Many lobbyists whose clients include financial institutions consider Cantor a go to. Wall St. loses ally with Cantor loss

Wall Street and the financial services industry are losing a top ally in congressional leadership after House Majority Leader Eric Cantor was defeated in a primary contest on Tuesday, a shocking upset that raises questions about Republicans’ agenda for the rest of this year and in the next Congress.

Many lobbyists on K Street whose clients include major financial institutions consider Cantor a go to member in leadership on policy debates, including overhauling the mortgage finance market, extending the government backstop for terrorism insurance, how Wall Street should be taxed and flood insurance.


He was “one of the few remaining House Republicans who understood the complicated and nuanced issues facing the financial services community,” one industry source said Tuesday following news of Cantor’s defeat.

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“When Dave Camp abandoned the business community with his tax reform draft, Cantor was incensed and promised to stand strong,” the person said, referring to the House Ways and Means Committee chairman’s proposal earlier this year to offset the cost of tax reform, in part, by taxing Wall Street banks.

While Cantor’s relationship with the industry did not play a big role in his primary against Randolph Macon College economics professor David Brat, it has served at several points this year as a source of tension with some of his House Republican colleagues and in particular House Financial Services Chairman Jeb Hensarling (R-Texas).

Flood insurance was perhaps the most striking example of the two lawmakers butting heads. Despite Hensarling’s objections, Cantor put a bill on the floor in March to halt flood insurance premium hikes. Hensarling opposed the legislation, saying it went too far in scaling back changes made in 2012 to improve the program’s finances.

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The bill passed the House with bipartisan support, but the episode stirred up frustrations among conservative activists. Brat cited it as an example of Cantor’s support for “Big Government.”

“We think that more people should be following Jeb Hensarling’s lead on conservative policy,” Barney Keller, the spokesman for the conservative Club for Growth told POLITICO at the time. “It’s a shame that Republican leaders try and stifle conservative policy instead of pushing moderates to support conservative policy.”

A similar fight is shaping up over whether to extend the charter for the Export-Import Bank, which Hensarling and other conservatives are holding up as a prime example of Washington cronyism. But it is a top priority for the business community and one that Cantor has supported in the past.

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Cantor and Hensarling appear to have found common ground on how to extend but scale back the Terrorism Risk Insurance Act, which was enacted after the Sept. 11 terrorism attacks and offers a federal backstop to the insurance industry for losses resulting from acts of terrorism that destroy buildings, stadiums or other parts of the physical infrastructure.

But industry lobbyists were scratching their heads Tuesday night trying to figure out whether Cantor’s loss could upset these negotiations.

Meanwhile, Hensarling’s leadership ambitions are now becoming even more of a fixation for the financial services industry.

Before Tuesday, Hensarling had repeatedly said he is not pursuing a leadership role, but also didn’t rule it out.

“He was positioning himself anyway,” one industry source said. “Now with Cantor out he will make a move before the young bucks move.”

The Texas Republican likes to tout that he is pro-free markets not pro-business.

For Wall Street this cuts both ways — as his chairmanship has shown. When it comes to rolling back regulations, he is an ally. But when it comes to keeping some government support in place for the housing and insurance markets, Hensarling has little patience for the industry’s complaints that his policies are going too far.

Over the years Cantor has been able to rely on the financial services industry to fill his campaign coffers, with his defense of how certain investment managers are taxed being particularly popular on Wall Street.

For instance, he was the top recipient from the private equity and investment industry during 2013 and 2014, according to the Center for Responsive Politics. Real estate and insurance were also top sources of contributions to his campaign committee.

Contributors at Blackstone Group gave $65,500 to Cantor’s campaign committee this cycle, followed by the hedge fund Scoggin Capital Management and Goldman Sachs.

“He had a firm grasp of financial services issues and the impact of those issues on the industry and consumers,” one banking lobbyist said about Cantor on Tuesday.