WASHINGTON — Rep. Jeb Hensarling, R-Texas, has less than a year left in office — and he seems to be spoiling for one last fight.

The Financial Services Committee chairman made clear last week that he would be seeking to make changes to a bipartisan regulatory relief package, whether financial services executives or his Senate counterparts like it or not.

The move frustrated prominent supporters of the bill and raised broader questions about when the package, passed by the Senate last week, might ultimately be signed into law. It also renewed industry concerns about Hensarling, who has previously sparred with members of his own party over key issues only to be eventually overruled by House leadership in several cases.

“Jeb is and always has been an ideologue — ideology drives Hensarling’s policymaking to the point that during much of his tenure as chairman of the [committee], ideology trumped compromise,” said one senior financial services lobbyist on condition of anonymity.

House Financial Services Committee Chairman Jeb Hensarling
The risks are high for House Financial Services Committee Chairman Jeb Hensarling. If a deal isn't struck soon, there will "be a lot of pressure to cut him out of a final deal and where he could get rolled," said one analyst. Bloomberg News

The lobbyist called the chairman’s current strategy “a continuation of Hensarling’s ideological approach to policymaking with a hint of pride mixed [in], given that the clock is ticking down on his time in Congress.”

A second senior financial services lobbyist concurred, warning that Hensarling will be blamed if the bill now fails.

“This is typical Jeb Hensarling — letting the perfect be the enemy of the good,” the lobbyist said. “Surely Chairman Hensarling does not wants his legacy to be defeating a bill that improves Dodd-Frank for banks back in Texas.”

For his part, Hensarling has insisted that his approach has the backing of House Speaker Paul Ryan, who reportedly agreed not to move the Senate bill until lawmakers in that chamber negotiate with the House, either formally or informally. Hensarling is seeking to add more than two dozen changes to the Senate bill, all of which have at least some bipartisan backing, but moderate Democrats who helped clear the bill in that chamber insist there’s no more room for negotiation. The Senate bill would make a number of changes to the Dodd-Frank Act designed to help small and regional banks.

Industry players and analysts warned, however, that Hensarling is walking out on a limb — again. They predict that Ryan or other House Republicans could pull the rug out from underneath the Texas lawmaker, who is retiring at the end of the year, if the overall bill is in peril.

“He’s been given room to negotiate, but he hasn't been given free rein,” said Edward Mills, a policy analyst at Raymond James. “If this is getting too deep into spring and early summer and his negotiations threaten the overall bill, that's where there will be a lot of pressure to cut him out of a final deal and where he could get rolled.”

House leaders have done it before.

In 2014, House leadership sidelined Hensarling in a fight over rising flood insurance costs, passing a modified version of Senate legislation designed to curtail large premium increases for some homeowners. The chairman had been critical of the National Flood Insurance Program and argued the changes would worsen the program’s finances.

House leaders again bypassed the chairman a year later in a vote to reauthorize the Export-Import Bank, a program Hensarling has repeatedly dismissed as “crony capitalism.” Lawmakers used what’s known as a discharge petition to force a chamber vote over the objections of Hensarling and other conservative lawmakers who opposed funding the bank.

“Time and again, leadership has chosen a less aggressive, more nuanced strategy than Chairman Hensarling had hoped for,” said Isaac Boltansky, director of policy research for Compass Point Research & Trading.

Critics also noted that the Texas Republican’s 2013 mortgage finance legislation, the Path Act, which called for removing Fannie Mae and Freddie Mac from the housing system, was not brought up on the House floor after being passed out of the committee.

Still, the chairman did strike a last-minute compromise with Sen. Chuck Schumer, D-N.Y., on the reauthorization of the Terrorism Risk Insurance Act after months of fierce debate, despite expressing earlier skepticism for the government backstop and pushing for a broader overhaul. The final deal, passed in early 2015, included some reforms to the program along with a Dodd-Frank Act modification exempting derivatives end users from margin requirements and an unrelated insurance measure.

Privately, however, some in the industry said Hensarling lost more than he gained in the battle over TRIA and that he was once again pushed to a deal by House leadership.

But Hensarling has also considerably moderated his tone over the past year, most significantly leaving the door open for a government guarantee in housing finance reform, something he’s vigorously opposed in the past.

Additionally, the chairman has shifted in recent months from pushing his Financial Choice Act, a sweeping bill designed to overhaul large portions of Dodd-Frank, to moving stand-alone provisions that can win bipartisan support — likely in preparation of a political moment like this one.

Hensarling told American Banker that he is working to ensure the House has a voice in the legislative process.

“We applaud the Senate’s hard work in passing this important bill. That is an important step in the process, but it is not the only step," Hensarling said. "Congress is not a unicameral legislature. We are not currently laboring underneath the Dodd Act. And we are not currently laboring under something called the Frank Act. We are laboring under something called the Dodd-Frank Act because the Senate went to conference with the House and they negotiated their differences. The House has worked hard, over the last several months especially, to put forth dozens of strong, bipartisan bills that merit inclusion. I look forward sitting down with the Senate and negotiating on a bipartisan, bicameral package.”

Hensarling spokeswoman Sarah Flaim added that “Chairman Hensarling offered to negotiate inclusion of House bills before the Senate bill was passed. That did not happen."

"Chairman Hensarling is not fighting for himself; he’s fighting on behalf of the whole House — including the Democrat sponsors, co-sponsors, and supporters of these strong, bipartisan bills,” she said.

Some observers said that even if the chairman has not always gotten his way, his hard-line tactics have impacted policy debates.

“Chairman Hensarling has often staked out principled positions that have affected the legislative outcome, even if he has not always gotten everything he wanted,” said Daniel Crowley, a partner at the law firm K&L Gates.

Crowley added that the current jockeying over the regulatory relief bill is to be expected. The Financial Services Committee has circulated a list of roughly 30 bipartisan measures that lawmakers would like to see added to the Senate package.

“House leadership always has the option of taking the Senate bill to the House floor, but there is no reason for them to rush or to otherwise preclude further improvement to the Senate passed bill,” Crowley said. “Indeed, it would be highly unusual for them to preemptively accede to the Senate when the House has staked out highly bipartisan proposals that are germane.”

For Ryan and other House leaders, the issue could come down to how close the chairman is to striking a deal. Industry officials said that Republican lawmakers are eager to notch some additional wins ahead of the November elections. Political analysts say it’s a tossup right now as to who will control the chamber next year.

“Leadership wants a victory and they want to support Hensarling. They are figuring out how to reconcile those two aims,” said a third senior financial services lobbyist. “While it’s too early to determine how exactly leadership will land the plane, it’s clear they want, and need, a victory.”
What’s less clear is whether this fight was necessary for Hensarling. If he’d largely accepted the Senate bill, he could have claimed, correctly, that some House provisions were part of the other chamber’s legislation. Instead, he’s raised the stakes for himself and the bill, potentially making himself the fall guy if the legislation fails to pass or he gets overruled again.

The Senate package already contains a number of House-approved measures, said the third financial services lobbyist. “Their input is all over the bill. Many believe this is the final opportunity for Hensarling to get a victory for his legacy, which makes the debate over substance so puzzling.”

Updated March 20, 2018 at 1:01PM: The story has been updated to reflect comments from Hensarling and a spokeswoman from his office.

Victoria Finkle

Victoria Finkle

Victoria Finkle is deputy Washington bureau chief and editor of American Banker's op-ed blog, BankThink.