Tuesday's elections wreaked havoc on the Senate Banking Committee and, possibly, the future of financial reform legislation.
After Sen. Alfonse M. D'Amato's stunning defeat, Sen. Phil Gramm is expected to become chairman of the Senate Banking Committee next year. The Texas Republican almost single-handedly stopped financial reform legislation last month.
"A lot of my colleagues in the private sector are thinking this could be one more nail in the coffin," said Robert A. Rusbuldt, executive vice president of the Independent Insurance Agents of America.
Supporters of financial reform, who had counted on Sen. D'Amato to win reelection and push the bill next year, are worried that Sen. Gramm will use the chairmanship to kill the legislation.
In an interview Wednesday, Sen. Gramm described himself as a strong advocate of financial reform but said he remains committed to keeping the legislation free of Community Reinvestment Act-related provisions.
"If financial modernization doesn't make financial services cheaper and better, then I don't want it," he said.
Sen. D'Amato was toppled by Rep. Charles E. Schumer after a bitter contest in New York. Though the race had been considered a dead heat, the Brooklyn Democrat handily defeated Sen. D'Amato, 54.1% to 44.4%, after a campaign marked by insults and attack advertising.
The Republican incumbent closed the door on an 18-year Senate career when he conceded late Tuesday. "The battle is over," Sen. D'Amato told supporters. He is the first Banking Committee chairman to be defeated since House Banking Chairman Fernand J. St Germain, D-R.I., lost in 1988.
Rep. Schumer, a 17-year veteran of House Banking, is expected to seek a seat on the Senate panel.
In the interview, Sen. Gramm said he wants to take a "long, hard look" at the legislation and consult with lawmakers, Federal Reserve Board Chairman Alan Greenspan, and Treasury Secretary Robert E. Rubin. He would not predict how much he might try to revise the legislation.
"Obviously, there is a lot of work to be done since HR 10 didn't pass," Sen. Gramm said.
He rebuffed critics who claim he is too ideological to strike a deal with Democratic defenders of CRA. "Anybody who has watched me work in Congress would realize there is no validity to that whatsoever," he said.
Several supporters said that they believed Sen. Gramm would be more pragmatic as leader.
"I've got to believe that Sen. Gramm is going to rise to the occasion," a bank lobbyist said. "He can't be chairman of the committee and stop everything until we eliminate CRA."
Though Sen. Gramm said two weeks ago that he was not planning for a loss by Sen. D'Amato, he had a press release ready to go Wednesday morning, listing his accomplishments during 13 years on the banking panel. He issued a second one later in the day, outlining his position on financial reform.
Overall, bankers and lobbyists said, Sen. Gramm might be better for the industry than Sen. D'Amato because he would defend them against burdensome consumer protection laws. Many bankers were angry that Sen. D'Amato championed expanded membership for credit unions and restrictions on automated teller machine fees.
"I don't think you'll see those kinds of initiatives spring forward from the Banking Committee under Phil Gramm," said Christopher L. Williston, president of the Independent Bankers Association of Texas.
"He's a strong proponent of the less government, the better off we all are," said Tom Frost, senior chairman of Cullen/Frost Bankers Inc., who has raised money for Sen. Gramm.
Voters not only put the committee's reins in new hands but also bounced two other members of the committee: Sens. Lauch Faircloth and Carol Moseley-Braun.
Sen. Faircloth, an extremely pro-bank Republican from North Carolina, was ousted by Democratic challenger John Edwards. The Raleigh-based trial lawyer defeated Sen. Faircloth 51.1% to 46.9%.
Sen. Moseley-Braun, D-Ill., was beaten by state Sen. Peter Fitzgerald, a Harris Bank director and banking lawyer. He won 50.8% to 46.9% over Sen. Moseley-Braun, who had staunchly defended the CRA and other consumer concerns in her only term.
On the House side, Banking Committee Chairman Jim Leach and Rep. John J. LaFalce, the panel's ranking Democrat, won easily. Only low-ranking committee members lost their races.