The Democratic victory in the U.S. House of Representatives paves the way for a top critic of President Donald Trump's financial regulators to lead the House Financial Services Committee.
Rep. Maxine Waters, D-Calif., is set to become the committee's chair after her party's victory in the House, even as Republicans expanded their majority in the Senate.
That means that regulators should expect to head to Capitol Hill more often for what could be contentious hearings, where some Democrats would criticize their approach on easing rules for the financial industry, analysts say. While the regulators' agenda is expected to continue, those efforts could see some delays as agency staff help prepare their leadership to face lawmakers' questioning.
"The regulators are thinly staffed near the top, so having to respond to antagonistic lawmakers will slow down their deregulatory work," Capital Alpha analyst Ian Katz wrote in a note to clients.
A major example could be Comptroller of the Currency Joseph Otting's efforts to reshape how regulators enforce the decades-old Community Reinvestment Act. Democrats on the committee have clashed with Otting over the issue and now "have a bigger platform to resist" him, Katz wrote.
The hearings will also not be limited to regulators, analysts say. Companies that have landed in hot water, such as Wells Fargo & Co. and Equifax Inc., may also see their CEOs called to testify in the House.
Waters also told Bloomberg Television in a Nov. 7 interview that the committee may look into Deutsche Bank AG's lending to businesses with ties to Trump, a topic that Democrats sought to investigate while in the minority.
But there is little that House Democrats could do with legislation to roll back any of the Trump regulators' agenda, analysts say, given that Republicans will have a larger majority in the Senate and Trump remains in the White House.
"Headline risk has increased, but we do not think this translates into policy changes," Keefe Bruyette & Woods analyst Brian Gardner wrote in a note to clients.
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Bipartisan bills could see bigger chance
Still, Waters' leadership could provide a mild boost to Congress' chances of passing bipartisan bills on other issues.
Congress has tried and failed to pass a long-term solution to shore up the National Flood Insurance Program, or NFIP, an issue on which Waters has clashed with the committee's current chairman, Rep. Jeb Hensarling, a Texas Republican who is retiring next year.
Ed Mills, a public policy analyst at Raymond James, said Waters taking over the committee is a "net positive" for the residential mortgage industry since she has been a major backer of reforming the NFIP. She also supports reauthorizing the Terrorism Risk Insurance Act, a program that is due to expire at the end of 2020 and that Mills said is critical to the commercial real estate industry in larger cities.
Lawmakers have also failed to develop a package addressing the future of Fannie Mae and Freddie Mac, which the federal government took into conservatorship during the financial crisis. In July, Waters said she would look to finally resolve that question if Democrats took over the committee.
The outlook on government-sponsored-enterprise reform in large part depends on who takes over at the Federal Housing Finance Agency once the term of its current director, Mel Watt, is up in January, wrote Isaac Boltansky, a Compass Point analyst. But a congressional fix remains unlikely, which gives the Trump administration "clear runway to administratively reform the GSEs," though it is not clear what its approach would look like.
Musical chairs
Analysts and lobbyists will also be watching for which Republican will look to become Waters' counterweight in the committee since Hensarling is retiring.
Rep. Patrick McHenry, a North Carolina Republican who is currently the committee's vice chairman, appears to be the front-runner to become ranking member, though analysts have said that depends on whether he moves up in the House GOP leadership ranks. McHenry is currently the House Republicans' chief deputy whip.
Rep. Blaine Luetkemeyer, R-Mo., told Reuters recently that he would not run for the post if McHenry does. Other names that have been floated for ranking member include Reps. Sean Duffy, R-Wis.; Bill Huizenga, R-Mich.; and Ann Wagner, R-Mo. All three won their re-election bids.
A leadership change could also happen in the Senate Committee on Banking, Housing and Urban Affairs, currently chaired by Sen. Mike Crapo, R-Idaho. That is because Sen. Orrin Hatch, R-Utah, is retiring and leaving his post as chairman of the Senate Finance Committee.
Crapo may end up taking Hatch's top spot on that committee, opening the door for Sen. Pat Toomey, R-Pa., to become the new banking committee leader.

