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Midterms for bankers: Winners, losers of key 2018 election battles

The months of political ads, debates and nonstop polling were finally replaced by actual voting on Tuesday.

The outcomes in the 2018 midterm elections are sure to have implications for financial services policy. The Democrats succeeded in retaking the House, in what is likely to be a blow to the Trump administration, but Republicans held onto the Senate, even picking up a few seats.

Following is a spotlight on key races for financial institutions, and their results:

Democrats take control of House
Nancy Pelosi and Paul Ryan
Democrats flipped the House from Republican control, regaining the majority after losing it in 2010.

The clearest likely result of the flip for bankers will be that the Financial Services Committee is expected to be led by Rep. Maxine Waters, D-Calif., who is currently the ranking member. That could mean sharper scrutiny of big banks, Trump administration-appointed regulators and regulatory relief plans.

Analysts expect the committee under Waters to focus more on housing and community reinvestment issues. However, in contrast to her criticism of Trump policies outside of financial policies, some say it is possible that she will try to reach across the aisle on key banking issues to try to move legislation.

With a Democratic-run committee, the likelihood of any legislation becoming law goes down. Still, a power shift stokes fear for financial services firms. When asked to quantify their concern about Democrats controlling the House leading up to the election, 41% of bankers participating in a Promontory Interfinancial Network responded with a 5 rating (with 1 indicating the least concern and 5 the most).
GOP holds onto Senate control
Sen. Mike Crapo, R-Idaho, and Sen. Sherrod Brown, D-Ohio
The Republicans will remain in power in the Senate following vote tallies around the nation Tuesday night.

Most pollsters saw the Senate as likely to stay in Republican control with the Democrats facing long odds to flip GOP-held seats and several Democratic incumbents in tight re-election battles in states won by President Trump in 2016. Several of those key races in red states, including North Dakota and Indiana, went to Republicans.

The Republican victory will result in a change to the makeup of the Senate Banking Committee, now chaired by Republican Mike Crapo of Idaho. It is unclear if Crapo will remain chairman, however. He has been mentioned as a possible chairman for the Senate Finance Committee, which would open up the banking panel to a successor such as Sen. Pat Toomey, R-Pa.
Tester pulls out close victory in Montana
Sen. Jon Tester, D-Mont.
A tight race for Democrat Jon Tester's Senate seat in Montana was finally called Wednesday afternoon, with the incumbent pulling out a razor-thin victory over Republican Matt Rosendale. The lead appeared to change hands multiple times Tuesday night heading into Wednesday.

Tester's victory makes him the only Democratic supporter of the recent regulatory relief package sitting on the Banking Committee who won re-election this fall. Two other moderate Democrats on the panel, Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana, both lost Tuesday night. The three senators played a significant role in encouraging Democratic support of the targeted reg relief package, negotiating the bill with Banking Committee Chairman Mike Crapo, R-Idaho.

Like Heitkamp and Donnelly, Tester was also defending his seat in a state won by President Trump in 2016. If he had lost, it would have been a bigger blow to bankers hoping for Democrats to favor reg relief. Compromise in the Senate will be harder with fewer red-state Democrats willing to cross the political aisle.
Sinema wins Arizona Senate race
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After nearly a week of votes being counted, Democrat Kyrsten Sinema was declared the winner in the Arizona Senate race Monday evening, defeating Republican Martha McSally. Sinema will occupy the Senate seat now held by Republican Jeff Flake, who is retiring.

Sinema, a member of the House Financial Services Committee who enjoyed banking industry support for her backing of the recent reg relief legislative package, went into the vote with a slight edge in the polls.

Sinema not only supported the reg relief bill but also a bill introduced by Rep. Blaine Luetkemeyer, R-Mo., which would have eliminated the asset threshold for banks to be considered “systemically important financial institutions.”

As of Oct. 16, Sinema received $173,204 from commercial banks, according to the Center for Responsive Politics. But McSally also drew backing from the industry. McSally received $25,100 from Wells Fargo’s PACs, individual members, employees, or owners, and immediate families of those individuals — putting her in at No. 4 on the bank’s list in terms of candidates running for Senate.
Dean Heller loses Nevada Senate race
Sen. Dean Heller, R-Nev.
Dean Heller of Nevada, the most vulnerable Republican incumbent on the Senate Banking Committee, lost his Senate seat late Tuesday to Democrat Jacky Rosen.

The race was tight, with Rosen pulling ahead in the final hours of the vote count. Though the Republicans gained seats overall on Tuesday, Heller's loss represented a rare pickup for Democrats in the 2018 midterms.
Cordray loses gubernatorial bid
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The race to elect Ohio's next governor lacked much direct relevance for banks, but the financial services industry was watching it closely anyway because of the Democrat on the ballot: former Consumer Financial Protection Bureau Director Richard Cordray.

Polls had given Cordray a slight edge in his race against former Sen. Mike DeWine, but Cordray ended up falling short. With most of the results in, DeWine looks ready to win with roughly 50.4% of the vote, according to CNN.

Democrats may now wish Cordray had stayed at the CFPB. He left in November 2017, several months before his term was due to expire in July 2018. As a result, President Trump installed Mick Mulvaney as acting director, who began reversing course on many Cordray priorities.
Heitkamp loses North Dakota Senate seat
Sen. Heidi Heitkamp, D-N.D.
One of the Senate Banking Committee’s most moderate members, Sen. Heidi Heitkamp, D-N.D., lost her bid for re-election to Republican Congressman Kevin Cramer, as pollsters were predicting the month leading up to election night.

Heitkamp was the banking panel’s most vulnerable incumbent heading into Tuesday's voting. An aggregation of polls by Real Clear Politics showed Cramer up by 11 percentage points at the end of last week, while FiveThirtyEight gave him a 75% chance of winning.

Heitkamp’s re-election challenges were despite her support for the regulatory relief law passed by Congress in May, which she helped negotiate. She received ample donations from the financial services industry.
Donnelly loses Indiana Senate race
Sen. Joe Donnelly, D-Ind.
Republican Mike Braun defeated Senate Banking Committee member Joe Donnelly, D-Ind., leaving the committee with one less moderate Democrat who had helped negotiate the reg relief bill. Donnelly faced a tough re-election fight in a state Trump took in 2016, and most pollsters viewed the race as a "toss up."

In pre-election analysis, FiveThirtyEight gave Donnelly a 69% chance of holding on against Braun. Yet several polls suggested the race was neck-and-neck. A recent poll by Fox News showed Donnelly 7 points ahead, but an earlier poll by CBS News showed Braun ahead by 3 points.
Menendez avoids defeat in surprisingly close race
Sen. Bob Menendez, D-N.J.
Senate Banking Committee member Bob Menendez, D-N.J., defeated Republican challenger Bob Hugin, in a tighter than usual race in a typically solid “blue” state.

Cook Political Report recently labeled the race as a “Toss Up.”

Menendez, who opposed the Crapo regulatory relief bill, has been under a microscope recently over allegations of corruption, though criminal charges have been dropped. New Jersey’s largest newspaper, The Star-Ledger, came out with a lukewarm endorsement of Menendez, with an editorial titled “Choke it down, and vote for Menendez.” The paper said the race “presents the most depressing choice for New Jersey voters in a generation, with two awful candidates whose most convincing argument is that the other guy is unfit to serve.”

Hugin won some support from big financial institutions. He received $54,400 from JPMorgan Chase’s political action committees, individual members, employees, or owners, and immediate families of those individuals — more than any other Senate candidate for the bank. He was also in the top five candidates for the Senate in terms of campaign contributions from Bank of America and Citigroup as well, according to the Center for Responsive Politics.
Barr wins close race in Kentucky’s 6th House district
Rep. Andy Barr, R-Ky.
Rep. Andy Barr, R-Ky., a senior member of the House Financial Services Committee who enjoys ample industry support, held off a tough re-election challenge from Democrat Amy McGrath.

According to numerous news networks, Barr won the close race against McGrath who had entered the national political spotlight as the first female to fly into combat in an F-18 jet.

FiveThirtyEight ranked the race as a toss-up. In September, Barr became the first House candidate ever endorsed by FOTB, the banking super Pac.
House Financial Services Committee member loses seat
Conor Lamb
Keith Rothfus, R-Pa., a member of the House Financial Service Committee, lost his seat to Democrat Conor Lamb, although Rothfus' re-election had already been in doubt. Lamb is already in the House after he won a special election months ago, but the districts were redrawn so Lamb ran for a full term in a neighboring district.
Senate Banking Committee's top Democrat re-elected.
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Senate Banking Committee ranking member Sherrod Brown, D-Ohio, won his re-election bid against Republican Jim Renacci.

Election watchers widely expected him to win as he consistently led in the polls, although he was running in a state that President Trump won in 2016.

Brown is expected to continue to push back against Trump-appointed regulators as they implement deregulatory measures, and he could begin to attract more attention as a potential presidential challenger in 2020.
Warren wins re-election easily in Massachusetts
Elizabeth Warren
Sen. Elizabeth Warren, D-Mass., the progressive member of the Banking Committee and a consistent critic of large banks, was projected to win her re-election campaign early on Tuesday night, beating Republican Geoff Diehl. Warren’s re-election was never in doubt. She is widely expected to be considering a presidential run in 2020.