Wall Street could count on Eric Cantor to take its side in the U.S. Congress. It won’t have the same luck with a top lawmaker in line to replace him.
House Financial Services Committee Chairman Jeb Hensarling, who twice voted against aid to the nation’s banks in the 2008 financial crisis, is poised to fill some of the vacuum left by Cantor’s defeat in a Virginia primary on Tuesday.
Yet just as investors kept Cantor’s campaign coffers well-stocked because they liked him, they stand to increase their contributions to Hensarling for a different reason.
They fear him.
Hensarling ranks first in raising money from commercial banks and sixth—one spot behind Cantor—in cash from the broader set of financial services, real estate and insurance sources since the beginning of 2013, according to data compiled by the Center for Responsive Politics, a Washington-based nonprofit that tracks money in politics.
Republican lawmakers and lobbyists say Wall Street contributions to Hensarling, a Texas Republican, will probably grow in the post-Cantor era.
“The future relationship between Hensarling and Wall Street will be mixed at best. Certain sectors will love him when he uses his position to advance anti-regulatory bills,” said Brandon Barford, a partner at Beacon Policy Advisors in Washington. “But they should worry about his populist and market fundamentalist views and how he is far more focused on creating a truly free market than supporting or aiding individual businesses or sectors.”
Hensarling twice voted against the Troubled Asset Relief Program, which was designed to aid the country’s banks during the recession and credit crunch, and has said he would have done it a third time if given the chance.
He has called for an end to the Export-Import Bank of the U.S., fought flood and terrorism insurance programs, and just last month said most Americans don’t want to occupy Wall Street but they are “tired of bailing it out.”
Cantor’s loss raises concerns about the future of political compromise, Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said.
“It was stunning,” Blankfein said in a television interview with CNBC today. “Eric Cantor in my view was a sensible politician who devoted himself to public service.”
“I hope it doesn’t mean that it will be impossible from this point forward to compromise on issues like the budget, immigration policy,” he said.
Cantor plans to step aside from his leadership post on July 31, according to a person familiar with his plans.
In recent months, Hensarling created a spreadsheet to track the favors he has done for other members of Congress—a sure sign he was thinking about asking them for their votes in a leadership race, according to another Republican lawmaker.
He hinted strongly that he might seek to succeed Cantor as majority leader, or perhaps even run for House speaker, which would give him even greater say over how Wall Street’s priorities are treated in Washington.
“There are many ways to advance the causes of freedom and free enterprise, and I am prayerfully considering the best way I can serve in those efforts,” said Hensarling.
Dressing the Part
For more than a decade, Hensarling’s chief rival in the House, Cantor, dominated Wall Street for congressional Republicans. He dressed like an investment banker down to Ferragamo loafers that showed no signs of outdoor wear, spoke the language of finance and tried to stand up to a populist tide that vilified anyone in a pinstripe suit.
He was rewarded with millions of dollars in campaign cash that he doled out to fellow Republicans, who in turn supported his climb up to the No. 2 spot in the Republican leadership.
If Hensarling stays in his current job, Cantor’s loss means Wall Street won’t have a champion to defend against a Hensarling agenda that weaves together the interests of Tea Party activists and industrialists such as Charles and David Koch.
Representative Jim Himes, a Connecticut Democrat and former Goldman Sachs banker, said Cantor’s defeat means the banking industry has lost “somebody who had an innate understanding of their issues.”
“For the broader business community, I think this is a real loss” because Cantor was willing to compromise on issues such as flood insurance. “Jeb Hensarling’s way of thinking about these things may prevail from now on, and that is not something I think that the business community will be all that comfortable with.”
Though the ramifications of Cantor’s defeat are still shaking out, Hensarling would likely have stiff competition for the majority leader’s job, most notably from Representative Kevin McCarthy, a California Republican, who currently serves as the party’s whip, one rung below majority leader. McCarthy is viewed as being more favorable toward the investment world than is Hensarling.
Republican officials on Capitol Hill say Hensarling; McCarthy; 2008 Republican vice presidential nominee Paul Ryan, who represents a Wisconsin district in the House; and Representative Patrick McHenry of North Carolina, a senior member of the financial services panel, all will probably boost fundraising efforts in New York in the wake of Cantor’s defeat.
In less than two years as Financial Services chairman, Hensarling has collected money from the financial industry even as his agenda has hewed directly toward eliminating government subsidies that give preferences to certain businesses and industries over others.
Of late, though, he appears to be recalibrating his populist rhetoric away from Wall Street and toward Washington. Instead of Wall Street vs. Main Street, in his formulation, it’s Washington vs. the world.
He called a May 20 speech to the Heritage Foundation “A Time for Choosing: The Main Street Economy vs. The Washington Crony Economy,” arguing that the Boston Tea Party was spurred by the monopoly guaranteed to the British East India Co. rather than by colonists’ lack of representation in the British government.
Both Cantor and Hensarling have given significant sums to Republicans seeking federal office in the 2014 midterm elections. Hensarling’s political action committee—called the Jobs, Economy & Budget (or JEB) Fund—has donated $408,403 to Republican candidates for federal office for the elections, according to the Center for Responsive Politics.
McCarthy’s PAC has topped that figure, with $489,073 in contributions to candidates.
Cantor, funded in large part by donors with New York ZIP codes, is far and away the leader in giving out PAC money, contributing $1.6 million.
Last year, Hensarling left his job as chairman of the House Republican Conference, just beneath McCarthy, to take over at financial services. Representative Cathy McMorris Rodgers, who holds the conference chairmanship now, is considered a contender for either majority leader or whip.
And Representative Steve Scalise, a Louisiana Republican who is chairman of the far-right Republican Study Committee, will run for the whip job, according to a Republican aide.
–With assistance from Christine Harper in New York.