WASHINGTON — As Democrats took control of the Senate Wednesday, Rep. John J. LaFalce, the ranking Democrat on the House Financial Services Committee, held forth on what the shift means to him.

“Proponents of consumer advocates have been emboldened,” the upstate New Yorker told reporters gathered in his Capitol Hill office. “I’m not in the position where I can set the agenda” in House Financial Services, “but my cards have improved considerably because I have more leverage going into conference” committees, where a small group of lawmakers iron out the differences in bills passed by the House and Senate.

Democrats became the Senate’s majority party this week after Sen. James Jeffords of Vermont became an independent and left the Republican Party.

The change elevated Sen. Paul Sarbanes of Maryland to chairman of the chamber’s banking panel. He and Rep. LaFalce are ideologically similar, both populists and strong consumer advocates.

Overhauling the regulation of the government-sponsored enterprises Fannie Mae and Freddie Mac is one issue that many in the industry would like Congress to debate. But Rep. LaFalce said Sen. Sarbanes’ accession to power means “there is less likely to be a jihad against the GSEs.”

When asked whether oversight of Fannie and Freddie should be kept at the Office of Federal Housing Enterprise Oversight or be transferred to the Federal Reserve Board, Rep. LaFalce said: “If you have a coin, I could resolve the problem.”

On deposit insurance reform, Rep. LaFalce lamented the “absurd situation” of the current system, in which most banks have paid no premiums in more than five years and large brokerage houses continue to sweep billions of dollars into insured deposits without paying a cent.

However, he would commit himself to only one legislative change: a merger of the Bank Insurance Fund and the Savings Association Insurance Fund. He described this as “the first thing we need to do” and said it could be the only change Congress makes this year.

On whether the current deposit coverage limit of $100,000 should be increased, Rep. LaFalce said: “The burden of proof is on those who say it must be done.”

Since the House Financial Services agenda is so securities-heavy, Rep. LaFalce said investor protection is among his top priorities.

“Over the past 25 years, there hasn’t been a serious investigation by Congress,” he said. “There is a crying need for a thorough and exhaustive investigation on the capability of the Securities and Exchange Commission to protect investors."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.