The Odd Couple

I banned the 11 o’clock news from my bedroom for the last couple of months. In the presidential battleground state of Virginia, where I live, every television ad was political. Obama ads, Romney ads, SuperPAC ads, Senate race ads—and on and on.

Forget that I’m a lobbyist. Forget that politics is my profession as well as my wife’s. And forget that the future of the Republic is at stake. I insisted she turn the damn news off. How bad was it? “Honey Boo Boo,” controversial child star of the TLC reality television show “Toddlers & Tiaras,” has become more interesting to me than those political ads.

So the big election is here. I don’t think withdrawal is going to be too difficult for me. In this issue, General Counsel Scott Sinder presents an excellent documentation of the numerical challenges that President Barack Obama and Congress will face regardless of the election results. They are exceptionally daunting.

Sinder focuses on fiscal problems and implications for healthcare in particular. I will focus here on the certain, fascinating changes that are coming to the leadership of the House Financial Services Committee. The current chairman is Rep. Spencer Bachus, R-Ala., and the ranking Democrat is Rep. Barney Frank of Massachusetts. Bachus is stepping down as chairman, though he will remain on the committee. Frank is retiring.

Almost certainly, the next chairman (assuming continued GOP control of the House, which I do) will be Rep. Jeb Hensarling, R-Texas, while the ranking Democrat will be Rep. Maxine Waters of California. Google either of them and you’ll see the word firebrand used quite a bit. Stylistically and politically, they are polar opposites. 

Bachus and Hensarling are friends, and their voting record is almost identical. But Bachus is mellow and low-key, whereas Hensarling is ideologically intense and more willing to mix it up. Frank and Waters have voting records that are on the far left of the political spectrum, but Frank has shown remarkable flexibility on a number of financial services issues, whereas Waters has not. (In her defense, she and her staff were quite helpful in the five-year reauthorization of the federal flood insurance program. Let’s hope that will translate.)

If Hensarling had his way, Congress would flat-out repeal the Dodd-Frank Act, but that’s not likely. In the absence of repeal, Hensarling will lead the intellectual charge in gutting some of its most egregious provisions, specifically the frightening development of the Consumer Financial Protection Bureau (CFPB). The insurance industry was excluded from the statutory creation of the CFPB, but everyone in our sector rightly fears mission creep, and any bank-owned Council member firm can testify to the Spitzer-on-steroids concerns about the bureau.

Insurers, too, are very concerned about the “systemically significant” provisions of Dodd-Frank that threaten a new layer of Federal Reserve regulation heaped on top of state-by-state regulation. Hensarling will be an ally in those battles.

You can count on Congresswoman Waters to just as forcefully fight back, particularly on any consumer protection issue. However, even many Democrats don’t like to see the CFPB insulated from congressional oversight or budgetary approval. Hensarling might prevail on legislation that would alter the structure of the bureau and create accountability to Congress.

Anna Palmer of Politico recently wrote about the dilemma: “For Waters, who has gotten into dustups with fellow Democrats at times, the issue is not that her policy positions clash with the party, but whether she can take Frank’s place, or at least pick up some of the slack, as the chief defender of Democrats’ policies while also keeping members unified behind party positions.”

Meanwhile, the federal Terrorism Risk Insurance Act is set to expire at the end of 2014. Hensarling has voted against the act in the past, worried that it unduly extends the contingent liabilities of the federal government. This has the industry nervous, especially as the ranking Republican on the Senate Banking Committee, Richard Shelby of Alabama, has expressed similar concerns in the past. The industry will have to aggressively make the case that the recoupment provisions of the law mean that the reinsurance backstop has no negative ultimate impact on federal spending. It will be a big lift.

Hensarling and Waters are going to be quite the odd couple. Go-along, get-along congressional comity in the Financial Services Committee in 2013 is highly unlikely.