6 key Senate races for bankers to watch

WASHINGTON — The banking industry’s legislative agenda hangs in the balance this November as the 2020 election will not only determine which party controls the Senate, but also the makeup of the Senate Banking Committee.

Several members of the panel from both parties are facing tough reelection contests, including particularly close races for Republican-held seats in Arizona and North Carolina and a Democratic-held seat in Alabama.

But perhaps the biggest question is whether Democrats will win enough seats in the full Senate to gain control of the chamber for the first time since 2014.

Here are the key races to watch:

Alabama

Sen. Doug Jones of Alabama is considered the most vulnerable Democrat up for reelection. He will face either former Attorney General and Republican Sen. Jeff Sessions or former Auburn University football coach Tommy Tuberville.

The Cook Political Report has the race leaning toward the Republican candidate and Sabato’s Crystal Ball rated it “likely Republican.”

Jones has been an ally to the banking industry, supporting the 2018 regulatory relief law. He has also helped lead the charge in the Senate to introduce the industry-backed, bipartisan Illicit Cash Act, which would shift the burden of reporting beneficial ownership information to Fincen from banks to corporations.

Jones also joined Sen. Elizabeth Warren, D-Mass., in calling on regulators to ensure that algorithms used by financial technology companies don’t result in discriminatory lending. More recently, he has supported a ban on unsolicited “live” checks that can be converted into high-interest loans.

Arizona

Sen. Martha McSally, R-Ariz., faces a tough reelection fight from Democrat Mark Kelly, an astronaut, former Navy captain and the husband of former Rep. Gabby Giffords, D-Ariz. The special election to finish the remainder of Sen. John McCain’s term is considered a toss-up by the Cook Political Report, but Sabato’s Crystal Ball has the race leaning toward the Democratic candidate.

McSally is fairly new on the Senate Banking Committee, but she voted for the Financial Choice Act, a sweeping rollback of Dodd-Frank that wasn’t considered by the Senate, as a member of the U.S. House in 2017.

At a Banking Committee hearing in February, McSally raised concerns about the decline in rural banks. She also introduced legislation to ensure that the Consumer Financial Protection Bureau has enforcement authority for the Military Lending Act.

North Carolina

Sen. Thom Tillis, R-N.C, is being challenged by Democrat Cal Cunningham, a lawyer and Army veteran, in a race that is considered a toss-up by Cook Political Report and Sabato’s Crystal Ball.

But Tillis has been an ally for the banking industry as a member of the Senate Banking Committee. He helped garner Republican opposition to Nellie Liang’s nomination to serve on the Federal Reserve board over the industry’s concerns that she would impede deregulatory efforts. He also pushed legislation that would delay and require a study of the controversial new Current Expected Credit Losses accounting standard.

For the 2020 election cycle, Tillis has received over $260,000 from commercial banks, more than any other Republican on the Senate Banking Committee, according to the Center for Responsive Politics.

Georgia

Sen. David Perdue, R-Ga., has served in the Senate since 2015 and is a member of the Banking Committee. He led an effort in 2017 to try to overturn an Obama-era rule by the CFPB to impose restrictions on prepaid card firms, and applied pressure on the Federal Reserve in 2018 to implement congressionally authorized reg relief for regional banks, among other actions.

The Cook Political Report rates Perdue’s seat as “Lean R.” But some polling last month showed Perdue only slightly ahead of, or even slightly behind, his potential Democratic challengers. The Perdue race is one of two competitive Senate races in Georgia, the other being a special election for the seat now held by Republican Kelly Loeffler, the former head of Bakkt, a cryptocurrency subsidiary of the Intercontinental Exchange.

Minnesota

Sen. Tina Smith, D-Minn., a member of the Senate Banking Committee who opposed the 2018 regulatory relief legislative package, is facing a surprisingly competitive reelection challenge in what is usually considered a blue state. The Cook Political Report rates the race as “likely D,” which isn’t considered “Safe” but isn’t in toss-up territory either. President Trump lost Minnesota by 2 only percentage points in 2016.

She has also joined other Democrats in calling on Trump-appointed financial regulators to ensure that companies are taking necessary steps to help consumers hurt by the coronavirus pandemic. This past week, Smith signed a letter with seven other members of the Banking Committee asking the Consumer Financial Protection Bureau and the Federal Housing Finance Agency for details on the agencies’ sharing of mortgage servicing data under the Borrower Protection Program.

Smith has also urged the Trump administration to fill remaining openings on the Federal Deposit Insurance Corp. board of directors with Democratic appointees, and opposed the Office of the Comptroller of the Currency’s December proposal to modernize the Community Reinvestment Act, saying the plan could undermine the anti-redlining law.

A former lieutenant governor in Minnesota, Smith was appointed to the Senate in 2018 to fill the seat vacated by Democrat Al Franken when he resigned. She won a special election that year to serve for the remainder of Franken’s term.

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Senate Majority Leader Mitch McConnell, a Republican from Kentucky, right, talks to Senate Minority Leader Chuck Schumer, a Democrat from New York, while walking towards the Senate Chamber at the U.S. Capitol in Washington, D.C., U.S., on Wednesday, Feb. 7, 2018. Senate leaders agreed on a bipartisan two-year plan to increase federal spending by nearly $300 billion over two years, a pact likely to avert a government shutdown on Friday. Photographer: Andrew Harrer/Bloomberg

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Party control of Senate

A number of analysts and pollsters have indicated that Senate control could be in sight for Democrats in the November elections. A Democratic sweep of the House and Senate would mean several changes to the banking policy agenda on Capitol Hill.

Republicans currently hold a 53-47 advantage in the Senate. If former Vice President Joe Biden wins the presidency, that means Democrats would need to flip a net total of three seats to control the Senate (with a Democratic vice president breaking the tie).

Banks have scored several legislative victories with the Senate under Republican control, including the passage of a significant regulatory relief bill in 2018. But there are two key legislative priorities for the industry that have stalled in the GOP-controlled Senate: anti-money-laundering reform and a key cannabis banking bill.

The industry has pushed to require corporations to report their true owners at the point of incorporation to the Financial Crimes Enforcement Network, which would remove the burden for banks to report beneficial owners of account holders.

And the industry has been advocating to be able to serve legal cannabis businesses. The Secure and Fair Enforcement Banking, or SAFE Banking Act, would bar federal regulators from penalizing depository institutions that cater to the cannabis sector in states where the substance is legal.

The Democratic-controlled House passed both measures in 2019, but Republican leaders in the Senate have not been able to hold votes on either bill.

A blue wave would also bring changes to banking industry oversight. While the Democratic House has held a number of hearings with executives from the U.S. megabanks, the Republican Senate has been quieter in its oversight of the industry.

While it is unlikely that Sen. Doug Jones, D-Ala., will be able to keep his seat, Democrats could pick up seats in Arizona, Colorado, Maine and North Carolina, which are all viewed as competitive races. In Colorado, Republican Sen. Cory Gardner is particularly vulnerable, despite his efforts to appeal to Democrats and the banking industry in sponsoring the SAFE Banking Act.

Democrats are also eyeing seats in Georgia, Montana, Iowa, and Kentucky as possible pickups. While Republicans could take Michigan, which President Trump took in 2016, and Minnesota, which Trump is reported to be viewing as a target.