With a little more than a week to go before Americans head to the polls in Congressional mid-term elections, attention is shifting away from the potential results to what the outcome might mean for the business of governance. And nowhere is the impact more salient than in the new leadership that will run Senate committees, should control change hands in that chamber.
As of Sunday, the Republicans are still poised to take over control of the Senate. Election prognosticator Nate Silver gives the GOP a 63.3 percent chance of winning, with the most likely result being a majority of 52 Senate seats for the Republicans.
If that happens, all of the Senate committees and subcommittees will name new chairs.
Most relevant to the debt industry is the potential new head of the powerful Senate Committee on Banking, Housing, and Urban Affairs. Sen. Richard Shelby (R-Ala.) is seen as the most likely to take that position if the Republicans win control.
The Banking Committee has oversight of the broad banking and financial services industry in the U.S., including banks and other similar companies, the mortgage system, and the federal agencies that regulate those activities, like the OCC, Federal Reserve, and of course, the CFPB.
It would be Shelby’s second stint as chair of the committee; he was previously Chairman from 2003 to 2007 when he was unseated after Democrats gained control of the Senate in the final mid-term election of George W. Bush’s Presidency. With a Republican at the head of such an influential committee, it seems certain that scrutiny of the CFPB would ramp up to align with actions taken by the GOP-led House over the past several years.
But Shelby’s background and experience – he’s been a U.S. Senator since 1987 – may limit the actual damage to the CFPB. Shelby was originally elected to the Senate as a Democrat and switched parties in the 1994 Congressional takeover by the Republicans. He is, above all else, a moderate and pragmatic Senator.
Former Democratic Congressman Barney Frank – of Dodd-Frank fame — told Bloomberg, “There is extremism [in the House] that I don’t think Shelby shares.”
Many feel that Shelby’s focus will be on can actually be accomplished. There is no way President Obama would ever sign a bill that completely dismantles the CFPB. There is little chance that bill would even see the Senate floor, as Democrats would mostly likely filibuster.
There’s also the matter of Sen. Elizabeth Warren (D-Mass.). She has a spot on not only the Banking Committee, but its most important subcommittee for the debt industry: Financial Institutions and Consumer Protection. Warren is not likely to let any legislation harmful to the CFPB leave the subcommittee without a formidable fight.
So what changes to the CFPB might be possible in a Republican-led Congress?
Ever since its inception through the Dodd-Frank Wall Street Reform and Consumer Protection Act, Republican opposition to the CFPB has focused on two main points: one individual Director solely heading the complicated agency and the fact that the Bureau skirts direct oversight of its budget because it is funded directly through the Federal Reserve. Republicans have wanted to install a commission to head the CFPB, similar to the structure at the FTC and SEC, and subject it to Congressional appropriations.
The installation of a five-member committee to replace current Director Richard Cordray seems the most likely. Several House Democrats actually voted in favor of a bill this year that would have done just that. And creating a commission structure would not directly weaken the consumer protections of the CFPB, making it at least politically feasible.
A commission would also probably have little impact on the debt industry. New CFPB proposals for debt collection rules would almost certainly be announced before any action can be taken by Congress, perhaps even before a new Congress is sworn in. And there is little political willpower to water down debt collection regulations.
But it will certainly be an interesting two years for the CFPB if Republicans control both chambers of Congress. We’ll have to wait until next Wednesday to see if that’s the case.