Should industry fear Waters-led banking panel?
Editor’s note: This is revised from a story that originally ran in July.
WASHINGTON — Rep. Maxine Waters has been in the headlines recently more as an outspoken critic of the Trump administration than for her banking policy positions on the House Financial Services Committee.
That perch could undoubtedly give her a bully pulpit to focus on President Trump’s business dealings or more generally criticize the administration. But observers say a Waters-led panel could also showcase her broad legislative experience, which might mean a more moderate approach and reaching across the aisle on issues ranging from housing finance reform to updating the Community Reinvestment Act.
“Waters is a veteran legislator who is far more transactional and outcomes-oriented than she gets credit for,” said Brandon Barford, a partner at Beacon Policy Advisors.
To be sure, the rhetoric in a Democratic-controlled House with a Financial Services Committee led by Waters, who is now the panel’s ranking Democrat, would be a sea change from the current GOP leadership.
Waters, a California Democrat, has led calls for President Trump’s impeachment and urged supporters to publicly confront administration officials to push back on their policies, notably the separation of migrant family members at the border. Sharply critical of the administration, Waters was among several prominent Democrats targeted with pipe-bomb mailings, allegedly sent by a Trump supporter.
She has not toned down her rhetoric leading up to the election. Addressing constituents last month, Waters noted the potential of her becoming the first African-American and first woman to lead the banking panel. But she also made clear that she intends to be tough on the industry.
“Of course, the CEOs of the banks now are saying, ‘What can we do to stop Maxine Waters? Because if she gets in, she’s going to give us a bad time,’ ” she said.
She added that she intends to refocus on mistakes financial institutions made in the crisis that hurt consumers.
“I have not forgotten you foreclosed on our houses. I have not forgotten that you undermined our communities. I have not forgotten that you sold us those exotic products, had us sign on the line for junk and for mess that we could not afford,” she said.
“And for doing that, I have people who are homeless who have never gotten back into a home. What am I going to do to you? What I’m going to do to you is fair. I’m going to do to you what you did to us.”
Her tone toward the administration would likely creep into her leadership of the House committee, observers say, with a new emphasis on challenging Trump’s deregulatory agenda, rebuking big banks, challenging the administration’s regulatory appointees, proposing stronger consumer protections and backing affordable housing initiatives.
“I am committed to ensuring that hardworking Americans and our nation’s small businesses have opportunities to thrive, expanding and supporting affordable housing opportunities for our nation’s families, making sure that the safeguards are in place to prevent another financial crisis, protecting consumers and investors from bad actors, and conducting appropriate oversight of the Administration and the regulatory agencies under the Committee’s jurisdiction,” Waters said in a statement issued by her staff to American Banker. (Through a spokesperson, she declined to be interviewed.)
But she also noted she believes in “hearing a range of views.”
“I have always maintained an open door policy, to hear the priorities and concerns of all stakeholders, including representatives of the financial services industry, as well as advocates,” Waters said. “I look forward to continuing to work with Members [on] both sides of the aisle on sensible solutions to benefit hardworking Americans and strengthen our nation’s economy.”
Waters’ comments at a rally in June calling for more public confrontations with Cabinet officials stoked an already tense political environment, illustrated by criticism over the administration’s “zero-tolerance” border policy, and some officials already facing high-profile pushback, such as when Press Secretary Sarah Huckabee Sanders was asked to leave a Virginia restaurant.
Waters was criticized for her remarks by fellow Democrats, and some Republicans even called on her to resign. The furor led to Waters reportedly canceling speaking engagements over security threats, which led to a rare show of support from the House committee’s current chairman, Rep. Jeb Hensarling, R-Texas.
“I disagree with almost everything Congresswoman Waters says, but she deserves the opportunity to be heard in safety and security,” Hensarling said in a statement after the reports of the threats.
Waters has served on the financial services panel in the House since 1991, when it was known as the Banking, Finance and Urban Affairs Committee. She has been ranking member on five of the panel’s subcommittees and was chair of a housing subcommittee from 2009 until 2011.
Big banks, and Trump, in the crosshairs
Waters' willingness to go toe to toe with the administration — on issues beyond financial services regulation — would likely significantly impact the committee’s agenda in a new Congress with her holding the gavel.
Few expect the committee would remain as positive toward the industry as the Hensarling-led panel has been during the recent push to unwind Obama-era regulations.
“Clearly on the bank side, it’s going to be a less friendly environment for the industry,” said Brian Gardner, director of Washington research at KBW. “The big banks will be the subject of the crosshairs of a lot of hearings.”
Major legislative action in a Waters committee is unlikely even with Democrats controlling the House.
But Waters would still have subpoena power and would still be able to call in bank executives to testify before the committee.
“I always thought that the oversight focus and the investigatory focus will be greater than the legislative agenda,” said Gardner.
Waters was one of the first members of Congress to call for Trump’s impeachment. While the House committee would have no jurisdiction over investigating Russia’s influence in the 2016 campaign or other scandals that have hurt the administration, she could use the gavel to put pressure on the White House in other ways, such as calling banks that have had business with both the Trump and Kushner families to testify.
“A focus on the Trump family … would be negative to Deutsche bank and Citibank given their relationship to the Trumps and Kushners, respectively,” said Isaac Boltansky, an analyst at Compass Point Research & Trading.
It is also likely that Waters would target Trump’s appointees if they came to testify before the committee. She has described Treasury Secretary Steven Mnuchin as the “foreclosure king” for his time heading OneWest Bank, and has blasted the appointment of Mick Mulvaney as the acting director of the Consumer Financial Protection Bureau.
“I think there are going to be subpoenas relating to the regulatory regime,” Boltansky said.
Will Waters try to cut deals with GOP?
But some watchers say Waters’ tough public rhetoric is complemented by a willingness behind the scenes to cut deals to pass legislation.
“There are certain bills in … financial services that she has voted for with Republicans in the past," Barford said.
She has arguably been most focused on housing and community reinvestment issues as a member of the committee. In June, Waters introduced a bill that would reverse or reform recent policies by the Department of Housing and Urban Development that she called discriminatory and "deeply problematic and harmful" for lower-income Americans. She also introduced a bill that would increase protections for homeowners facing possible foreclosure by increasing the Federal Housing Finance Agency’s oversight of mortgage servicers.
Both bills come on the heels of legislation Waters introduced in April that would require HUD to increase its oversight of Federal Housing Administration mortgage lenders in an effort to strengthen compliance with the loss mitigation requirements. That bill would also establish a complaint and appeals process to provide borrowers the ability to adequately voice their concerns about unfair treatment.
But some observers said Waters could tailor her legislative priorities somewhat while holding the top spot on the committee to try to get legislation enacted.
Her recent housing bills “are probably a bit more aggressive and a bit more of a signaling act,” said Brian Knight, senior research fellow at the Mercatus Center at George Mason University. But with Waters chairing the panel, “I would expect you would see a more moderate version,” he added.
On the complex issue of reforming the government-sponsored enterprises Fannie Mae and Freddie Mac, Knight suggested Waters would possibly reach across the aisle to develop a housing finance system.
"You could see her work with some of the Republicans to have legislation that works for governmental support for affordable housing or regulations that would enable more competition within the space,” he said.
Consumer protection and community reinvestment seen as priorities
A Waters committee would also be expected to have a stronger focus on consumer issues, particularly measures that protect lower-income and minority families and seek to give them greater access to the financial system. This could also mean even more headlines criticizing the policies of the biggest banks, such as the numerous scandals facing Wells Fargo.
“The hearings [under Hensarling] were dominated by industry voices,” said Chris Peterson, director of financial services at the Consumer Federation of America. “It would be a breath of fresh air to hear from actual consumers and those who are working to protect the interests of those consumers.”
Others said Waters would be able to shift that focus regardless of her ability to pass legislation.
“The agenda is much about the bully pulpit and drawing attention to the deregulatory agenda that has been pursued over the last year,” said Jesse Van Tol, chief executive officer of the National Community Reinvestment Coalition. “Waters has a long history of fighting for her district and for minority communities across the country. Certainly she expresses a lot of leadership in the Congressional Black Caucus. I do think that there’s a heightened awareness of what’s happening in low and moderate income communities and communities of color.”
One key issue Waters has been focused on has been the CRA, a 40-year-old law that regulators and other stakeholders say should be modernized.
While Waters would likely prioritize the concerns of community groups in any CRA reform effort, observers said modernizing the law could be another opportunity where she might work across the aisle with GOP members and Trump-appointed regulators.
“She would work with [Comptroller of the Currency Joseph] Otting and work with regulators and work with her colleagues in Congress on something that is agreeable with the administration but also isn’t something that rolls back the CRA,” said Yana Miles, senior legislative counsel at the Center for Responsible Lending.
Should banks worry?
Several leading Republicans on the committee have raised concerns to industry groups about what might happen under a Waters-led panel.
Rep. Bill Huizenga, R-Mich., articulated that message at a Chamber of Commerce event in April, saying the Financial Services Committee under Waters would be a “24/7 impeachment hearing.” And when asked about who his successor should be, Hensarling’s response was that he knows whom it shouldn’t be: “That nice lady who sits next to me whose name begins with a ‘W.' "
But some industry groups aren’t necessarily fearful of Waters taking the reins, noting they would work to develop a working relationship with the committee’s chair regardless of party affiliation.
“ABA has always had strong lines of communication with House Financial Service Committee chairs, regardless of party. We look forward to working with the next chairman whoever that may be,” said James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Association.
Paul Merski, group executive vice president for congressional relations and strategy at the Independent Community Bankers of America, said his organization has worked with Waters on several small-bank issues.
“We have worked well on a number of issues, including new bank charters, the [industrial loan company] charters, the fintech charter,” Merski said. “Making sure new charters are on a level playing field with existing bank charters and complying with all the same rules and regulations that existing bank charters have to comply with.”
Other industry groups acknowledge policy disagreements with Waters while noting that she is still willing to listen to industry concerns.
“While we usually do not share the same perspective on these issues, she is open to having a dialogue with us, and we are appreciative of that,” said Beth Mills, a spokeswoman for the California Bankers Association. “She has also always been very supportive of our community development financial institutions and the important role they play in many of our California communities.”