California's next governor, Arnold Schwarzenegger, is expected to change the political playing field for financial companies - from the issue of predatory lending to the people he will name to run the state's bank regulator.
Lobbyists say there are several banking-specific issues they expect the Democratic-controlled Legislature to take up when its next session starts Dec. 2. These include identity theft prevention, liquidity standards on banks that accept municipal deposits, homeowners insurance, and insurance scoring. Taxes for credit unions and safeguards against predatory lending are also possible issues.
The Republican governor-elect is set to clash with personal insurers, which supported a law that lets illegal immigrants obtain driver's licenses. Mr. Schwarzenegger has promised to overturn it.
But for the most part, business groups, including the banking lobby, are expecting him to be more supportive of their concerns than his predecessor.
Already, the California Chamber of Commerce has indicated it will try to overturn a health insurance bill that passed on the last day of the last session and that Gov. Gray Davis signed one day before the Oct. 7 election that recalled him.
The group is considering a court challenge or a referendum to overturn the Health Insurance Act of 2003, or SB2, which requires companies with more than 200 employees in the state to offer health benefits by 2006. Business groups, including the California Bankers Association, opposed the bill, which they said would burden companies with too many expenses and would hurt job growth.
Legislation like this, enacted when the Governor's Mansion and the Legislature were controlled by the same party, has frustrated trade groups, who say it is becoming increasingly uneconomical for businesses to expand in the state.
California's financial industry leaders have taken notice. Angelo R. Mozilo, Countrywide Financial Corp.'s chairman and chief executive; David Pottruck, Charles Schwab & Co.'s president and CEO; and Richard C. Kovacevich, Wells Fargo & Co.'s chairman and CEO, have all weighed in on the financial and regulatory situation.
In an interview last week, Mr. Kovacevich said Mr. Schwarzenegger's stance on the state's business climate was a positive. "If you look at the most consistent comments made by the new governor on his platform, they are that we have to make the state more friendly to businesses - I don't remember that with any other administration."
But whether the governor-elect can make good on his promise to improve operating conditions, which Mr. Kovacevich says affects Wells mostly when it affects its customers, remains to be seen. "We'll have to see what the execution is."
At the very least, Mr. Schwarzenegger is expected to counteract initiatives by the Democrats that bankers don't support.
Previously "we could have all Republicans agreeing with us, and that wasn't enough to stop a bill in committee or do anything when it got to the governor," said James Clark, a senior vice president for government relations with the California Bankers Association. Now "at least some of the things we've fought over years will get a solid veto."
A two-thirds vote in the Legislature is required to override a veto. Since the Democrats hold only 73 of the 120 seats, they would need some help to override.
Melissa Richards, the general counsel for the California Mortgage Bankers Association, said that Mr. Schwarzenegger clearly "wants to make California pro-business."
Still, the specifics about actor-turned-politician's stance on banking matters is mostly a mystery.
"Unlike other candidates, he doesn't have a past voting record, and that makes it hard to speculate on what he'll do," said John Van Etten, a lobbyist for the California Credit Union League.
While they are waiting for more information to trickle out about the state's next administration, lobbyists list a number of issues they are either considering raising or anticipate having to fight.
The California Independent Bankers would like a law that allows state and local government agencies to put more deposits in community banks. They propose the creation of a network of banks that would be able to cover losses on municipal deposits if a network member fails, said Craig Hudson, the group's executive director.
Mr. Van Etten said the credit unions are girding for any attack on their tax-exempt status.
Likewise, Anissa Yates, a spokeswoman for the California Bankers Association, said it "is taking a closer look at anti-competition issues that exist between banks and credit unions, including regulatory disparities and tax inequities."
The California mortgage group expects to advocate reform of a section of the Business and Professions Code that allows individuals to sue companies that they accuse of unfair practices. They also want to remove impediments to the development of real estate for affordable housing.
The group will also continue to support a bill that would authorize county recorders to record titles electronically. The measure, which the group sponsored, failed to pass in the last session but will carry over into the next one.
Consumer groups are weighing whether to back legislation that did not make it through the last session. Consumers Union, which was at the center of this year's fight over financial privacy (and continues to be on the national level), considers the costs of insurance credit scoring and homeowners insurance to be two "outstanding issues," said Norma Garcia, a senior attorney with its West Coast office.
Consumers Union supported a bill that died in the last session that would have prohibited the use of insurance credit scoring, and it could do so again in the next session. It has also supported consumer-friendly bills on the issue of homeowners insurance. Ms. Garcia was non-commital about what the group would do come December.
California has hosted several struggles that have spread beyond the state's borders and could affect large sections of the industry.
In the last session, which ended Sept. 12, a four-year effort to pass financial privacy legislation resulted in a law signed in August that some U.S. senators are pushing to include in a federal law.
And a fight between the state Department of Corporations and Wells landed in a federal district court in January. The outcome of that case, which the department appealed after the court decided in favor of Wells, will set a standard for how state agencies regulate units of national banks.
Mr. Schwarzenegger will also make his stamp on the regulatory agencies. Among the 1,100 cabinet and agency positions he will have to fill are a handful that affect banks in the state.
One is the commissioner for the Department of Financial Institutions, which regulates state-chartered banks, thrifts, and credit unions. Gov. Davis appointed Donald R. Meyer, a Republican former attorney, as its commissioner in April 2000. An assistant for Mr. Meyer, who returned a call on his behalf, said that "he didn't know anything about his position and probably wouldn't know anything for a few weeks."
But the Schwarzenegger administration has already put the call out for applicants. At a press briefing this month, Rep. David Dreier, R-San Dimas, told "anyone who's interested in being part of this historic event" to go to the governor-elect's Web site and submit a resume.
Among the positions for which applications are available on the site are Mr. Meyer's post and that of the commissioner of the Department of Corporations, which revoked Wells' mortgage lending licenses in May over alleged violations of state interest rate laws.
Andre Pineda, the department's deputy commissioner, said Wednesday that he and Commissioner Demetrios Boutris plan to resign once they hand their roles over to people appointed by the next administration.
The California Independent Bankers had its eye on the former bodybuilder before he received 48.7% of the votes in the gubernatorial recall election.
The group has asked him to speak at the March conference of its umbrella group, the Independent Community Bankers Association, to be held in San Diego.
Mr. Schwarzenegger has not responded yet, according to Mr. Hudson.
