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What Elections Could Do to Financial Regulations

by Marian Wang, ProPublica

As Americans go to the polls today, their votes will influence a number of issues that we’ve been watching, whether it be the foreclosure scandal or implementation of financial regulation and healthcare reform–some of our favorite topics. So here’s our attempt to parse some of the election coverage and bring these issues into sharper focus:

Foreclosure Crisis

In the wake of a foreclosure-documentation scandal that has grabbed headlines for more than a month, Elizabeth Warren, who’s leading the Obama administration’s Consumer Financial Protection Bureau, said, “Right now my money is on the attorneys general,” who in October launched a joint investigation in all 50 states.

Midterm elections, however, could present a complication for that investigation, given that 30 state attorneys general races are being decided today. As the Washington Independent reported, some of the state attorneys general who’ve been most active in the investigation are either engaged in close re-election contests or are set to leave their posts. More from the Independent:

Consider this: Of the 12 state attorneys general on the executive committee of the coordinated investigation, only two of them — Roy Cooper in North Carolina and Rob McKenna in Washington — aren’t up for re-election this year. Several of them — Jerry Brown in California, Richard Blumenthal in Connecticut, Terry Goddard in Arizona, Andrew Cuomo in New York and Bill McCollum in Florida — are running for higher office and will not return to their posts. And other races are closely contested.

Currently, 32 of the 50 attorneys general across the nation are Democrats, to 18 Republicans. According to Governing Magazine, the GOP is poised to pick up anywhere from six to 13 of those seats after November, dramatically changing the makeup of the attorneys general across the country — and potentially the nature of their investigation.

Two notable cases include Ohio attorney general Richard Cordray and Iowa attorney general Tom Miller, both of whom are up for re-election today and are members of the executive committee that is leading the probe.

Miller, who has tracked mortgage-industry practices for years, is the investigation’s point man. And Cordray is the only attorney general so far to have filed a lawsuit against a servicer–GMAC–for its foreclosure practices. The Ohio Democrat has promised that the foreclosure probe will continue past the elections, but he’s currently locked in a race that Governing magazine is still calling a toss-up.

Financial Regulation

According to a piece in today’s New York Times, if the predictions are correct and Republicans gain more control in Congress, elections will likely leave the financial industry in a much stronger position and blunt the effect of the financial reform bill:

A Republican victory would also shift control of the oversight and appropriations process in Congress, and lobbyists are hoping that means less money for agencies like the S.E.C. and the C.F.T.C. to hire staff and aggressively enforce the Dodd-Frank financial regulatory reform bill passed this summer.

While that bill is already law and a rollback would be tough, other attempts at an end-run around it are likely, especially if the Senate also switches hands. In that case, Republicans could block appointees the industry considered hostile at the Treasury, as well as at the S.E.C. and C.F.T.C. Nominees for two of the five commissioner’s seats at the S.E.C. will require approval by the Senate during the next session, while the term of one commissioner at the five-member C.F.T.C. expires.

“At this juncture, gridlock is good,” Richard Hunt, president of the Consumer Bankers Association, told the Times. “It’s time we take a breather from all the excess of regulation and Congressional legislation. Our members and customers are ready for common sense to reappear.”

Health-Care Reform

Much of the campaign rhetoric this year has dragged incumbents’ health-care reform votes through the mud, putting lawmakers who voted for the unpopular bill–or even those who at one point helped–on the defense.

Republican wins in both Congress and statehouses throughout the countrywould likely “slow down implementation of the law and make the debate even more contentious–but not outright stop the law,” according to Politico:

“I think if they don’t fully repeal it and replace it, they will make such big changes in it over the next three years that you won’t recognize it,” Republican Governors Association Chairman Haley Barbour said Sunday on NBC’s “Meet the Press.”

Given that the law has already passed and the likelihood of repeal at the federal level is low, NPR points out that those interested in how well it’s implemented should watch what happens the state level.

Elections in more than three dozen states will help determine who becomes the state’s insurance commissioner, whose job it is to police insurers and enforce the law’s new consumer protections. In four states–Georgia, California, Kansas, and Oklahoma–insurance commissioners are being directly elected by voters today.

In a number of other states, whoever is elected governor today will appoint a health-care commissioner, and in some states, these gubernatorial candidates have voiced opposition to the law as a whole, NPR reported.

Three states–Arizona, Colorado, and Oklahoma–are also voting on ballot measures that would prohibit enforcement of a key provision in the reform bill that requires most everyone to have health insurance by 2014, according to Kaiser Health News. At least eight other states have already approved similar statutes, though not changes to the state constitution.

Policy analysts and legal experts, however, aren’t putting too much stock in these efforts by the states, which they say are just for show.

“It’s more of a polling statement,” Elizabeth McGlynn, an associate director at the research organization RAND Corp., told Kaiser Health News. “It’s not clear to me in this case that the federal law wouldn’t override state mandate. 2026 [T]hat will be something the courts decide.”

Other Issues Move Off the Back Burner

It’s also worth mentioning that getting past the elections–no matter who wins what–could also set in motion a number of issues that have for months been put on the back burner amid all the politicking.

Those include a stalled food safety bill–the importance of which was highlighted by salmonella outbreaks earlier this year.

Two prominent Democrats, Reps. Charles Rangel and Maxine Waters, will at last face ethics trials that had been moved until after the elections–despite requests from both to have their hearings held before midterms.

A New York Times piece today reminds us that the Bush tax cuts expire in 59 days, and that debate will likely be an issue again in the near term. It, too, had been postponed because of the elections.

And that’s just to name a few. If you’ve got more examples, feel free to leave them in the comments.

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