Banking Committee Stays Quiet as Shelby's Tenure Wraps Up

All Banking Law, All in One Place. Bloomberg Law: Banking is the comprehensive research solution that powers your practice with access to integrated banking-related legal news, analysis,...

By Jeff Bater

Sept. 1 — By the time the Senate returns after Labor Day, 474 days will have elapsed since the Banking Committee last met to consider banking legislation.

Chairman Richard Shelby’s (R-Ala.) bill marked up in May 2015 was the only financial services legislation taken up thus far in his two-year tenure, and it advanced no further. Another 10 months elapsed before the committee voted on the first Obama administration nominee, and two Federal Reserve nominees remain waiting for a confirmation hearing.

The paucity of action, Democratic critics said, encapsulates Shelby’s chairmanship, which will end this Congress, no matter which party controls the Senate next year. Shelby has shown little appetite for advancing legislation while overseeing a panel where partisanship has eclipsed comity.

“It's almost impossible in this environment right now to get anything done,” a banking lobbyist told Bloomberg BNA. “Shelby looks at that and says, ‘It's not going to happen.' Now, another chairman might dive in there and work the thing and at least try to move the ball forward, and maybe you do develop a consensus.”

Shelby's press office did not respond to requests for comment. But Brandon Barford, a former Banking Committee Republican aide, said Shelby is focused on his priorities, particularly using nominations as leverage to get the White House to nominate a Federal Reserve vice chairman for supervision of financial institutions.

“He wants to do what he wants to do,” said Barford, now a partner at Beacon Policy Advisors in Washington. “So I think people saying, ‘You’re not doing anything, you're not doing enough' — well, that's in the eye of the beholder, really. Yes, there's fewer hearings and fewer bills. That’s inescapable. That's just a fact. But it's also, on the nominees in particular, he’s just trying to exert leverage.”

The panel’s top Democrat, Sen. Sherrod Brown of Ohio, has not been shy in expressing his frustration with how Shelby has run the committee.

At a July event, Brown said he’s “more optimistic” about the prospects for making improvements to post-crisis efforts to regulate financial services once Shelby steps down. Brown noted he has a “working relationship” with Mike Crapo (R-Idaho), who is in line to succeed Shelby.

“He's way more conservative than I am,” Brown said. “But he's straightforward and honorable, and I'm hopeful we can see some real things happen to make Dodd-Frank better.”

Big Push

As chairman, Shelby's big legislative push was S. 1484, a sprawling bill that offered relief for small banks and proposed sharply raising the asset threshold for banks considered systemically important financial institutions (SIFIs) from a level of $50 billion.

He rolled out a discussion draft in May 2015, and it quickly met resistance from Democrats, who branded the plan as a rollback of Dodd-Frank protections. They offered an alternative measure that, like Shelby's, included breaks for smaller banks, but did not provide for changes to the systemic risk designation process.

The committee passed Shelby's measure on a strict party-line vote, but the bill itself wasn't considered on the Senate floor. The measure was added to a Senate appropriations bill — a maneuver that Shelby characterized as a dual-track approach and was, in turn, attacked by Democrats.

At the end of the year, some small bank relief found its way into a highway-funding package cleared by Congress, including a provision allowing more banks to be eligible for a longer examination cycle.

The Shelby Bill

Critics of Shelby's regulatory bill found fault with its “kitchen sink” approach. “I think it boils down to a major missed opportunity for the committee to get some accomplishments done,” a Senate Democratic aide said. “I think we go back to when you look at what that bill was trying to do in one fell swoop — to push a broad-based deregulatory agenda.

“The Republicans essentially used community banks and credit unions as camouflage to push this broader agenda to roll back Dodd-Frank, to help the biggest banks.”

Barford said changes in the composition of the Senate panel have made it difficult to get anything done. “It's become harder and harder to come to consensus both within each party but also broadly for anything bipartisan,” he said.

Logjam on Nominees

While Shelby has been at the helm of the committee, the Obama administration has sent 27 nominations to the committee. Three of the 27 have been withdrawn. Shelby has held hearings on some of the administration's picks, and the committee reported 10 nominees to the full Senate.

For instance, Adam Szubin, nominated in April 2015, has been cleared by the committee to be Treasury undersecretary for terrorism and financial crimes but awaits full Senate confirmation.

Perhaps the most powerful posts under the committee's aegis waiting to be filled are those on the Fed's Board of Governors. Last year, the administration submitted two nominees for the body that sets monetary policy and regulates banks — retired Bank of Hawaii chief executive Allan Landon and University of Michigan economics professor Kathryn Dominguez.

Neither nominee has appeared before the committee. Shelby has said the panel won't hold hearings until the White House nominates a vice chairman for supervision of financial institutions at the central bank.

Congressional Prerogative

Of the backlog, Barford said Shelby is trying to “exert congressional prerogative, to say, ‘You get to nominate them, but we have to approve them and confirm them and until you, the executive branch, do certain things I’m demanding — such as name someone to be the vice chair for the Fed board for regulation, supervision — then we’re not going to play ball.'

“I think more overwhelmingly he's never been one to rubber-stamp any nominees, even for President [George W.] Bush, who was of the same party,” Barford said. “I think that trend is continuing, and he feels the Obama administration and others are less cooperative than he would like. He's exerting the congressional prerogative that's in the Constitution.”

Larry Powell, a University of Alabama-Birmingham professor who specializes in political communications and consults for candidates, said, “I think in some ways he's been successful, but I think he didn't do nearly as much as he would like to do, and I think in some ways, his work on the committee was hampered by Republican ideology” in refusing to yield on Dodd-Frank.

Shelby History

Shelby has served on the Banking Committee since being elected to the Senate in 1986 as a Democrat. He switched parties in 1994 after the Republicans gained control of Congress. He served as chairman of the Banking Committee from 2003 to 2006, then became ranking Republican when Sen. Christopher Dodd (D-Conn.) took charge of the panel.

Shelby, 82, cruised to victory in a March primary and is expected to win in November, which would give him his sixth term in the Senate.

He also serves on the Senate Appropriations Committee, an assignment the banking lobbyist suggested Shelby likes better. “He's never been one who's really been serious about legislating,” the lobbyist said. “I'm not sure this is a criticism — or how he views things. I think Shelby is the kind of guy who thinks there is always unintended consequences from legislation.

“He’s transactional. I think he's biding his time until he’s back on the Appropriations Committee. That stuff he likes. He likes funding things.”

Looking at Shelby over time, Ernie Patrikis, a partner at White & Case, called him “a pretty good conservative Republican, relatively pro-business and, really, a free-market individual.”

“I think his policies were all in the right direction,” he said. “Whether he was effective in getting all those things through is another story.”

Ideological Consistency

Barford said Shelby has tried to maintain ideological consistency over time. “He's been on the Federal Reserve's case for a number of years before the financial crisis, even,” Barford said. “He's never been an apologist for the industry, but he's always been an advocate for community banks and, first and foremost, he looked after Alabama and what he thought was best for constituents and for the business and financial environment in Alabama.”

Barford said he doesn't think Shelby “particularly cares what lobbyists in the financial services community think.”

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor responsible for this story: Mike Ferullo at mferullo@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.