Wall Street and the Republican Senate

A Republican-led Congress would undoubtedly result in the passage of more bills designed to loosen financial regulations, particularly for community banks and nonbank institutions such as insurers and asset managers. Measures that have passed the House and languished in the Democratically-controlled Senate in the past few years would likely see floor action under a Republican Majority Leader. Specifically, measures that chip away at the Dodd-Frank law and its subsequent creations – the Financial Stability Oversight Council and the Consumer Financial Protection Bureau – would be well-received in both chambers. Republicans would likely push for more transparency regarding FSOC’s decision-making process and aim to establish a five-member commission at the CFPB to ensure conservative viewpoints are represented, in addition to making the agency subject to the annual appropriation process.

The Populists’ Banking Committee 

While a Republican-led Congress is likely to favor the business community in general, those benefits might not extend as robustly to all Wall Street players, at least when it comes to legislation originating in the Senate Banking Committee, Housing and Urban Affairs Committee. That’s because Sen. Richard Shelby (R-Ala.) is expected to replace Sen. Mike Crapo (R-Idaho) as the top Republican on the panel. Shelby, a former Democrat and one of the few senators from both parties to vote against the Troubled Asset Relief Program in 2008, is not considered a staunch ally of Wall Street banks and, instead, is known for having a populist streak. Still, some financial institutions see themselves benefiting from a GOP takeover in the Senate. Groups such as the Independent Community Bankers of America have been outspoken about their desire for regulatory relief, and they say a GOP-led Congress, particularly with Shelby wielding the Banking Committee gavel, is the best way to achieve that. All the more so if Sen. Sherrod Brown of Ohio, considered a friend of small banks and credit unions, becomes the ranking Democrat on the committee following the retirement of the current chairman, Sen. Tim Johnson (D-S.D.). Ranking Republican Mike Crapo of Idaho has also expressed an interest in becoming chairman, though Shelby has emerged as the front-runner.

Hensarling (But Maybe Lucas?) As Financial Services Committee Chairman

While House Financial Services Committee Chairman Jeb Hensarling of Texas was comfortably re-elected yesterday to an eighth term, his perch atop the committee dais faces a challenge from fellow panel member Frank Lucas. The Oklahoma Republican already has experience not just as a committee chairman, but also with shepherding financial regulation bills through the legislative process in his role as head of the Agriculture Committee, which has jurisdiction over the Commodity Futures Trading Commission. Lucas is also looking for a new hom, since Republican term limits prevent him from serving another two years atop the Ag Committee. The House Republican conference is expected to vote on panel chairs, as well as committee assignments for the rank and file, in the coming weeks. Lucas is billed as someone who’s able to move major pieces of legislation through the House, such as the farm bill earlier this year, while Hensarling is sometimes viewed as divisive within the party.

Hatch’s Finance

Early on in the 113th Congress there were high hopes for a significant overhaul of the U.S. tax code. Those plans fell apart after then chairman of the Senate Finance committee Max Baucus (D-Mont.), was named U.S. ambassador to China, and a plan from Rep. Dave Camp (R-Mich.), head of the Ways and Means Committee, got a cold reception from the House GOP leadership. Similarly, once-high expectations for comprehensive tax reform under a Republican-led Congress have already been lowered, with the idea that it might make more sense to hold out hope for a Republican in the West Wing in 2017, accompanied by a GOP-controlled Congress. Still, there is talk of bifurcating the tax overhaul and possibly making inroads on either the corporate or individual side of things. Either way, the Senate Finance Committee will most likely be lead by the current ranking Republican, Sen. Orrin Hatch of Utah. Hatch has laid out his requirements for both tax reform and any temporary measures that address corporate tax inversions.

Ryan as Ways and Means Chairman

Rep. Paul Ryan (R-Wisc.) is expected to take over as chairman of the House Ways and Means Committee next year, replacing Dave Camp of Michigan who’s retiring at the end of this term. Ryan, the GOP’s 2012 vice presidential nominee, is very much considered the party’s big-picture thinker, and this new position will allow him to put many of his ideas into practice, more so than his time leading the House Budget Committee. In that role he proposed lower tax rates and fewer tax breaks, suggesting he would take a similar approach on Ways and Means. He also has advocated for what’s known as dynamic scoring, which would require the Congressional Budget Office to change the way it measures the cost and impact of proposed legislation by taking into consideration the broader economic effects of bills. Rep. Kevin Brady (R-Texas) is also vying for the Ways and Means gavel, but is not expected to out perform Ryan. There are also several upcoming openings for seats on the committee. The House GOP steering committee is tasked with filling those openings and is expected to do so in the coming weeks.

The Future of Fannie Mae and Freddie Mac

Momentum for significantly overhauling Fannie Mae and Freddie Mac came to a halt earlier this year when the Senate Banking, Housing and Urban Affairs Committee narrowly passed a bill that lacked broad Democratic support. The bill, which would wind down the two GSE’s over five years, was authored by retiring Banking Committee Chairman Sen. Tim Johnson (D-S.D.) and ranking Republican Mike Crapo of Idaho. Whereas the Johnson-Crapo bill would replace Fannie Mae and Freddie Mac with a single “last resort” entity, Sen. Richard Shelby (R-Ala.) has expressed interest in winding down the two GSEs without a replacement. That would require new legislation and risk losing some Republican support or prompt a Democratic filibuster from the likes of Sen. Elizabeth Warren.

Export-Import Bank

A Republican-led Congress increases the odds of sending a bill to the White House that would overhaul the Export-Import Bank. Or the agency’s authority could simply expire without congressional action. The Ex-Im Bank won a nine-month reprieve near the end of fiscal 2014, which ended on Sept. 30, but bank supporters such as Boeing Co. are concerned that Republican opposition to agency will rage anew next spring when the bank’s authority expires.

Morning Consult