The failure of Republicans to capture the presidency or take control of the Senate in Tuesday's elections will limit further opposition to the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
While congressional opponents of the law, which introduced more stringent financial regulation in the wake of the Great Recession, may issue further challenges and seek to limit regulatory funding, the main components of the law will not be halted, observers say.
The elections, however, will change the makeup of two key congressional committees that deal with insurance issues. In addition, there will be a new treasury secretary given Treasury Secretary Timothy Geithner's recent announcement that he does not plan to serve in a second Obama administration.
“Fundamentally on the issue of Dodd-Frank this is a status quo election,” said Joel Wood, senior vice president of the Council of Insurance Agents & Brokers, Wednesday morning.
Mr. Wood said there is going to be a “full plate for regulators” on the implementation of Dodd-Frank as well as the Patient Protection and Affordable Care Act.
“No one should have labored under the illusion that even a Republican sweep would have resulted in a repeal of Dodd-Frank,” he said. Given the election results, insurers are “somewhat less likely to get legislative relief” from any regulatory burdens imposed by Dodd-Frank.
“The implementation of Dodd-Frank will continue along the same lines as it has over the past two years,” said Peter Lefkin, senior vice president-government and external affairs for Allianz of America in Washington.
“Republicans will attempt to challenge either through hearings or their funding authority the activities of the regulators, but to a large degree they will be stymied by the fact that Democrats still control the Senate and White House,” he said.
He added, though, that “the other thing to keep in mind, as has been the case in the last three elections, it was sort of a loss for the moderates in both parties. A number of Blue Dog Democrats and moderate Republicans lost their seats thereby cementing the ideological rigidity that exists in the House,” thus making compromise more difficult.
Mr. Wood pointed out that Rep. Judy Biggert, R-Ill., was among the losers. Rep. Biggert chairs the House Financial Services Committee's Subcommittee on Insurance, Housing and Community Opportunity. “That loss is a significant disappointment to everyone in our industry,” he said. Among other things, Rep. Biggert championed reform and extension of the National Flood Insurance Program.
Mr. Wood also said he doesn't think “there's any question” newly elected Sen. Elizabeth Warren, D-Mass., a critic of the financial services industry, will be named to the Senate Banking, Housing and Urban Affairs Committee. “She didn't campaign on insurance issues, but I expect her to be a very assertive, aggressive and liberal member of that key committee,” he said. Ms. Warren helped establish the Consumer Financial Protection Bureau, which enforces financial protection laws including Dodd-Frank.
A pair of veteran Washington observers said the sheer number of new players who will be in Washington as a result of the election means there could be different approaches to Dodd-Frank implementation.
The elections mean that there will be “a lot of new faces” on the House Financial Services Committee, the Senate Banking Committee, in the Treasury Department and throughout the administration, said Jimi Grande, senior vice president in the National Association of Mutual Insurance Cos.' Washington office. “All of those new faces will have different takes on Dodd-Frank implementation,” he said. He added that “any legislation or reform is going to require bipartisanship.”
“You're going to have some new players,” said John Lobert, founder of Lobert Legislative & Regulatory Consulting in Lisle, Ill. “And now you've got Elizabeth Warren in the Senate. The people who are interested in punishing the bankers are still going to be in charge on the administrative side.”
The American Insurance Association “will continue to work with the Obama administration on issues concerning Dodd-Frank Act implementation,” said AIA President and CEO Leigh Ann Pusey in a statement. “AIA maintains the position that property/casualty insurers engaged in regulated insurance activities do not pose a threat to financial stability and should not be regulated like banks.”
She said it is “imperative” that implementation follow congressional intent by “addressing gaps while not obstructing competitiveness.”