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Garrett Mention - POLITICO: New test for GOP: Subtlety on regs
Washington, Apr 30 -
By: Victoria McGrane House Republicans who’ve cast unequivocal “no” votes on the stimulus, this year’s budget, next year’s budget and the second half of the bailout funds may soon find themselves in need of a little more nuance: With voters seething over Wall Street abuses, Republicans know they can’t just say no to Democratic plans for new regulations on the nation’s financial system. “We’re not just going to be in committee and just say that the proposals are problematic for X, Y and Z reasons,” says New Jersey Rep. Scott Garrett, the top Republican on the Financial Services Committee’s Capital Markets subcommittee. “We want to be able to say that we have solutions to them as well.” The catch for the GOP: The regulation of the financial services industry is such an esoteric subject that it’s going to be hard to explain — in TV sound bites or in the Democratic campaign commercials to come — why opposition to this provision or that doesn’t amount to being soft on the industry many blame for today’s economic crisis. “If you’re going to have to as a minority party differentiate yourself, ... it’s going to be tough,” says Democratic strategist John Michael Gonzales. “How do you do it without sounding completely oblivious to what’s going on? I wouldn’t want to be them right now.” Rep. Spencer Bachus (R-Ala.) acknowledges the steep climb ahead. “Getting financial regulatory reform and modernization done right is one of the biggest challenges facing the country,” he told POLITICO. “The committee is full of talented Republicans who are all working hard to communicate how many of the Democrat policies will affect current and future generations.” But Republican messaging has been far from perfect this Congress. They’ve suffered through disjointed messages on climate change and health care, and they took a huge blow when they unveiled a budget blueprint that was helium-light on details. The arcane nature — and heated populist politics — of financial-industry regulatory reform may prove an even more difficult needle to thread, especially with Rep. Barney Frank (D-Mass.) standing in the way. The quick-witted, sharp-tongued chairman of the Financial Services Committee has been leading the charge on financial regulatory reform so far, and he’s already preparing to portray the Republicans as out-of-touch obstructionists on the issue. “A great number [of Republicans] take the philosophical position that you should have no regulation,” Frank said in an interview with POLITICO. The chairman likened some of his Republican colleagues to the politicians who argued that Franklin D. Roosevelt’s creation of the Securities and Exchange Commission and Teddy Roosevelt’s attempts to bust the trusts would destroy the American economy. Other Republicans, he said, are simply afraid to break ranks with the leaders. As an example of the latter, Frank cited Bachus’ support for his 2007 subprime lending bill, which aimed to crack down on abusive lending practices that contributed to the economic crisis, as a major reason some Republicans tried to oust him from the ranking spot on the committee. Bachus held onto his post, but he’s not supporting the latest version of the predatory lending bill, Frank noted. Garrett meets regularly with fellow committee members Tom Price (R-Ga.) and Jeb Hensarling (R-Texas) to work on developing a set of Republican proposals on regulatory reform — or, as Price puts it, “what appropriate regulatory reform looks like.” The three meet with Bachus and House Republican leadership, too. Bachus has brought on two additional message gurus since last Congress — deputy staff director for communications Seth Webb, formerly the chief of staff for the House Republican Conference under Rep. Adam Putnam (R-Fla.), and communications director Travis Windle, the former conference press secretary. Republican committee members and staff get message points before each hearing and markup. They also get a weekly wrap-up each Friday to guide messaging for the weekend. Both are new initiatives this Congress. So far, the GOP message on regulatory reform has focused on embracing the need for reform — though not necessarily more regulation, just smarter rules — while trying to find chinks in Democrats’ plans. Republicans have focused on saying regulatory reform must be done “right, not fast.” They quote former Federal Reserve Chairman Paul Volcker, an outside economic adviser to the president, urging lawmakers last month to “move with caution.” They crowed a bit when Frank announced recently he was abandoning his initial plan to do regulatory reform in two steps, moving the first piece as early as this spring. The delay — which Frank attributes largely to the Senate, since the upper chamber will move only one large bill — improves Republicans’ chances of inserting themselves into the mix. Republicans on the committee also are questioning a major centerpiece of Democrats’ reform blueprint, the creation of a “systemic risk regulator” to watch over the system as a whole. Their critique aims to undermine Democrats by equating this policy idea to another financial sector bailout — a clear play for the anger of weary taxpayers. Republicans argue that having a super-regulator single out firms that are “too big to fail” would distort the market, hurt the economy and lead to a cycle of never-ending bailouts. They emphasize that they want to protect taxpayers and keep the government from picking winners and losers in the market. “What we want to say is what you don’t want to have is simply a system where you just create another government bailout manager,” said Garrett. “They couldn’t be more wrong,” Frank charged, saying that Republicans are misrepresenting the systemic risk regulator idea. A systemic risk regulator wouldn’t just have power over a handful of large institutions, he said. It would also take action when a larger number of smaller firms engaged in the same kinds of bets that, added together, threatened the system, Frank said. Since there’s no legislation yet, there’s no firm definition of this super entity, but Frank has described it in preventive terms — a regulator that would keep a financial firm from getting so overindebted to so many other firms that its failure would threaten the entire system.
Republicans are already laying the groundwork for the reform battle ahead.
http://www.politico.com/news/stories/0409/21910.html