John Heasley

John Heasley
TBA General Counsel

What happens now that Democrats took the Senate?

Now, with Democrats ruling the executive branch and both houses of Congress, the momentum is with the progressive left."

Sherrod BrownPrior to the Georgia elections for the U.S. Senate, it was assumed that Republicans would win at least one seat, giving Mitch McConnell a narrow majority as Senate Majority Leader. Democratic victories in both races gives the Senate a 50-50 balance, and Vice President Kamala Harris will cast the winning vote for Democrats on all contested matters.

If the Republican majority had held, the Biden administration would have chosen centrist regulators that had bipartisan support. Any House legislation deemed too radical would have been halted or moderated. Now, with Democrats running the executive branch and both houses of Congress, the momentum is with the progressive left.

New Yorker Chuck Schumer will be the new Senate Majority Leader and Democrats will chair all committees. Bernie Sanders will chair Budget and Ron Wyden will chair Finance, meaning that tax increases and spending increases can be enacted through a process called “budget reconciliation,” which only requires 51 votes. Dems may try to repeal the 60-vote cloture rule to allow passage of all bills with 51 votes, but so far moderate Dems have objected. Fifty-one votes will continue to confirm federal judges.

What about banking matters?

Sherrod Brown will chair Senate Banking, and any Biden regulatory appointee, such as for the OCC, CFPB, Fed, FHFA, will sail through his committee to be considered by the full Senate.

Because legislative victories with thin majorities are difficult, expect the “Bidenites” to placate Alexandria Ocasio-Cortez and her crowd with nominees that will push the envelope on new regs and enforcement actions similar to what we witnessed with the Obama CFPB. Kathy Kraninger will be shown the door early, and the new appointee will take over the CFPB, access the annual $600 million in free money from the Federal Reserve and promptly lawyer-up.

More troublesome are the policy proposals on banking currently being discussed in Congress. Brown wants to give the financial system a progressive overhaul, saying that the committee in the past had been about Wall Street and he wants it to focus on workers and their families.

Besides an ambitious agenda covering issues from climate change to racial justice, Brown wants to create a system of government-sponsored and administered banking accounts. Because large banks were bailed out, he wants the Fed to give money to individuals and have consumer saving and lending done through local post offices. Similar bills have been introduced in the House by AOC and Rep. Rashida Tlaib.

The passage of postal banking is far from assured. Speaker Pelosi’s majority has shrunk to 222 members, and 218 is what she needs to pass bills. There are enough centrist Democrats, including several from Texas, that could make it harder for her to pass hard left legislation. Similarly, to get to 51 votes in the Senate, they have to placate at least three centrists from West Virginia, Arizona and Montana.

The intraparty feuding is currently within the Republican Party. It will probably shift to the Democrats when they can’t pass a Green New Deal, Medicare for all and post offices lending to consumers all over the country.