Cicero Policy Briefer

Issue 8, January 2007

2007: New faces for financial services across the pond

By Jacob Coy

Imagine it’s Thursday 4 January, 2007. You are sitting atop one of the many towering office blocks near Wall Street at the helm of one of the US’s major financial corporations—and gone are the Republican lawmakers who have been so supportive to you throughout their tenure leading Congress.

It’s not that you didn’t try to help them. As anyone reasonable, you and your colleagues in the financial services industry have supported both parties with financial largesse (commonplace in the US). As is usually the case, you and others in the industry were particularly generous to the Republicans, giving them 56 per cent of your donations in the 2006 election cycle (just over $107 million). But that wasn’t enough and in the end, they fell short rather spectacularly. So now it’s the Democrats you must placate.

Out are the Majority Committee staffers you’ve spent the past years wining and dining. In are a new cadre of Democratic staffers. Note to self: book a table at the Caucus Room every day for the next two weeks; there are some introductions to be made. Better organise an early spring golf outing at Greenbriar as well. And check what hoops we now have to jump through with these new damn ethics laws the Democrats are rushing through.

These Democrats may be a lot more challenging than the Republicans ever were. Briefly consider the new Chairman of the House Financial Services Committee Barney Frank (previously known to many for his private life rather than his legislative ability). As Chairman-elect, he has already called for an investigation into CEOs salaries and inequality. Great; just what you need. His other proposal, the so-called ‘Grand Bargain’, tries to convince you and other senior management into allowing organised labour into your workforce easier and provision of healthcare in exchange for supporting trade agreements vital to the industry. Again, that’s going to be a difficult pill to swallow.

It’s not much better on the crucial Appropriations Subcommittee for Financial Services and General Government, where Jose E Serrano takes the helm. A left-leaning Democrat, he’s not exactly the best friend of big business. He’s unlikely to want to carve out generous appropriations for companies like yours. On the Senate side, you may fare a bit better. The new Chairman of the Banking Committee, Chris Dodd, is a seasoned political veteran and knows the industry. You probably already have a pretty good relationship with him because he’s been around so long and he’s very tuned into the issues that matter. But you need to be sure that familiarity doesn’t breed contempt: this guy is looking at 1600 Pennsylvania Avenue and what it would take for such an obscure Senator with no public profile to get there.

The Administration has been only a little better; it’s been a pretty tumultuous year. Luckily your friend Hank Paulson replaced John Snow at the Treasury in May. The other hugely important personnel change in 2007 is the new face at the Fed. Out is the ‘Maestro’, Alan Greenspan, and in is Ben Bernanke. Bernanke’s first year was fairly steady, despite a notable interview faux pas that sent the markets reeling. But overall, Bernanke and fellow Federal Reserve Governors appear to be doing a good job manipulating fiscal levers and managing the economy.

No doubt—2006 was quite a blockbuster. But 2007 promises just as much change with Democrats in power in Congress, oversight hearings, Presidential posturing and the most dangerous thing for your business—the uncertainty of what you don’t know. But one thing you do know, you’ve got to make a lot of friends and fast if you’re going to be effective on the Hill. And you’re probably going to need some help. Those former Republican committee staffers seemed like a good idea in 2004, but it’s a new era.

Jacob Coy can be contacted on +44 (0)20 7665 9535 or click here to email.

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