In partisan D.C., House banking panel flips the script

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WASHINGTON — Nearly a year ago, the Democrats' takeover of the House prompted fears that Rep. Maxine Waters' control of the Financial Services Committee could spell trouble for banks. But some observers say their worst predictions proved to be wrong.

While the committee's two sides clearly have their policy differences, the working relationship between Waters and Rep. Patrick McHenry, R-N.C., has been seen by some industry representatives as a contrast to the partisanship in Congress with the impeachment inquiry against President Trump.

"We’ve been pleased on a number of issues regardless whether we’ve won or lost on the legislation that there seems to be a willingness to have the debate on the legislation and have a bipartisan debate on the House Financial Services Committee,” said Paul Merski, executive vice president for congressional relations and strategy at the Independent Community Bankers of America.

So far in this term more than half of the roughly 50 bills the House Financial Services Committee advanced either had unanimous or strong bipartisan support.

Several passed the full House with bipartisan support, including a bill to enable banks to serve legal marijuana businesses and a bill updating anti-money-laundering laws to require corporations, rather than their bank, to disclose their "beneficial owners" to the Financial Crimes Enforcement Network. The committee also unanimously passed a long-term extension of the National Flood Insurance Program, though the bill’s prospects in the Senate are unclear.

Observers say both Waters, a California Democrat, and McHenry have made a good-faith effort to promote open dialogue on a number of priorities that were not even up for debate under former Chairman Jeb Hensarling, R-Texas.

Some note the relationship between the panel's current two leaders is a departure from the seemingly fractious one between Hensarling and Waters, then the committee's top Democrat while the party was in the minority.

Camden Fine, president and CEO of Calvert Advisors and former head of the ICBA, said that Hensarling and Waters' dynamic led to partisan legislation on issues such as authorizing the National Flood Insurance Program and reforming the government-sponsored enterprises.

Waters is "pretty ideological herself, so there was next to no collaboration under the Hensarling chairmanship,” Fine said. “A lot of bills got through the committee, but they were almost always party-line votes. … GSE reform is one, flood insurance is another good example of essentially nothing got done because Jeb was not willing to cut a deal.”

Waters' efforts to reauthorize the Export-Import Bank illustrate her attempts to listen to GOP members.

When Republicans held the majority, Hensarling was among a group of senior lawmakers opposed to any reauthorization, despite pleading from Democratic members. But as Waters has tried to advance an Ex-Im bill, she has made some concessions to Republicans, even taking flak from her own caucus.

At an October markup for the bill, she suggested she has tried to promote open dialogue to avoid the legislative stalemates that resulted from her interactions with Hensarling.

"I bent over backwards to work with the ranking member because of the history that we experienced with the previous chairman of this committee, Mr. Hensarling,” the California Democrat said at the committee markup. "You can look at his picture all you want, he's not here. [Hensarling] should not be allowed to exercise any influence over the decisions.”

Ultimately, however, Republicans — including McHenry — said the Ex-Im bill that Waters moved to the House floor this week was too partisan for them to support. But the Ex-Im debate was not the first time Waters pushed the message that the committee’s Democratic leadership made concessions to Republicans.

The committee initially scheduled a markup for the beneficial ownership legislation sponsored by Rep. Carolyn Maloney, D-N.Y., in May, but the markup was postponed until a month later to continue negotiations with McHenry.

In May, Waters said Maloney was “bending over backwards” to respond to McHenry’s questions about the bill. And McHenry, who ultimately opposed the beneficial owner legislation that eventually passed the full House, admitted that his frustration with the legislation was “not upon the willingness of the sponsor or [Waters] to hash out the details.”

Many in the banking industry see the spirit of cooperation as a positive sign for the sector's legislative priorities.

“It’s not my way or the highway” with Waters and McHenry, said an industry source who spoke on the condition of anonymity. “It’s about moving the process forward.”

One of Hensarling’s signature bills was the Financial Choice Act, a sweeping rollback of the 2010 Dodd-Frank Act reforms, but his legislation passed the House entirely along party lines and had no chance in the Senate. When the Senate introduced a bipartisan regulatory relief bill, S 2155, Hensarling pushed for the House to be able to amend the legislation, but ultimately supported it when it was clear moderate Democrats were not open to any changes.

Like Hensarling, Waters has pushed bills through the committee that could not garner support from the opposing party. One of her signature bills this Congress was the Consumers First Act, an attempt to reverse Trump administration efforts to weaken the Consumer Financial Protection Bureau. That bill passed the House without any Republican support.

McHenry has stood firm in his opposition to a number of Waters-backed proposals, but observers say he has been more pragmatic than Hensarling in his opposition to Democrats' proposals, allowing members of his caucus to break from him on certain legislative efforts.

“He’s a great ranking member for the Republicans,” said J.W. Verret, an associate law professor at George Mason University who worked for the committee under Hensarling. McHenry "picks his battles very carefully. … Jeb came into the chairmanship with unrealistic expectations about what he could achieve.”

As with beneficial ownership, McHenry was a strong opponent of marijuana banking legislation, but acknowledged on the House floor that he expected it to meet the two-thirds vote threshold to pass the House under suspension.

Fine added that if the House were to flip back to Republican control, he thinks McHenry would be more open to compromises if he chaired the committee.

“While Patrick is a very conservative Republican congressman, he is not nearly as dogmatic and ideologically based as Jeb was,” Fine said. “McHenry is more in the vein of some of the past chairmen of the committee. If he were chairman, I think he would be more open to compromises.”

McHenry even lauded Waters at a Conference of State Bank Supervisors event Wednesday for establishing committee task forces on financial technology and artificial intelligence, and added that he believes there is bipartisan political will to produce a package of legislation related to fintech before the end of this Congress.

“The bills that I’ve been able to get signed into law over the last seven years here in Washington, four of those bills that I got signed into law, Maxine Waters was the co-sponsor on it,” McHenry said. “I don’t have to tell you that Chairwoman Waters and I don’t agree on, you know, everything, but in this arena, we have had productive legislating to a productive end.”

A former committee staffer, who spoke on the condition of anonymity, noted that the committee under Hensarling’s leadership passed more than 140 bills between 2017 and 2018, many with bipartisan or unanimous support. Many of the provisions in S 2155 came from his committee. In the last months of his tenure, Hensarling and Waters co-sponsored legislation known as JOBS Act 3.0, which focused on capital markets. The former staffer also noted that the committee held a number of oversight hearings in which Democrats were able to question Trump administration officials.

Hensarling made a last-ditch effort at housing finance reform, co-sponsoring a bill with former Rep. John Delaney, D-Md., and Rep. Jim Himes, D-Conn., that would maintain a government backstop for the mortgage system. He previously tried to push a more extreme bill, known as the Path Act, that would have effectively ended government support for housing.

The former staffer also pointed out that Hensarling publicly came to Waters' defense when she was threatened after making pointed remarks about the Trump administration.

“The committee was civil and maybe other people don’t forget that when Ranking Member Waters received attacks and threats, Chairman Hensarling defended her,” the former staffer said.

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AML Marijuana banking GSE reform Flood insurance Finance, investment and tax-related legislation Maxine Waters Patrick McHenry Jeb Hensarling House Financial Services Committee