Pivotal Day for Makeup of Industry Regulators

By Heller, Michele | American Banker, November 2, 2004 | Go to article overview

Pivotal Day for Makeup of Industry Regulators


Heller, Michele, American Banker


Crucial financial services regulatory matters are riding on today's elections.

The two key questions -- who will be President and which party will control the Senate next year -- have implications for financial companies because several top agency jobs are vacant or expected to open up soon, and issues such as Community Reinvestment Act reform and defense of national bank preemption hang in the balance.

Presidential nominees will have to meet the approval of the Senate, which could end up being controlled by a different party than the one in the White House.

"The regulatory appointment arena is one of the more significant aspects of the elections," said Edward L. Yingling, the executive vice president of the American Bankers Association.

In addition to naming a successor to Federal Reserve Board Chairman Alan Greenspan, whose term as a governor expires Jan. 31, 2006, and cannot be renewed, the next President will have to name a comptroller of the currency and a director of the Office of Federal Housing Enterprise Oversight.

New leadership at other financial regulatory agencies is likely as well.

"Regardless of who is elected, you are going to see a lot of changes in the regulatory agencies," said Diane Casey-Landry, the president of America's Community Bankers. "If Bush is reelected, there will be some turnover or you might see some of the regulators in different positions."

For example, Federal Deposit Insurance Corp. Chairman Don Powell might be named comptroller or to some other federal post by President Bush, sources have said. He has also pursued jobs outside of government.

Some of the most pressing issues facing regulators, the White House, and Congress are whether to toughen regulation of Fannie Mae and Freddie Mac, limit national bank preemption of state laws, set national standards to combat predatory lending, or widen the use of streamlined community reinvestment exams.

The lawmakers who most influence banking policy are all but certain to be returned to Congress next year by their constituents, but how much power each will wield depends on the outcomes of today's votes.

Democrats are trying hard to pick up at least two seats to win a majority in the Senate. Republicans are expected to retain and perhaps even add to their majority in the House, where they currently control 52% the 435 seats.

Senate Banking Committee Chairman Richard Shelby, R-Ala., is expected to cruise to a fourth Senate term in his race against a little-known Democrat whose top legislative priority is the legalization of marijuana. However, Sen. Shelby would have to give up the committee gavel if the GOP loses control of the chamber.

If that happens, Sen. Paul Sarbanes, D-Md. -- who is not up for reelection until 2006 -- is in line to become Senate Banking chairman. The cerebral populist and senior Democrat on the committee has long tried to boost community reinvestment requirements for banks and tighten lending, privacy, and other consumer-protection laws.

It is possible Sen. Sarbanes could give up his position as senior Democrat on Senate Banking for the top slot on the Foreign Relations Committee. (Party rules generally prohibit a senator from holding more than one top committee post.)

Should Sen. John Kerry become President and appoint Sen. Joseph Biden of Delaware, the ranking Democrat on Foreign Relations, secretary of state, Sen. Sarbanes would be next in line for head of Foreign Relations. It is unclear if Sen. Sarbanes would seek the Foreign Relations chairmanship if it became available, and his office did not return calls seeking comment.

Sen. Christopher Dodd, D-Conn., who is expected to win reelection, is the No. 2 Democrat on the Banking Committee. Sen. Dodd has been most active on insurance issues. Though he does support some consumer protections banks find burdensome, such as sponsoring a bill targeting credit card practices, most industry officials say they consider him to a moderate and more sympathetic to their interests than Sen. …

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