Jeb Hensarling (R-Texas) had a perfect view for what should have been the capstone of his six-year tenure as chairman of the House Financial Services Committee.
Hensarling stood beside the desk in the White House’s Roosevelt Room on May 24, where President Donald Trump signed legislation designed to provide regulatory relief to small and midsize banks.
The new law fell far short of the broader rollback of the Dodd-Frank Act long sought by Hensarling, who for weeks had threatened to hold up the narrower version with hopes for negotiations with Senate Democrats. At Trump’s urging, Hensarling relented in exchange for a promised vote this summer on a modest package of bills encouraging capital formation.
The moment was quintessential Hensarling: a principled stand that hasn’t necessarily translated into many legislative achievements. With his retirement from Congress approaching in January, Hensarling is unlikely to accomplish his goal of undoing most of the robust regulatory framework put in place after the financial crisis.
“Hensarling certainly was unwilling to enter into any meaningful negotiations that would result in significant compromises to his core principles,” David Tittsworth, counsel at Ropes & Gray LLP, told Bloomberg Law.
Hensarling was first elected in 2002, and carried on the legacy of his Texas A&M professor and future Republican Sen. Phil Gramm as a free-market and budget hardliner. Hensarling, dubbed “budget nanny” by the National Review early in his tenure, joined the conservative Republican Study Committee in 2005 and was elected chairman a year later.
J. Mark McWatters, chairman of the National Credit Union Administration who first met Hensarling at the University of Texas law school and later served as his counsel, described his former boss as a thoughtful leader who “seeks the principled, market-based perspective regardless of how the political winds are blowing.”
Hensarling twice opposed the $700 billion bank bailout in the middle of the 2008 financial crisis, warning it could put the nation on a “slippery slope to socialism.” Two years later, he was equally adamant in opposing passage of the Dodd-Frank Act, a law he said “clogs the arteries of capitalism in our system.”
Hensarling in 2016 introduced his preferred remedy: a broad rollback of Dodd-Frank he dubbed the Financial Choice Act. The bill would eliminate federal authority to seize and unwind a failing financial firm during a crisis — an authority the Trump administration proposed keeping in a 2017 Treasury Department report.
Hensarling set his sights on diminishing what he considered one of Dodd-Frank’s most troubling creations: the Consumer Financial Protection Bureau. His bill, which passed the House in 2017 but was never touched by the Senate, would have taken away one of the CFPB’s core enforcement powers: its ability to go after “unfair, deceptive, or abusive” practices in the financial services industry.
Hensarling also wanted to weaken the CFPB’s supervisory authority, prevent publication of its consumer complaint database, bring it under congressional appropriations, and make its director removable at will by the president — all of which were nonstarters with congressional Democrats.
“He has very strong principles. I’ve enjoyed working with him, though I don’t share many of those principles, but he is honest,” Rep. Brad Sherman (D-Calif.), a member of the House Financial Services Committee, told Bloomberg Law before the May 22 vote. “Certainly he has within intelligence and honesty fought for the principles that are totally rejected by the Democratic Party in most cases.”
Overhauling Dodd-Frank isn’t the only area where he ultimately had little to show for unyielding stands. House Republican leaders passed flood insurance legislation over his objections in 2014. To do so, then-House Majority Leader Eric Cantor (R-Va.) bypassed Hensarling and worked with Democrats.
Hensarling made an imprint on the new banking law, despite not getting the broader changes he wanted, Diego Zuluaga, a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives, told Bloomberg Law.
“It is true that legislation that gets passed often depends on the legislation that came before it but didn’t make it through,” Zuluaga said, adding that Hensarling may consider himself more impactful than he is being given credit for now, because the Volcker Rule changes and community bank relief in the new law echo his desired approach.
With the banking deregulation bill signed, Hensarling is working on a package meant to promote capital formation and small business creation. His committee will hold markups in June for more capital formation bills, Hensarling told reporters May 24.
“This is about, where’s the next Apple coming from? Where’s the next Yahoo coming from?” he said. “Where the economy of tomorrow coming from? Why is it we have half the [initial public offerings] we had two decades ago?”
To contact the reporter on this story: Catherine Douglas Moran in Washington at email@example.com
To contact the editor responsible for this story: Michael Ferullo at firstname.lastname@example.org
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)