Wall Street scourge Sherrod Brown to get 'gigantic megaphone' as Senate Banking chair

[ELCA Lutheran] Brown is poised to lead the Senate Banking Committee, creating new headaches for finance industry executives.

By Zachary Warmbrodt for Politico.

Sen. Sherrod Brown, one of Washington's fiercest critics of Wall Street, is poised to lead the powerful Senate Banking Committee once Democrats take control of Congress, creating new headaches for finance industry executives who will face greater scrutiny.

Brown, an unabashed liberal with a sharp populist edge, is planning to reorient the focus of the committee, which has been under business-friendly GOP control since 2015 and has placed a priority on deregulating the financial services industry.

"We're under no illusion," said Consumer Bankers Association President and CEO Richard Hunt, who represents JPMorgan Chase, Bank of America and other lenders. "We have our work cut out for us."

Brown's agenda, according to people familiar with the committee's plans, will zero in on expanding affordable housing, tackling the financial fallout of climate change and strengthening regulations that were loosened during the Trump era. Economic relief for Americans during the Covid-19 pandemic will be an initial goal. Racial justice will be a prominent theme across issues before the committee.

"For too long, the Senate Banking and Housing Committee has only delivered for Wall Street," Brown said in a statement Thursday. "Under new Democratic leadership, we’re going to get to work for everyone else, and put workers, and their families, and what matters to their lives at the center of everything we do."

Brown's elevation to Banking Committee chair means that one of Congress' strongest consumer watchdogs will be a key player in implementing economic policy in the Biden era. He'll have not only the power to write new laws, which may be out of reach unless Democrats undo the legislative filibuster, but also hold headline-grabbing hearings and direct investigators to probe the finance industry.

"The chairman of the Senate Banking Committee has a gigantic megaphone and spotlight that he can use, and I expect will use, to identify problems, shape public opinion and change banking regulation and behavior," said Better Markets President and CEO Dennis Kelleher, an advocate for Wall Street oversight who recently served on President-elect Joe Biden's transition team.

Brown, who has called for the breakup of the biggest banks and clashed with centrist Democrats on financial issues, is pledging an aggressive approach to leading the committee. In November, he said Democrats should be uncompromising with their agenda in the majority and not allow Senate GOP leader Mitch McConnell to continue having what Brown called an "insidious, corrupt, borderline evil influence" on the U.S.

"There is no equivocation about that at all," Brown said. "It will be a challenge. It will mean that we have to get everybody on board on every issue."

Since his election to the Senate in 2006, Brown has played a lead role in fighting for stricter regulation as he rose through the ranks of the Banking Committee.

After the 2008 financial crisis, he led unsuccessful efforts to break up "too-big-to-fail" banks, teaming up with then-Sen. Ted Kaufman of Delaware, now a leader on the Biden transition, and later former Sen. David Vitter (R-La.) on legislation that would limit the size of the largest lenders.

In 2013, he was the lone Banking Committee vote against President Barack Obama's nomination of former prosecutor Mary Jo White to lead the Securities and Exchange Commission because of her private sector work representing Wall Street banks. In 2018, as the committee's top Democrat, Brown led opposition to a landmark bank deregulation bill backed by 16 senators of his own party.

When the Ohio Democrat takes control of the committee, Hunt said he expected Brown to have big bank executives testify. It's the kind of risk that several finance industry players can expect under Brown's leadership, even if he isn't able to pass sweeping legislation cracking down on lenders and investment firms in a 50-50 Senate.

Chris Scribner, a lobbyist at the law and government affairs firm Venable, said that "Brown’s passion and strong views can lead to rhetoric that makes banks uneasy, and as chairman of the Banking Committee there will be more frequent and contentious hearings."

Brown's ascendance to committee chair is giving an opening to progressives who want to force regulators by law or through political pressure to crack down on risks posed by banks, private equity firms and hedge funds.

Gregg Gelzinis, senior policy analyst at the Center for American Progress, said progressives will push for bills that would raise bank capital requirements, make financial regulators responsible for policing climate risks and increase oversight of money market mutual funds and other nonbank entities that showed instability during financial market turmoil last March.

It's unclear whether business-friendly moderate Democrats would support such proposals, even if Democrats eliminated the ability of Republicans to filibuster legislation. But advocates want Brown to at least try.

"We should start with the big, bold ideas that would solve these important structural problems that still exist in our financial system, whether it's the financial stability or consumer protection side or investor protection or housing rules," Gelzinis said. "Then, go from there in our discussions with various Senate offices, starting on the Banking Committee and then working our way off the Banking Committee."

Brown has signaled that he's game. Speaking at an event hosted by the advocacy group Better Markets in September, he said the role of the committee should be to implement proposals the organization released recommending tougher rules at agencies regulating banks, consumer lending and markets. He has also called for an overhaul of consumer credit reporting and for the creation of free Federal Reserve payments accounts that Americans could access at Post Offices.

“We have a lot of work to do to undo the damage that Trump and his regulators — deregulators is a better word — have done to our financial system," he said.

Brown for years has framed his watchdog approach around the risks that financial institutions and their regulators pose to consumers without adequate oversight. In numerous speeches and statements since the global financial crisis, he has cited his Cleveland ZIP code's sad distinction of leading the country in foreclosures during the first half of 2007.

Yet Brown has sometimes balanced his antagonism of Wall Street with a mindful approach to the sprawling financial services industry back home in Ohio. Working with Republicans, he fought for one of the first big changes to Democrats' major financial reform law, the Dodd-Frank Act, to help insurers in his state and elsewhere in the country avoid stricter capital requirements. But he later frustrated lenders by walking away from negotiations that led to the 2018 law that eased banking rules. He then became the leader of the opposition.

Brown's first order of business will likely be additional economic aid and financial safeguards for Americans struggling in the Covid-19 pandemic. During economic relief talks over the past year, he pushed for rental assistance, an eviction moratorium and a pause on negative consumer credit reporting.

But he also plans to make housing a broader priority, pushing for more major new investments in affordable housing, oversight of HUD and addressing racial inequities in the housing market, sources familiar with his views said.

“We've got to deal with Covid and especially the impending housing crisis, where we will see a huge wave of evictions if Congress doesn't act," Brown told reporters Wednesday, noting that lawmakers passed an eviction moratorium that expires at the end of this month and approved $25 billion in rental assistance.

"But the problems are so much deeper than that," he said. "Twenty-five percent of renters prior to the pandemic spent half their income or more on rent and utilities. One thing goes wrong in their lives and they're evicted. That was a problem before the pandemic."