December entered with a bang for Republicans. Not only did former House Speaker Kevin McCarthy (R-Calif.) announce plans to retire and leave Congress early, sitting House Financial Services Committee (HFSC) Chair Patrick McHenry (R-N.C.) revealed he does not plan to return to Washington, D.C. for another term in 2025.
While Rep. McCarthy’s announcement was expected, Chair McHenry’s hit hard, even if it also was not entirely surprising. Because the GOP imposes term limits on committee leaders, Rep. McHenry would not have been eligible for another stint at the helm of HFSC even if he won reelection and Republicans kept control of the chamber.
Anticipated or not, Chair McHenry’s departure leaves a big hole in the GOP’s top brain trust, especially when it comes to financial services and fintech policy.
Who might take his place as head of the HFSC, and what will Chair McHenry try to get done over the remaining 12 months of his term?
Let’s take a look, starting with his agenda for 2024.
What Is On Chair McHenry’s Must-Do List?
Shortly after his retirement announcement, Chair McHenry spoke to the inside-the-beltway publication Punchbowl about his plans for his final year in the House. In general, he was optimistic about the potential for policymaking and said having negotiations over spending bills at the beginning of the year may actually get Congress’ gears moving before Washington turns its focus to the 2024 elections.
When it comes to the HFSC’s oversight function, the congressman revealed the committee’s tentative schedule for early 2024 includes hearings focused on the Biden administration’s “rogue regulators” in January, “holding bad actors accountable” in February, and “ensuring American competitiveness” come March.
On the legislative side, Chair McHenry wants to enact consumer financial data privacy reform, create a regulatory framework for digital assets, and approve bills to spur capital formation. Each of these issues faces opposition in the Senate. (Though momentum for data privacy reform has sometimes grown in bipartisan fits and starts, right now those forces are at an ebb.) Regarding his approach for regulating stablecoins specifically, Chair McHenry told Punchbowl he is not backing down from the GOP’s preferred regulatory approach, which has encountered resistance from Democrats and the Biden administration.
Punchbowl also reported Chair McHenry is willing to take on his own party — at least regarding outbound investment reform. As the news outlet noted, House Foreign Affairs Committee Chair Michael McCaul (R-Texas) and Sen. John Cornyn (R-Texas) have written legislation that would introduce new reporting requirements for Americans’ investments abroad. Chair McHenry opposes that approach – and pushed to make sure it wasn’t included in the end-of-year defense authorization bill Congress is considering this week.
Finally, Chair McHenry told Punchbowl that it is time for the House to take a closer look at the anti-money laundering rules for cryptocurrency. Indeed, while he acknowledged the other issues would be difficult to get through a Senate held by Democrats, Chair McHenry said crypto money laundering rules could be a place where the two parties could come together.
“We want to identify workable policies … as it relates to digital assets. We want to make sure that the regime works and is effective,” Chair McHenry said. “And I think we need a broader policy effort to make that work.”
That agenda is a bold one for a Congress that has had trouble getting any legislation to the House floor, much less off of it. But the landscape may not get any easier after Chair McHenry departs Congress at the end of 2024.
What Happens At The Top Of The HFSC If Republicans Win The House?
According to another inside-the-Beltway publication — this time Politico — GOP House leaders privately have said the process of picking Chair McHenry’s successor could be “contentious.”
“You're going to have an absolute melee on the Financial Services Committee,” said Rep. Frank Lucas (R-Okla.), who has served on the panel longer than any other Republican. Rep. Lucas himself even said he might enter the committee leadership race if Republicans keep the House.
Rep. Lucas would not be the leading candidate, however.
Among the top contenders for the chairmanship is Rep. Blaine Luetkemeyer (R-Mo.) who, like Chair McHenry, is one of the banking sector’s top allies in Congress. Indeed, Rep. Luetkemeyer is probably the favorite in this race if for no other reason than he would offer some continuity in terms of policy focus. As Politico noted, the conservative congressman is largely aligned with Chair McHenry on legislation and oversight focus with one notable exception: he has exhibited a much more skeptical view of crypto. On the regulatory state in general, however, Rep. Luetkemeyer sounds a lot like most other Republicans. When asked in an October what he would do if he were chair and Republicans were still control the House in 2025, he said, “You can do a lot of pulling back on some of the regulations.”
While Rep. Luetkemeyer probably is the top contender to replace Chair McHenry (and may even be interested in becoming ranking member if Democrats win the House and, therefore, control of the committee), other lawmakers almost certainly will throw their hat in the ring. Politico noted Rep. Bill Huizenga (R-Mich.), who has led the panel’s capital markets and oversight subcommittees, has said he is interested. Rep. French Hill (R-Ark.) has been tight lipped, but he currently serves as vice chair to Rep. McHenry. Unlike Rep. Luetkemeyer, Rep. Hill is an unabashed fan of digital assets. Indeed, he has spent most of his time on the committee of late focusing on crypto issues. He also was lead player on the panel’s response to the banking failures that happened back in March.
House Budget Committee Chair Jodey Arrington (R-Texas) summed up this potential “melee,” quipping, “That committee has an embarrassment of riches when it comes to talented lawmakers and potential leaders. That’s going to be quite a competition.”
Of course, all bets could be off if the GOP doesn’t keep control of the lower chamber of Congress in next year’s elections.
What Happens To The Committee If Democrats Are Victorious In 2024?
In 2022, Democrats considered a plan to impose term limits on committee chairs, just as House Republicans do.
At the time, House Foreign Affairs Chair Gregory W. Meeks (D-N.Y.) said, “The testimony that I’ve heard from most in there is that if something’s not broke, you don’t need to fix it. We have accountability and transparency now. … So therefore, there is no real fix here, because nothing is broken.”
Practically what that means is that unless she does not run for another term, loses her bid for reelection — or Democrats change course and decide to change their committee rules — current HFSC Ranking Member Maxine Waters (D-Calif.) will resume her position as chair. (Even if Democrats do change their rules, they likely would not affect a Rep. Waters bid for HFSC chair. While she has served as chair before, she sat in that seat for just four years, or two terms. She would likely have at least one more term atop the committee even with a rules change.)
At the end of her four years at the helm of the HFSC, which spanned early 2019 to early 2023, then-Chair Waters issued a report on the committee’s accomplishments under her leadership. The issues she focused on included housing, protecting retail investors (the committee under her leadership went after both GameStop and FTX), standing up to tech firms and “megabanks,” and fighting financial crime and trafficking that undermine the country’s national security.
We expect a similar agenda if Rep. Waters resumes her leadership of the committee in 2025. When they took office in January 2023, Republicans also disbanded an HFSC subcommittee devoted to diversity, equity, and inclusion. A Chair Waters likely would reconstitute that committee and put financial services’ providers commitments to these principles under a microscope. That panel also would focus heavily on issues related to financial equity and discrimination.
Another issue that would generate a lot of scrutiny from would be-Chair Waters? Digital assets. As The Block reported just last week, at a recent hearing, Rep. Waters, “known for being a crypto critic,” asked the U.S. Securities and Exchange Commission to “organize a group of lawmakers to take a deeper dive into firms that operate in the industry and study how they should be overseen.” Rep. Waters said she wanted these sessions to ferret out “the problems and the pitfalls that may occur” with crypto and stablecoins.
In other words: Digital asset companies might miss Chair McHenry even more than the banking sector.