Can Opposites Attract?

Reps. Jeb Hensarling and Maxine Waters: an unlikely pairing that offers a test case of congressional cooperation on the House Financial Services Committee

By Tim Cook

Could political Mercury and Pluto ever share the same orbit? Debate continues in Washington about how to extract Capitol Hill from its partisan policymaking gridlock. For those wondering whether Democrat and Republican lawmakers can work constructively together in the new Congress, a test case stands before the House Financial Services Committee.

There, Rep. Jeb Hensarling, a limited-government, fiscal-conservative Republican from Texas, presides as chairman. His Democrat committee counterpart as ranking member is Rep. Maxine Waters from California, a liberal champion of socially activist government programs and consumer-protection regulation.

As outspoken, hard-charging defenders of their political parties views, Hensarling, an attorney and former businessman, and Waters, a former Head Start teacher, are political polar opposites. For community bankers, their differing views can be summed up along predictable lines over the Dodd-Frank Wall Street Reform and Consumer Protection Act. He’s adamantly against the law, which he views as vast government meddling and overreach. She steadfastly defends the law as a necessary regulatory correction to protect America’s consumers and economy.

With Hensarling and Waters leading their respective party’s agenda on the House Financial Services Committee, odds-on conventional wisdom is predicting that partisan temperatures on the committee will rise. But conventional wisdom in Washington doesn’t always turn out right.

On your right

While Republicans don’t have the votes in the Senate to overturn Dodd-Frank, constructive oversight over the implementation of Wall Street financial reform will continue under the House Financial Services Committee. In that way, a certain amount of bipartisan cooperation and compromise could benefit both sides, if not America and the financial services industry. For community banks, important Dodd-Frank oversight for the committee will include how well regulators distinguish between community banks and Wall Street financial institutions, as Congress intended.

Re-elected last fall to serve a sixth term in Congress, Hensarling represents a district extending southeast from downtown Dallas. Considered a rapidly rising star in the GOP, he joined in 2007 and then later became chairman of the Republican Study Committee, a group of the most conservative Republicans in the House. As a fiscal conservative, he follows the budget-hawk mold of retired Texas senator Phil Gramm, his former Capitol Hill boss and a former Senate Banking Committee chairman. “Ladies and gentlemen, at some point, you’ve got to quit spending money you don’t have,” Hensarling told a gathering of his constituents two years ago. “At some point, you’ve got to quit borrowing money at 40 cents on the dollar.”

In the last Congress, Hensarling’s GOP peers nominated him as House Republican Conference chairman, the fourth highest ranking GOP leadership position in the House. He also served on the Joint Select Committee on Deficit Reduction and the President’s Debt Commission, the so-called Simpson-Bowles deficit commission.

In the aftermath of the Wall Street financial crisis, Hensarling became a high-profile critic of the Wall Street reform legislation and of the housing government-sponsored enterprises, introducing legislation that would totally privatize Fannie Mae and Freddie Mac over a five-year transition period. Advocating for free-market corrections instead of government intervention, he opposed the Troubled Asset Relief Program and introduced legislation to eliminate the Emergency Homeowners’ Relief Program, a troubled mortgage initiative set up during the financial crisis to aid unemployed homeowners. He also served on a special congressional TARP oversight panel.

On community banking issues, Hensarling has been a strong supporter of ICBA’s proposals to provided meaningful regulatory relief for community banks. “The sheer weight, volume and complexity of a lot of the federal rulemaking, much of which is represented by Dodd-Frank, is ultimately harmful to our community financial institutions and gives the larger banks a competitive advantage,” he told the Associated Press last fall.

Ben M. Shirey II, president of the Canton office of Texas Bank and Trust Co. in Longview, Texas, which is within Hensarling’s congressional district, says the congressman has a clear and appreciative understanding of the important differences between community banks, regional banks and nationwide megabanks. “He has a very conservative philosophy, which lends itself well for the banking industry,” says Shirey, who has known and worked with Hensarling for several years. “I’m a strong supporter of him.”

On your left

First elected to Congress in 1990, Waters serves a diverse district in and south and southeast of Los Angeles, including a large portion of the city’s South Central district. With nearly 40 years experience in municipal and federal public offices, Waters is fond of her self-styled moniker “The Organizer.” Having grown up under segregation in St. Louis as one of 13 children in a family who relied on federal welfare assistance, she believes in the potentially leveling social opportunities from federal government intervention, regulation and spending programs. Affordable housing programs are among her priorities, and she has also pushed for federal loan guarantees for a wide range of municipal and infrastructure development programs.

As a member of the House Financial Services Committee, Waters has been a strong advocate for consumer protections, and she has introduced legislation to crack down on abusive lenders. While consistently outspoken in supporting community banks, she has helped turn a spotlight on the damage caused by too-big-to-fail Wall Street financial institutions. She has also supported ICBA efforts to reduce regulatory burdens on community banks to help redirect and rebalance regulation within the financial system.

And when it comes to making a point, Waters has demonstrated that she’s not afraid to step on toes, Democrat or Republican. As a Congressional Black Caucus member, she temporarily blocked a vote on the Dodd-Frank reform legislation to leverage more Obama administration backing of programs supported by many of her African-American constituents. In 2009, she told a panel of banking executives, “To the captains of the universe sitting here before all of us, all of my political life I have been in disagreement with the banking industry. …”

“I don’t have time to be polite,” she said on another occasion with characteristic impatience.

In contrast, however, small-business leaders and community bankers in her district credit Waters for her offer of support and open-door policy for her Main Street constituents.

“Personally, all of my experiences with her over a very extended period have been very positive,” says Wayne-Kent Bradshaw, president and CEO of Broadway Federal Bank in Los Angeles. “And it has also been enhancing to Broadway Federal Bank specifically and to the community that we serve generally.”

A way forward

In their respective leadership positions on the House Financial Services Committee, Hensarling and Waters have both consistently recognized the fundamental differences between community banks and the Wall Street institutions. Regulatory relief targeting community banks and further actions to end too-big-to-fail should be common-ground issues for them. Progress in improving the governance structure of the Consumer Financial Protection Bureau could also become an area of bipartisan agreement if a more cooperative spirit of Dodd-Frank oversight takes hold.

A very big issue confronting them—ending the government-run limbo of Fannie Mae and Freddie Mac—also holds promise for them to achieve a historic legacy. Resolving the federal dependence of these housing finance entities is widely considered one of the most complicated and politically difficult issues facing Congress and the Obama administration. Although they carry different philosophical approaches to the issue, Hensarling and Waters share a strong commitment to sustaining a working housing finance system that keeps homeownership accessible to everyday Americans.

Not so long ago, before the Wall Street financial crisis, lawmakers on the Senate and House banking and financial services committees upheld a longstanding record in making financial services issues largely bipartisan. Hensarling and Waters have already held private conversations, including a cordial lunch last year, to sketch the contours of the committee’s upcoming potential agenda. As the new Congress gets under way, community bankers will be closely watching their efforts, as will the rest of Congress.

Perhaps a momentous break from Congress’ long run of partisan gridlock could happen in one of the most unlikely places. endmark


Tim Cook is ICBA senior vice president, publications. Thomas Warren, ICBA’s director of communications, contributed to this article.