Correction: The name of Rep. Spencer Bachus (R-Ala.) was misspelled in earlier versions of this article.
After the 2008 credit crisis nearly wrecked the nation’s financial system, few panels in Congress were more instrumental in putting the pieces back together than the House Financial Services Committee.
The committee was led then by Rep. Barney Frank (Mass.), a Democrat who worked with then-ranking Republican Spencer Bachus (Ala.), as well as the Bush and Obama administrations, to push through major pieces of financial legislation.
Today, the issues before the committee are not any less critical to the country’s economy but its leadership could not look any more polarized.
Holding the gavel now is Rep. Jeb Hensarling, 55, a free-market conservative from rural Texas who believes the government should have hardly any involvement in the economy.
The ranking Democrat is Rep. Maxine Waters, 74, a liberal representing South Los Angeles who believes the government has a role in helping the disadvantaged reach the middle class.
With such a dichotomy of views at its top, the committee may struggle to get anything done, some analysts predict. And a number of pressing matters are on its plate this year, such as revamping the nation’s mortgage system and overseeing the implementation of the financial regulatory overhaul.
“Thus far, I haven’t seen a single instance where I feel encouraged by what the committee is going to accomplish in this Congress,” said Isaac Boltansky, policy analyst at Compass Point Research and Trading.
Given the new dynamic, Hensarling has been cautious about what his committee can deliver. When asked whether his panel will make progress on an overhaul of the mortgage industry, which for years has been propped up by the federal government, his response revealed a certain familiarity with the ways of Capitol Hill.
“I approach it like every other thing in Washington — high hopes and low expectations,” he said in an interview.
Hensarling said he plans to stick to his convictions, but he said there should be ways to find common ground.
“I don’t intend to compromise my principles, nor do I expect any other member to compromise their principles,” Hensarling said. “But we should all be ready to compromise our preferred policies in order to advance those principles.”
Waters said it is too soon to tell whether pressure from the right wing of the Republican Party will make it harder for the committee to make deals.
“I’m sure we will come to some points of strong disagreement,” she said. “And we’ll have an opportunity to see if we can work through it.”
But she noted: “I’m not so sure that all of the [Republicans’] issues are so well defined that they have formed a real approach to dealing with them. Depending on how well they do with that, we’ll determine whether they’re going to push for housing reform in a way that we would absolutely oppose.”
The differences between the two were on display during the committee’s first hearing in February, which wrestled with an independent audit projecting that the Federal Housing Administration will face a $16.3 billion shortfall in the coming years, leaving it unable to cover loans that are likely to default.
Waters considers the role of the FHA vital in helping first-time home buyers and contends that Congress must give the agency more flexibility to ensure its long-term solvency.
But Hensarling has pegged the agency as a prime target for a taxpayer bailout. And while he has pulled back from calling for the outright abolishment of the agency, he blames the FHA for placing borrowers in homes they could not afford.
That frustration was evident at the hearing.
Hensarling read an ad from a private lender heralding FHA financing for borrowers with poor credit — proof, he suggested, that the agency is not acting responsibly.
“Did you say that ad you just read was by some unknown private business?” Waters asked.
“The chair said private,” Hensarling responded.
“I beg your pardon?” Waters fired back. “And so this was not an FHA ad soliciting anything?”
“That’s correct,” Hensarling said.
“Thank you very much,” Waters said.
Hensarling threw up his hands.
Under Hensarling, the GOP is more intent on promoting its ideology and delivering a broader message that government is too big, said a GOP aide.
That is a change from the approach under Bachus, who became chairman in 2010 but was term-limited and had to step down and who was seen by staffers as too willing to accommodate Democrats such as Frank.
“Hensarling is very focused on making sure the committee puts out a message that’s in line with his ideology,” said the GOP aide, who was not authorized to speak on the record. “There is a lot bigger messaging focus than when Bachus was in charge.”
When announcing subcommittee assignments in January, for instance, Hensarling said “a mind-numbing, innovation-choking, job-killing flood of federal red tape” was among the challenges confronting the economy.
“We’ve observed how Congress enshrined a ‘too big to fail’ bailout scheme into law,” he said in the news release.
The allusions to the Dodd-Frank financial regulatory act were enough for Waters to issue a statement the next day refuting the “questionable assertions” that she said misconstrued the law. “We have much work to do, and I sincerely hope that we establish a fair representation of the facts as the basis for a sound, bipartisan working relationship,” the statement said.
At a recent subcommittee hearing, titled “Fannie Mae and Freddie Mac: How Government Housing Policy Failed Homeowners and Taxpayers and Led to the Financial Crisis,” the squabbling seemed almost surreal to observers.
“At least a third of that hearing was spent fighting over the title,” Boltansky said. “It was incredible to have experts on the subject sitting there while committee members bicker and use the experts to advance their specific side of the issue.”
There was hope that new leadership on the committee could provide support to advance some of the long-delayed rules mandated by Dodd-Frank, Boltansky added. The changing of the guard was supposed to clear out the bad blood created during the negotiations over the far-reaching overhaul bill.
Mark Calabria, director of financial-regulation studies at the Cato Institute, cautioned against reading too much into the political theatrics.
“I’ve seen members get on the floor and insinuate the other was corrupt, incompetent. Then, they’d go in a back room and cut a deal,” he said. “As long as its kept to the level of rhetoric, none of that is going to be a real obstacle.”
Waters also brushed off the heated exchanges as par for the political course.
“You have to recognize the difference between philosophy and antics,” she said. “Heated debates are not often fights, just people trying to advance their point.”
For now, the two sides are making nice.
“We have vast disagreements on policy, but as a human being, Maxine commands my respect,” Hensarling said. “My views are not an impediment for sitting down and negotiating in good faith with somebody who has a different approach and opinion.”