Patrick McHenryChairman

Washington, June 8, 2017 -

By Zachary Warmbrodt 
Politico Pro

Rep. Jeb Hensarling is on the verge of winning one of his biggest legislative victories, with House Republicans on Thursday expected to pass a sweeping bill to replace major banking regulations enacted after the financial crisis.

To get there, the Financial Services chairman has risked alienating big banks, angered leading consumer groups and prompted the nation’s top retailers to mobilize an army of lobbyists to kill a key provision.

Hensarling's Financial CHOICE Act is too controversial and massive in scope to pass the Senate in its current form. Yet getting the bill through the House has given him a chance to do on a grand scale what he has done throughout his career: push the political limits in debates even if that threatens easier, near-term success.

“This is Jeb," said former Sen. Phil Gramm (R-Texas), a mentor to Hensarling and a private equity firm vice chairman. “This is not the administration. This is not some grassroots movement. This is the power of an idea."

That idea is to try to leverage the strength of market forces, rather than the government, to keep the financial system in check.

Hensarling's plan would gut important parts of the 2010 Dodd-Frank law, which was enacted after the 2008 meltdown to shore up oversight across the financial sector. Democrats say it's a recipe for a new economic calamity. House Republicans are expected unify behind it in contrast to the struggle over a health care bill.

The bill would eliminate most of the powers of the CFPB, the agency embraced by Democrats for returning billions of dollars to consumers, and block bank regulatory agencies from intervening in the failure of a major financial institution.

The heart of the legislation offers a trade-off that many large banks would be unwilling to make: comply with more stringent capital requirements in exchange for escaping more prescriptive regulations.

A prominent talking point that Hensarling has tried to promote is the idea that many big banks, which have spent years trying to comply with Dodd-Frank, aren't that excited about what he's offering.

While it's politically convenient to point to Wall Street opposition as you deregulate the financial system, it wouldn't be the first time Hensarling has veered away from the lobbying wish list of big business.

It hasn't always worked in his favor.

In the last Congress, a majority of House Republicans agreed to reauthorize the Export-Import Bank despite Hensarling's attempts to kill the agency, which fell under his committee's jurisdiction.

The defeat followed policy clashes with fellow Republicans and business interests on reforms to the National Flood Insurance Program and the Terrorism Risk Insurance Act.

But Hensarling's supporters say he was willing to compromise when it came to one of the most disputed parts of his Financial CHOICE Act. It just took a while.

Late last month, he agreed to drop part of his Dodd-Frank repeal that would have eliminated a debit swipe fee cap. It was clear for several months that the issue would force Republicans to choose between two powerful industries — retailers, which want the rule to stay in place, and banks, which want to kill it.

Hensarling had acknowledged the controversy and said both sides should be heard, an openness he didn't show publicly when it came to other parts of the bill.

In the end, Walmart prevailed. Hensarling waited to cut the provision until two weeks ago, when Republican vote counters confirmed that it threatened the rest of the bill.

Former Hensarling chief of staff Dee Buchanan, now a lobbyist, said his ex-boss is "willing to absorb political arrows on principle ... so others who follow behind him can take up the mantle."

"Putting a different color lipstick on the pig and calling it done is really not Chairman Hensarling's style," former Rep. Randy Neugebauer (R-Texas) said.

In an interview Tuesday, Hensarling said he was always willing to negotiate, and he pointed to committee bills that President Barack Obama signed. But he conceded that some of his work "will not bear fruit for years."

"Sometimes in winning the debate you've got to have a lot of different battles," he said. "It doesn't always happen the first time. ... I've been through this before."

Hensarling joked that he has been "committed to capitalism and freedom since I was in my mother's womb." One of the biggest threats to freedom that he sees is the national debt. When Republicans speak in the Financial Services Committee room, he runs a clock tallying the debt, which he calls an “existential threat."

Speaking to POLITICO by phone after a round of television interviews in New York, Hensarling said he talked with President Donald Trump about the Financial CHOICE Act Tuesday morning and met with Vice President Mike Pence, a close friend, on Monday.

Trump "indicated he was all for helping us," Hensarling said.

The administration is still putting together its own views on financial regulation. The Treasury Department will make some of its first concrete recommendations in the coming days through a report ordered by the president in February.

The White House said in a statement that it supported several provisions of Hensarling's bill, but they are already diverging on some issues.

Administration officials have entertained the idea of reviving the Depression-era Glass-Steagall law, which is not in Hensarling's plan.

Two weeks ago, Treasury Secretary Steven Mnuchin told Republicans on the Financial Services Committee in a closed meeting that he planned to propose substantial revisions to the bank proprietary trading ban known as the Volcker rule. Members told him it should just be repealed, which is what Hensarling is proposing.

Hensarling said he supports the president, but that he wouldn't be shy about pushing back if need be. He cited his opposition to the administration's decision to move forward with a "fiduciary duty" rule for retirement advice and his fight against the Ex-Im Bank, to which Trump has announced plans to nominate new board members. Trump’s pick to lead the bank, former Rep. Scott Garrett (R-N.J.), is a Hensarling ally and a fellow foe of the agency.

As for the Senate, Republicans on the Banking Committee have shown no intention of taking up Hensarling's bill as is.

While the House legislation was the product of a partisan process, Banking Committee Chairman Mike Crapo (R-Idaho) is going out of his way to find areas where he can reach agreement with Democrats — an approach that will significantly limit the scope of what's possible, much to the disappointment of some conservatives.

If Hensarling doesn't get all he wants now, he can live with that. He says he's playing the long game.

"I hope most of CHOICE can get enacted in this Congress, but if not, we want to normalize the debate," he said. "Some ideas may take years or Congresses to gel."