Nunn to retain her seat in the 2022 midterm elections.

Axne's district, which includes the state's capital, Des Moines, and one of its only urban centers, still leans Republican during this election cycle. Axne trailed Nunn by a slim 2 points in the most recent polls.

During her time on the House Financial Services Committee, Axne has focused largely on rural housing issues. She touted the investment in Iowa housing when Democrats' pandemic-era spending bills passed, and has introduced legislation aimed at preserving affordable housing in rural communities. She is vice chair of the housing and insurance subcommittee.

Although it's not yet become a campaign issue, Axne was named in reporting about potential conflicts of interest for lawmakers and their stock ownership.

According to The New York Times, Axne and her husband reported four purchases of Wells Fargo stock while the House Financial Services Committee investigated the bank over its fake-accounts scandal. She also reported trades in Visa, Meta, JPMorgan Chase and U.S. Bancorp, among other financial companies.