8 midterm contests to watch for financial institutions

November 4, 2018 9:00 PM

It all comes down to Tuesday to determine whether congressional Republicans maintain their full grip on financial services policy, or whether Democrats get a bigger seat at the table.

By most accounts, the Democrats running in the House continue to have momentum going into the midterm elections. Polls by and large favor the opposition party picking up at least the 23 net seats in the House necessary to retake the chamber.

Several projections also point to the GOP holding on to the Senate and even picking up a few seats. But just like the presidential election two years ago, there is still plenty of uncertainty about the final outcome in both chambers as well as certain key races for members of the banking committees.

Which party holds either chamber, the size of the majorities in both the House and the Senate, and the outcome of re-election bids by key members of the Senate Banking Committee, are questions that will hopefully be answered Tuesday night (if not Wednesday).

Here are key contests to watch:

Battle for House control

Representative Maxine Waters, a Democrat from California and ranking member of the House Financial Services Committee, speaks during a hearing on Capitol Hill in Washington, D.C., U.S., on Thursday, July 27, 2017. Mnuchin ruled out prioritizing U.S. debt payments if Congress fails to raise the borrowing limit and repeated his call for quick action by lawmakers. Photographer: Zach Gibson/Bloomberg

Zach Gibson/Bloomberg

As of Friday, the Democrats had a five in six chance of winning the House, according to the FiveThirtyEight blog. On Thursday, Larry Sabato’s Crystal Ball was predicting a Democratic pickup in the House of about 30 seats, exceeding the 23-seat minimum needed to gain control.

For financial institutions, Democratic control of the House would likely mean that the Financial Services Committee will be led by Rep. Maxine Waters, D-Calif., who is now the ranking member. That could mean sharper scrutiny of big banks, Trump administration-appointed regulators and regulatory relief plans.

Analysts expect the committee under Waters to focus more on housing and community reinvestment issues. However, in contrast to her criticism of Trump policies outside of financial policies, some say it is possible that she will try to reach across the aisle on key banking issues to try to move legislation.

But if Democrats gain more power, the likelihood of any legislation becoming law goes down. Still, a power shift stokes fear for financial services firms. When asked to quantify their concern about Democrats controlling the House, 41% of bankers participating in a Promontory Interfinancial Network responded with a 5 rating (with 1 indicating the least concern and 5 the most).

And the financial and real estate sector has contributed over 60% more to House Republicans ($81.9 million) than Democrats (49.7 million) in the 2018 election cycle, according to OpenSecrets.org.

Battle for Senate control

Senator Mike Crapo, a Republican from Idaho, left, greets Senator Sherrod Brown, a Democrat from Ohio, prior to a Senate Banking Committee hearing in Washington, D.C., U.S., on Thursday, May 24, 2018. The committee is holding the hearing to look into cybersecurity risks to the financial services industry. Photographer: Aaron P. Bernstein/Bloomberg

Aaron P. Bernstein/Bloomberg

Most pollsters see the Senate as likely to stay in Republican control with the Democrats facing long odds to flip GOP-held seats and several Democratic incumbents in tight re-election battles in states won by President Trump in 2016.

The FiveThirtyEight blog on Friday gave the GOP an 85% chance of keeping control in the Senate. On Thursday, Larry Sabato’s Crystal Ball was predicting that the GOP will pick up one or two net seats to add to their majority.

Still, the midterm elections could change the makeup of the Senate Banking Committee, now chaired by Republican Mike Crapo of Idaho. Some of the closest races involve moderate Democratic incumbents on the committee who have supporters in the financial services industry as a result of their Senate votes in favor of regulatory relief. That could explain why the financial and real estate sector has given more than double to Democratic Senate candidates in the 2018 cycle, totaling $45.3 million, compared with just under $20 million for Republicans.

Seven of the banking panel’s members are up for re-election, and four of them are viewed as particularly vulnerable.

North Dakota Senate race

Senator Heidi Heitkamp, a Democrat from North Dakota, reacts while speaking with attendees during the West Fargo Police Department's Night to Unite event in West Fargo, North Dakota, U.S., on Tuesday, Aug. 7, 2018. Heitkamp, one of 10 Senate Democrats who face a November re-election in states President Donald Trump won in 2016, is being challenged by Representative Kevin Cramer. Photographer: Dan Koeck/Bloomberg

Dan Koeck/Bloomberg

Sen. Heidi Heitkamp, D-N.D., is perhaps the banking panel’s most vulnerable incumbent. Most polls show her behind Republican Congressman Kevin Cramer. An aggregation of polls by Real Clear Politics shows Cramer up by 11 percentage points, while FiveThirtyEight gives him a 75% chance of winning.

Heitkamp’s re-election challenges have come despite her support for the regulatory relief law passed by Congress in May, which she helped negotiate. Commercial banks have given her $320,891, according to OpenSecrets.

Montana Senate race

Senator Jon Tester, a Democrat from Montana, listens during a Senate Banking, Housing and Urban Development Committee hearing with Steven Mnuchin, U.S. Treasury secretary, not pictured, in Washington, D.C., U.S., on Tuesday, Jan. 30, 2018. Mnuchin said he can extend the debt limit suspension period into February before the government exhausts its borrowing capacity. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

Senate Banking Committee member Jon Tester, D-Mont., has mostly had the edge in his re-election battle. As of Friday, Real Clear Politics had him up by 4.2 percentage points over Republican Matt Rosendale, and FiveThirtyEight has given Tester an 87% chance of keeping his seat.

But some polls and published reports have pointed to the race narrowing of late, in part because Tester has continued to draw the ire of the Trump administration.

Still, Tester, who like Heitkamp was among moderate Democrats who supported the reg relief bill, continues to enjoy backing from the financial services industry, having received support both from the American Bankers Association and the super PAC Friends of Traditional Banking. From commercial banks, Tester has received a total of $274,944, according to OpenSecrets.

Nevada Senate race

Senator Dean Heller, a Republican from Nevada, speaks during the Nevada Republican Party Convention at the Suncoast Hotel and Casino in Las Vegas, Nevada, U.S., on Saturday, June 23, 2018. Trump will hold a fundraiser in the Las Vegas area on Saturday for Senator Dean Heller, and will also speak to the Nevada Republican Party and attend a tax-focused event, six months after the passage of major tax-cutting legislation. Photographer: Jacob Kepler/Bloomberg

Jacob Kepler/Bloomberg

Dean Heller of Nevada has been the most vulnerable Republican incumbent on the Senate Banking Committee. Polls show him in a virtual dead heat with Democrat Jacky Rosen. The RCP poll average has Heller up by 2 points, but a recent CNN poll had Rosen up by 3 points. Commercial banks have given Heller $227,325 for this election cycle.

Indiana Senate race

Senator Joe Donnelly, a Democrat from Indiana, listens during a Senate Banking Committee hearing with Jerome Powell, chairman of the U.S. Federal Reserve, not pictured, in Washington, D.C., U.S., on Tuesday, July 17, 2018. Powell said the central bank will continue to gradually raise interest rates "for now" to keep inflation near target amid a strong U.S. labor market. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

Like Tester and Heitkamp, Sen. Joe Donnelly, D-Ind., supported the reg relief bill and is also in a tough re-election campaign.

FiveThirtyEight gives Donnelly a 69% chance of holding on against Republican Mike Braun. Yet several polls suggest the race is neck-and-neck. As of Friday, the RCP average gave Donnelly a slight edge, but different polls have favored both candidates. A recent poll by Fox News showed Donnelly 7 points ahead, but an earlier poll by CBS News showed Braun ahead by 3 points.

Donnelly has received $232,966 from commercial banks during this election cycle, according to OpenSecrets.

New Jersey Senate race

Senator Robert Menendez, a Democrat from New Jersey and ranking member of the Senate Foreign Relations Committee, makes an opening statement during a confirmation hearing for Michael Pompeo, director of the Central Intelligence Agency (CIA) and U.S. secretary of state nominee for President Donald Trump, not pictured, in Washington, D.C., U.S., on Thursday, April 12, 2018. Pompeo was pressed by Senators to give the president independent advice on foreign policy hot spots should he be confirmed as the next secretary of state. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

Sen. Bob Menendez, D-N.J., is up for re-election in a typically safe “blue” state, but Cook Political Report recently labeled his race against pharmaceutical executive Bob Hugin, R-N.J., as a “Toss Up.”

Menendez, who opposed the Crapo regulatory relief bill, has been under a microscope recently over allegations of corruption, though criminal charges have been dropped. New Jersey’s largest newspaper, The Star-Ledger, came out with a lukewarm endorsement of Menendez, with an editorial titled “Choke it down, and vote for Menendez.” The paper said the race “presents the most depressing choice for New Jersey voters in a generation, with two awful candidates whose most convincing argument is that the other guy is unfit to serve.”

Hugin is getting some support from big financial institutions. He received $54,400 from JPMorgan Chase’s political action committees, individual members, employees, or owners, and immediate families of those individuals — more than any other Senate candidate for the bank. He is also in the top five candidates for the Senate in terms of campaign contributions from Bank of America and Citigroup as well, according to the Center for Responsive Politics.

House race in Kentucky’s 6th district

Representative Andy Barr, a Republican from Kentucky, speaks during a panel discussion at the Institute of International Finance (IIF) policy summit in Washington, D.C., U.S., on Thursday, April 19, 2018. The event provides an opportunity to hear leading policy experts, financial industry leaders, and senior U.S. administration officials discuss economic policy priorities and potential implications for the U.S. and global economies. Photographer: Toya Sarno Jordan/Bloomberg

Toya Sarno Jordan/Bloomberg

Rep. Andy Barr, R-Ky., a senior member of the House Financial Services Committee, enjoys ample industry support but has faced a tough re-election challenge from Democrat Amy McGrath, who has come into the national political spotlight as the first female to fly into combat in an F-18 jet.

FiveThirtyEight currently ranks the race as a toss-up. In September, Barr became the first House candidate ever endorsed by FOTB, the banking super Pac. As of August, he was among the top five House members in terms of donations from commercial banks, receiving $169,978.