Bachus Plots Agenda, But Faces Leadership Challenge from Royce

WASHINGTON — Rep. Spencer Bachus, who is the lead candidate to chair the House Financial Services Committee next year, said Wednesday that he is focused on phasing out government support for the mortgage market, rolling back certain derivatives provisions of the Dodd-Frank Act, and limiting the power of the new consumer protection agency.

But the Alabama Republican will face a fight with a fellow Republican first before he gets a chance to act on that agenda.

Rep. Ed Royce told Bloomberg News Wednesday that he planned to campaign against Bachus to chair the committee. Although the California Republican has proven to be a top leader on the panel, it's unclear if he will have the support of Republican leadership.

Bachus' rise to chairman had been in doubt just a few months ago, but the Alabama Republican has moved aggressively to shore up support. He remains well liked by his caucus and the business community, and has earned the good will of his colleagues by his prolific fundraising, amassing more than $1.8 million this election cycle for fellow Republicans.

Prior to Royce's comments, several Republican lawmakers, including Rep. Shelley Moore Capito, R-W.V., and Rep. Randy Neugebauer, R-Tex. said Wednesday they expected Bachus to be the next chairman.

Outside analysts agreed Bachus was the top contender.

"I think Bachus has it," said Anthony Plath, an associate professor of finance at the Belk College of Business at UNC Charlotte. "He's the guy to beat."

Despite his leadership role, Bachus was not always pegged as the likely choice. Some Republicans felt he was not avid enough or agile enough in rebutting Frank, who was noted for his quick wit and sometimes brusque manner.

Bachus has also taken heat from conservative members for supporting a mortgage lending reform bill in 2007, and was replaced in 2008 as the top House Republican representative for the Financial Services Committee to negotiate the $700 billion Troubled Asset Relief Program.

Still, Bachus has proven adept at overcoming those hurdles.

"Spencer Bachus is capable, he knows the issues and he is philosophically aligned with the GOP conference," said Dan Crowley, a partner with K&L Gates.

In an interview prior to Royce's comments, the Alabama Republican was already plotting his agenda. He promised a change in tone and style from Chairman Barney Frank, pledging to consult closely with subcommittee chairmen and work in a bipartisan manner when possible.

"Chairman Frank basically had a unitary control over the committee," Bachus said in an interview. "I'll continue to give my subcommittee chairs a chance to lead on issues of their expertise. … We're going to have an inclusive approach that includes all members of the committee."

Bachus sees his first test in questions over what to do with Fannie Mae and Freddie Mac, which were seized by the government two years ago. He said the long-term goal is to cut government backing of the mortgage market, but he also announced plans to restrict underwriting.

"We need to transition from a government controlled mortgage market with Fannie and Freddie to a privatized market and that will be a long-term goal, weaning ourselves off taxpayer-subsidized loans," he said.

"In the short term we'll try to stop no-down-payment loans to people with poor credit at high loan-to-value rates."

Bachus pointed to a bill by Rep. Jeb Hensarling, R-Texas, which Bachus co-sponsored, as a workable approach. The legislation would essentially eliminate Fannie and Freddie.

"The administration continues to pump money into Fannie and Freddie and guarantee their new issues and they continue to have two programs of no-down-payment loans with people of poor credit at high loan-to-value," Bachus said. "We need to shut those programs down. Fannie and Freddie are in a conservatorship which implies a continuation of business as usual. We think they ought to be put into a liquidation process even though it will be a multiyear process."

Bachus said that robust oversight of Dodd-Frank is also at the top of his agenda, and that he plans to go through the statute with a fine-tooth comb to remove any measure that could hurt the economy.

"We are going to immediately take a look page by page at the job-killing provisions in the Dodd-Frank Act," he said. "Vigorous oversight is going to be essential to make sure they don't use regulation to advance their agenda, so we are going to have a sustained effort to using oversight to keep them in check."

Specifically, Bachus said that derivatives restrictions were too harsh.

"The most problematic, which is impacting job creation, is the overly expansive derivative provisions, which are really going to take a trillion dollars out of the economy and new capital requirements," he said. "Not all derivatives need to be traded on the exchanges. … It's not good for manufacturing or other Main Street industries."

Bachus said that he would also like to stem the funding for the Consumer Financial Protection Bureau and overhaul its structure. Rather than a presidentially appointed director, Bachus would like to put a commission in charge of the agency. Currently, the agency is funded by a mix of appropriations and money from the Federal Reserve Board.

"Consumer protection is important and it ought to be a bipartisan goal, but you don't need a director who has executive privilege and not subject to congressional power of the purse," he said. "You are starting an agency with $600 million without having to answer to Congress. We need to look at having a commission as opposed to a director who has a really almost carte-blanche power to make lending."

Bachus also said the committee needed to re-evaluate the role of the credit rating agencies.

"We will look at the broad liability imposed on the credit rating agencies," he said. "We need to address that and bring some certainty to those matters."