6/3/14, "Why Wall St. cares about the Mississippi Senate primary," Politico, by MJ Lee, Kate Davidson
"Wall Street banks may not be rooting for Mississippi Republican Thad Cochran to lose his Senate primary contest on Tuesday, but there would be an upside for the industry if he did.
If tea party challenger Chris McDaniel defeats Cochran and Republicans gain control of the chamber next Congress, big banks are likely to get their preferred Senate Banking Committee chairman: Mike Crapo of Idaho.
In the event that Cochran defends his seat, the Senate
Banking panel could be chaired by Richard Shelby, an Alabama Republican
with a populist streak who has clashed with big banks in the past and
would be less likely to lend a sympathetic ear to the industry’s
arguments.
.
“Crapo has shown a willingness to meet with folks on all sides of an
issue and then form an opinion,” said one banking lobbyist based in
Washington, who like others requested to speak anonymously to share
candid views about lawmakers who oversee the industry. “Shelby having
been around for so long, his opinion is known in some instances and I
don’t think the welcome mat is necessarily rolled out for folks on the
other side of the issue and that can make it difficult to work with him
sometimes.”.
.
With no Cochran in the Senate, the gavel of the Senate Appropriations Committee would be Shelby’s for the taking, clearing the way for Crapo to chair Senate Banking.
Financial services lobbyists, including former Senate staffers who have moved on to K Street, privately say many in the banking world are quietly rooting for a Chairman Crapo over a Chairman Shelby should Republicans take the Senate.
In the aftermath of the 2008 financial crisis, big banks have not exactly viewed Shelby as a friend.
In 2010, for example, the Alabama Republican voted for the so-called Brown-Kaufman amendment to the 2010 Dodd-Frank law that would have broken up the country’s biggest banks. He was also just one of a few Senate Republicans to vote against 2008 bank bailout law that set up the Troubled Asset Relief Program (TARP), refusing to support a government bailout of banking giants like Citigroup and Bank of America.
Shelby has also advocated for making banks meet tougher capital rules, an issue on which some liberal and conservative senators have found common ground.
Shelby’s relationship with the industry is viewed similarly to that of House Financial Services Chairman Jeb Hensarling (R-Texas). Both lawmakers’ push to repeal certain Dodd-Frank rules is welcomed by the financial sector, but Hensarling and Shelby also oppose government backstops enjoyed by sectors such as housing and insurance that their more moderate GOP colleagues, like Crapo, tend to support.
“There’s far more of a willingness to ruffle some feathers on Shelby’s part, and Crapo puts more emphasis on consensus-building,” said Mark Calabria, director of financial regulation studies at the Cato Institute and a former Shelby aide....
Several banking lobbyists emphasized that there has been no strategic effort by the industry to back McDaniel, whose tea party background would make him an unlikely Wall Street ally if elected. McDaniel’s Federal Election Commission records show that he has received no political donations from the PACs of major banks or financial services trade groups this cycle.
The race is simply a matter of which senator they find easier to work with, one financial services industry source noted.
“Some in the industry think that Crapo might be a bit more thoughtful on these issues,” the person said. “But no one’s rooting for Cochran to lose, not at all — people are just watching and trying to guess how the chess pieces might move.”
Shelby spokesman Jonathan Graffeo said the senator is “proud of his record, especially in opposing all taxpayer-funded bailouts.”
“If banking lobbyists were looking for Sen. Shelby to change his mind about bailing them out or putting taxpayers at risk going forward, then of course he was going to remain resolute in his opposition regardless of their attempts to persuade him otherwise,” Graffeo said. “He sees through that stuff.”
Crapo’s office declined to comment.
Even when it comes to repealing parts of Dodd-Frank, Shelby’s priorities may not neatly align with those of Wall Street banks. For instance, the industry is concerned that as chairman he would back getting rid of the part of Dodd-Frank the industry actually likes.
The law created a system for the government to seize and liquidate large failing financial firms without relying on a taxpayer bailout to avoid a repeat of the chaos that followed Lehman Brothers declaring bankruptcy in September 2008.
In 2012, House Republicans passed a bill to repeal the orderly liquidation authority, arguing that it won’t work and could cost taxpayers billions of dollars, therefore enshrining “too big to fail.”
.
But for the industry, the authority is the main line of defense against calls to break up the big banks. If the provision does work as intended, too big to fail is over, and there’s no need to impose further restrictions on their size or operations, the argument goes....
A Shelby chairmanship would also likely throw a wrench in the bipartisan deal struck in the Senate this year on housing finance reform. The Senate Banking Committee recently approved a bill authored by Senate Banking Chairman Tim Johnson (D-SD) and Crapo, which was backed by much of the industry as well as the the Obama administration, to do away with Fannie Mae and Freddie Mac and put in place a new mortgage financing system.
Shelby voted against the bill out of concern that it leaves too much of a government role in the new system and as chair of Senate Banking he would be unlikely to revive the bipartisan proposal.
“We have seen what happens when government becomes too entrenched in housing and the system becomes too complicated, even for regulators to oversee,” he said when the committee met last month to vote on the bill."
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