POLITICO Pro Wall Street critic Brown to be top Democrat on Banking

Sen. Sherrod Brown will be the top Democrat on the Senate Banking Committee in the next Congress, providing the Ohio Democrat with a bigger stage to make his case that Wall Street banks are out of control and need to be reined in by the government.

On Friday, Sen. Chuck Schumer (D-N.Y.) announced he would pass on the post, which was his for the taking under seniority rules, so he can concentrate on his party leadership duties as the No. 3 Democrat in the Senate.


Schumer’s announcement ends months of speculation in Washington and New York’s financial communities over who will be the lead Democrat on the panel.

While the issue has lost relevance now that Democrats will not control the Senate next year, it still means an outspoken critic of the country’s biggest banks will be the lead Democrat on a panel that oversees Wall Street rather than a senator whose home state includes the country’s financial center.

For Schumer, it was a dilemma to decide whether to take the Banking top spot. If he took the job, he likely would have felt pressure from panel liberals, such as Brown and Sen. Elizabeth Warren (D-Mass.), to take an aggressive stance toward his home state industry. If he didn’t, he risked alienating a constituency that would be key to the possibility of him one day becoming Senate Democratic leader.

Wall Street officials, meanwhile, would have been looking for a lighter touch from their home state senator, who has often turned to the industry in search of campaign dollars to help both himself and fellow Democrats in elections.

The fact that Brown would get the job if Schumer passed on the post put increased attention on his decision.

In recent years, Brown has emerged as one of Wall Street’s fiercest critics in Congress.

Last year, he teamed up with Sen. David Vitter (R-La.) on a bill that would require the biggest banks to meet much tougher funding rules in what the industry saw as a de facto attempt to break up the largest Wall Street institutions.

He also helped put a spotlight on the issue of whether big banks should be involved in physical commodity markets, such as metal warehouses and parts of energy infrastructure. Due, in part, to the increased scrutiny from lawmakers and regulators, some Wall Street banks are getting out of these businesses.

Brown also has been critical of some of President Barack Obama’s nominees for regulatory jobs, arguing too often the administration looks to Wall Street to fill these openings. For instance, he voted against the nomination of SEC Chairwoman Mary Jo White because she worked as a lawyer for the industry.

In recent months, however, Brown has tried to make clear that while he is critical of big banks, he is not an enemy of the financial services industry as a whole. In particular, he has sought to highlight his support for regional and community banks.

In a news release Friday, Brown highlighted supportive comments from the heads of the Ohio Bankers League, the Ohio Credit Union League and the Coalition on Homelessness and Housing in Ohio.

“This committee is about ensuring a fair set of rules for all financial institutions while protecting taxpayers and consumers,” Brown said. “Serving as ranking member will allow me to continue to fight for Ohio consumers, Ohio jobs, and Ohio economic development and for our state’s financial institutions and their customers. We must ensure transparency and accountability for Wall Street and access to credit on fair terms for Main Street.”

Brown has also been an ally of insurance companies. This week, Congress enacted a change to how the Federal Reserve can write capital rules for insurers — a top priority for the industry — that the senator pushed to get into law.

“While strong capital standards are crucial, they must make sense,” Brown said in a release, highlighting that the bill will help Nationwide Insurance, which is based in Ohio. “Applying bank standards to insurers could make the financial system riskier, not safer.”

Brown can be expected to be an ally of financial reform advocates who have been increasingly unhappy with how some congressional Democrats approach Wall Street. This dynamic was on full display this week when Congress moved a year-end spending bill that contains language to roll back a part of the 2010 Dodd-Frank law intended to crack down on banks’ derivatives trading.

“This is great news! Senator Brown is a leader who fights to make our economy safer and to promote strong oversight of our financial system,” Warren said in a statement. “He will fight hard to make sure our economy works for middle class families — and I’m looking forward to fighting right alongside him.”

A big question facing the the committee next year is the degree to which Brown and Sen. Richard Shelby (R-Ala.), the presumed chairman, can find common ground on issues.

Shelby also has been critical of Wall Street and supports forcing banks to be meet tougher capital standards, which require institutions to rely less on borrowed money when funding their operations.

Brown was able to become ranking member because senators on the panel with more seniority opted to take other jobs.

Sen. Jack Reed (D-R.I.) will be the top Democrat on the Armed Services Committee while Sen. Robert Menendez (D-N.J.) will be ranking member on the Foreign Relations Committee.

Schumer will be able to continue to wield influence over Democrats’ relationship with and policy approach toward the financial services industry through his party leadership role and as a member of the committee.

Wall Street is hoping that means he will be able to serve as a counterweight to the growing number of industry critics in the party.

“New York relies on Sen. Schumer to be a strong and effective voice for the city and our financial services industry in Washington, D.C.,” said Kathryn Wylde, head of the Partnership for New York City, a group that represents CEOs from companies based in New York. “We are confident that his decision to focus on a leadership role with Senate Democrats, rather than the ranking position on Banking, is based on his assessment of where he can best represent us.”