November 2016
American Bankers Association
Analysis of the 2016 Elections
and the Impact on Banking
Presidential election years often bring excitement to the electoral process. The 2016 elections did not
disappoint. In what some have described as the most exhausting election in modern history, the American
people have chosen to retain Republican control in the U.S. Senate, only marginally shrink the
Republican majority in the House of Representatives and elect businessman Donald Trump as the 45th
president of the United States.
Although the banking industry was not prominently featured in the presidential election campaign, in a
handful of congressional races banking played a prominent role. Like previous elections, voters expressed
the greatest concerns about the economy, terrorism, immigration, trade foreign policy and health care.
With control of Congress now firmly in the hands of the GOP and a Republican dance partner at the other
end of Pennsylvania Avenue, new life may be breathed into efforts to enact some meaningful banking
regulatory relief in the 115th Congress (2017-18).
Comprehensive regulatory relief—promoted by the current chairmen of both the House Financial
Services and Senate Banking Committees—failed to gain passage despite Republican majorities in the
past Congress, but will likely be revived early in the legislative session. The looming court case around
the constitutionality of the Consumer Financial Protection Bureau and an adequate majority will now give
Republican leaders the confidence to move forward on restructuring the bureau and to pursue other
changes to Dodd-Frank Act rules, the majority of which have already been finalized.
While the overall results of the 2016 election show Republicans maintaining control of both bodies, the
results of individual U.S. House and Senate campaigns indicate that there is continuing strong
partisanship, with a shrinking and now nearly invisible number of centrists in Congress. The failure to
obtain a Senate supermajority (60 seats) to move major legislation could result in continuing gridlock on
both major and minor issues, including issues important to the banking industry. It is important to note
that in the 2015-16, cycle Senate Republicans held a 54-46 advantage and still had difficulty moving
legislation. However, we are cautiously optimistic that strong leadership will help guide much-needed
legislative proposals through Congress this year. Our optimism is built on the hope that members of
Congress heard the voices of their constituents who expressed frustration with the dysfunctional nature of
Capitol Hill. Bankers—who are constituents, employers and community leaders—have also grown
frustrated at Congress’ inability to move commonsense regulatory fixes through the legislative process.
The U.S. Senate
While much was made of the Senate possibly moving towards the Democrats, the close-to-final tally in
the Senate shows Republicans maintaining a narrow majority. Current results show Republicans holding a
51-47 advantage with two seats in New Hampshire (Republican Sen. Kelly Ayotte and her Democratic
opponent Gov. Maggie Hassan are in a virtual tie with the race too close to call; a recount will likely be
requested) and Louisiana (Democrat Foster Campbell and GOP state Treasurer John Kennedy in Dec. 10
runoff) still to be decided.
With Republicans maintaining control, Senate leadership and committee chairmen will remain largely
intact. Mitch McConnell (R-Ky.) has stated his desire to continue as majority leader and at this time his
position is safe. Chuck Schumer (D-N.Y.), currently the Democratic Policy Committee chairman, is
expected to take over as minority leader in the Senate.
With current Senate Banking Committee Chairman Richard Shelby (R-Ala.) term-limited and unable to
continue as chairman, the committee will likely be led by Mike Crapo (R-Idaho). Crapo, who easily won
re-election, has served in the Senate for 18 years and is currently the second-ranking Republican on the
committee. Crapo also served as the lead Republican on the committee in the 113th Congress. The senator
will bring a different perspective to the leadership of the banking panel, as he has been known to work in
1
November 2016
a bipartisan manner on many issues. We expect him to take that approach in his new role. While Crapo
has been reluctant to outline his priorities prior to the election, we expect the incoming chairman to
maintain his focus on passing meaningful regulatory relief; pursue CFPB and Dodd-Frank reforms,
particularly in the areas of the Volcker rule, swaps and derivatives; and to focus on data breach and
consumer privacy. In addition, he has shown a particular interest in the Economic Growth and Regulatory
Paperwork Reduction Act process. While the senator has worked in the past with a bipartisan group of
colleagues on GSE reform, it is uncertain whether he will dedicate the committee’s time on this issue in
the upcoming Congress.
The committee’s partisan membership ratio will likely stay the same with 12 Republican and 10
Democratic seats. The political dynamics could also stay the same with Democratic members, particularly
the more progressive members of the committee, pushing back on any efforts to make major reforms.
Sen. Crapo will be challenged on these efforts, but may find some willing moderate Democrats on the
committee willing to assist him as three of the moderates (Heidi Heitkamp of North Dakota, Joe Donnelly
of Indiana and Jon Tester of Montana) will be up for re-election in 2018 in traditionally Republican states.
Sherrod Brown (D-Ohio), who is the current lead Democrat on the committee, will likely maintain his
position. He is best described as a liberal/progressive member with a very strong tilt toward consumer
protection. We expect Brown to stay focused on consumer protection as well as capital standards, with a
focus on Wall Street activities and a strong defense of the Dodd-Frank Act.
The U.S. House of Representatives
On election night, there were 246 Republicans, 186 Democrats and 3 vacancies in the House. With a
small number of seats still being considered, it appears the Republican majority will only be diminished
by a couple of handfuls. Current results have the House makeup as 236 Republicans and 191 Democrats,
with eight races outstanding. The Republican majority is enough to ensure passage of most legislation,
but it is not enough to move major/more controversial proposals (appropriations bills, budget, tax reform)
that often require some bipartisanship to advance through the House. While a Republican presidential
victory is a needed boost to the Republican majority in the House, the presidential election illuminated
fractures within the Republican caucus, and efforts will now have to be made to determine which
direction the party will go.
House Speaker Paul Ryan of Wisconsin, who has stated his intentions to seek the speaker’s chair again,
may be challenged for his position when party elections take place. If Ryan retains his position we expect
him to continue his “Better Way” agenda, which House Republicans launched in mid-2016. This
comprehensive agenda contains six different areas of focus—poverty, national security, the economy, the
Constitution, health care and tax reform. If Ryan were removed as speaker, it is uncertain who would
assume his seat and what agenda would be put forth. With potential fractures in the Republican caucus,
Minority Leader Nancy Pelosi of California may gain some negotiating leverage on must-pass proposals.
The current leadership of the House Financial Services Committee will remain intact, with Chairman Jeb
Hensarling and Ranking Member Maxine Waters staying in place. Subcommittee chairmen will change
with the retirement of active Financial Institutions Subcommittee Chairman Randy Neugebauer of Texas.
This subcommittee, important to the industry, will need a leader that is equally active and knowledgeable
like Neugebauer. The leading candidate for the chairmanship is Blaine Leutkemeyer (R-Mo.), a former
community banker and banking regulator, and current chairman of the Housing and Insurance
Subcommittee. There will also be movement on the Capital Markets and Government Sponsored
Enterprises Subcommittee as current Chairman Scott Garrett (R-N.J.) was defeated for re-election.
The committee ratios will likely remain unchanged. The committee, however, will see several new
members as a result of retirements and defeats among committee members. The committee could see up
to eight new members.
2
November 2016
Hensarling is entering his last Congress as committee chairman due to GOP caucus term limits. While the
chairman has successfully moved some bipartisan measures through the committee, many of the measures
have moved with little Democratic support. With growing tensions around the constitutionality of the
CFPB and the impact that Dodd-Frank has had on the banking industry, particularly community banks, it
is unlikely that the ideological themes that have been on display the past four years will change. We are
optimistic that, as more new members come onto the committee who are not wed to long-held views, the
desire to move legislation will increase.
We expect Hensarling to continue to pursue in whole or in part his Financial CHOICE Act proposal,
which the committee passed on a party-line vote in July 2016. We also expect the committee to resume
consideration of housing/GSE reform and to consider flood insurance reforms. The committee will likely
conduct additional oversight on the actions of the financial regulators to ensure they are closely
monitoring the activities of large institutions.
The New Administration
Immediately gauging how the Trump administration will react to the banking industry is not easily
discerned since his banking priorities were not revealed during the campaign. For every idea that was
shared about the need to repeal the Dodd-Frank Act, an alternative idea was put forward to reinstate
Glass-Steagall. Clear banking proposals put forward by Trump have been difficult to come by. We expect
the Trump administration will take cues from Hensarling and Crapo on banking priorities. Based on the
Trump campaign’s positions shared during the campaign, the new administration’s views on banking
could include:





Take power away from the Federal Reserve and allow Congress to audit its decision-making;
Repeal or greatly alter the Dodd-Frank Act;
Abolish the CFPB;
End “too big to fail” and eliminate bailouts; and
Temporarily freeze all agency rules.
While not directly citing proposals on regulatory relief for smaller institutions, Trump has mentioned that
small banks are being harmed.
In addition to legislative issues, the Trump administration will have the task of appointing new heads of
the Office of the Comptroller of the Currency (Comptroller Thomas Curry’s term expires in March 2017),
Federal Deposit Insurance Corporation (Chairman Martin Gruenberg’s term expires in November 2017),
Federal Reserve Board of Governors (Chairman Janet Yellen’s term in the chair expires in February
2018) and the CFPB (Director Richard Cordray’s term expires in July 2018).
3