WASHINGTON - Sen. Richard Shelby, R-Ala., the next likely chairman of the Senate Banking Committee following the Republican takeover of the chamber, is expected to push for greater oversight of the Securities and Exchange Commission and to oppose Federal Reserve policy.
The eighty year-old Shelby, who currently serves as ranking minority member of the Senate Appropriations Committee, is poised to reclaim leadership of the committee after having previously led it from 2003-2007. Though Shelby has not been outspoken on muni issues in the past, he has been a strong opponent of many Dodd-Frank provisions and the Federal Reserve's quantitative easing.
But the rise of Michael Piwowar, a former Republican Banking Committee economist who is now an SEC commissioner with strong views on some muni issues, could make Shelby more interested in them, said Bond Dealers of America senior counsel and managing director of federal regulatory policy Jessica Giroux.
"Sen. Shelby believes in strong oversight, especially of the SEC," Giroux said. “Since the SEC has been focusing a great deal of attention on the muni market, in the months ahead the BDA anticipates that Sen. Shelby will dig into the SEC initiatives and we can anticipate the Senate Banking Committee would hold an SEC oversight hearing in the area. It is also important to note that SEC Commissioner Piwowar came from Shelby's staff so it's very likely that Shelby would carefully consider what Mr. Piwowar has to say on issues in front of the SEC."
Piwowar has given several speeches in recent months expressing a keen interest in muni market transparency, particularly with respect to requiring dealers to reveal their markups on so-called riskless principal transactions. He also has questioned the need for extremely complex bond transactions, arguing that securities with fewer bells and whistles would cost less to issue as well as trade more often and contribute to market liquidity.
"As we know, Commissioner Piwowar has been actively involved in discussing SEC muni issues and very recently, the SEC has been focusing on providing more transparency in pricing for retail investors generally, so we would assume that Sen. Shelby is cognizant of the retail investor component to the muni market," said Giroux.
Shelby voted against Fed chair Janet Yellen's confirmation last year. The Fed's unwinding of its accommodative monetary policy and expected interest rate increases could spur the Senator to make noise about increasing oversight of the Fed, said Susan Collet, president of H Street Capitol Strategies.
"It could be choppy waters ahead," Collet said. "That always makes Congress itchy and, at least posture about more Fed oversight." Shelby has shown an ability to work across the aisle and could join with Democrats to advocate for higher capital requirements for the largest banks, sources said.
While Shelby may attempt to repeal sections of Dodd-Frank that Republicans find least favorable, he is unlikely to attempt any kind of full repeal, said Micah Green, chair of the financial services and tax policy practice group at Squire Patton Boggs.
Republican control of both chambers may result in an end to gridlock. House bills targeting the sweeping legislation have died without reaching the Senate floor over the past four years, but there could be a willingness to discuss them now, Green said.
