Politico Pro - Q&A: Randy Neugebauer

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By Zachary Warmbrodt

Randy Neugebauer is bored with messaging.

The West Texas conservative is a leading member of the House Financial Services Committee, which in Republican hands has approved numerous bills in recent years that would have eased the bite of financial regulations.

But one after another, the bills faced certain death in the Democratically controlled Senate, where party leaders dismissed the proposals as attempts to weaken the 2010 Dodd-Frank law.

Now, with Republicans in control of the Senate, Neugebauer says he wants to craft bills that can be passed by Congress and sent to the president's desk -- not just send a message on where Republicans stand with regard to overseeing the financial services industry.

But that will mean crafting legislation that can garner some bipartisan support in order to get past potential filibusters led by Democrats in the Senate.

This has Neugebauer, who is taking the gavel of a subcommittee overseeing bank regulation and consumer protection, taking stock of potential areas where Democrats and Republicans can work together.

"What I want to do is hopefully get everybody thinking about actually making things become law," the former banker and home builder said in an interview in his Capitol Hill office Friday.

First on Neugebauer's agenda is legislation that would revise regulations for small and regional banks.

Neugebauer said a "good warmup" was his work on a terrorism risk insurance bill that became the first piece of legislation President Barack Obama signed into law in January.

Neugebauer introduced the original draft of the legislation in the House. While the finished product negotiated between House Republicans and Senate Democrats was significantly different from what he first put on paper, Neugebauer said he learned lessons as he tried to build consensus around the bill.

"I've got a little taste in my mouth of getting something done, and it tasted pretty good," he said.

In the interview, Neugebauer discusses the top items on his agenda, how to define a big bank, how he's "all for capital" and where bipartisan compromise may be possible.

What follows are excerpts of the interview edited for length and clarity.

You're chairing a subcommittee that has oversight of banking rules and the Consumer Financial Protection Bureau. What is the first thing on your agenda for the subcommittee in terms of hearings and legislation?

We've broken down what we want to accomplish into three areas.

One is regulatory reform. We threw this big blanket over the entire financial market, and we've seen some unintended consequences.

Secondly is … doing consumer protection in a way that it's good for the consumer and not taking away consumer choices, but expanding their choices while at the same time making sure that we're doing proper oversight.

The third thing is we are looking at cyber and data security. …

I would say probably one of the priorities is going to be looking at some regulatory reform for our Main Street lending institutions.

Does that mean community banks?

Community banks and credit unions.

Are there any specific proposals you're considering?

There are a lot of different ideas out there. One is the SIFI [systemically important financial institution] designation, changing the floor on that, and we've been looking at a lot of different proposals that are out there, and there's been even talk from former authors of Dodd-Frank that maybe that threshold is too low and could be raised.

That's the $50 billion asset level, where if you're above it you face enhanced prudential standards?

Yes.

Do you lean toward raising the number or doing away with the threshold and replacing it with an activities-based test?

One of the things about setting a number is you literally pick winners and losers.

My current thinking is, I'd rather give a financial institution the ability to say, OK, these are the metrics -- if I change my business model or if I decide to stay in this business or get out of this business, I understand where I fit in the scheme of things.

When you set a number, then you're really forcing an entity to shed assets. Or somebody grows and when they get closer to the ceiling or to the floor, they start to throttle their business down. I think there's a little bit of a disincentive there. I may be leaning more to looking at some standards.

We're hearing from financial reform advocates and Democrats who say regulators have the tools to tailor this part of Dodd-Frank and that amending it could create some new risks or might lead to missing some risks. Are you anticipating this is going to be a difficult lift?

What we've heard from some of the regulators is they think there needs to be some changes made. What we're going to be talking about then is the best way to do that. We would listen to the regulators. What we're trying to do is to accomplish what Dodd-Frank was really structured to do, and that is to make sure that banks are healthy. But, by the same token, trying to apply all those standards universally though the banking system, I don't think, is good policy.

So that proposal would be in the initial group you were talking about with legislation that would help community banks and credit unions? Because that helps the bigger, regional banks.

Some of the smaller holding companies would be affected by that. What we're really doing right now is filtering through a couple dozen bills that were passed in the last Congress out of the committee, that were passed with bipartisan support, and ascertaining, is that support still there? And really taking the easier bills, marking those up in committee in the next month or so and taking those to the House floor …

I met with [subcommittee ranking member William Lacy] Clay today and we've been talking about beginning that dialogue. We talked to [Senate Banking Financial Institutions and Consumer Protection Subcommittee Chairman Pat] Toomey about sending some stuff over to them.

My sense is from the first hearing they had over in the Senate, I think we're on the same page, that the community banks and the community credit unions are both on our initial thrust here for a while.

As you start getting to more complex stuff, then obviously those will be difficult lifts.

You mentioned you're filtering through proposals from the last Congress. It seems like the dynamic around those bills has changed since the fiscal 2015 spending bill, which eased a Dodd-Frank derivatives rule, and the terrorism risk insurance bill, which included another derivatives rule exemption.

Are you trying to be more pragmatic and say "where is an area we can get real bipartisan support" rather than just sending messages and having those bills die in the Senate?

I'm going to spend my efforts on things I think we can actually make law. We'll obviously have some issues where there probably may not be support to necessarily get those passed, but it doesn't keep us from talking about those, marking those bills up, seeing if we can pass them in the House, understanding that we may or may not get a warm reception for those. But I don't think you can start saying I'm going to give up on some of the issues, but there is some real need for some regulatory relief out there and we're going to try to deliver some.

Is there one example of something under your jurisdiction where you think you can work with Democrats and send something to the president that he would actually sign?

I think so, but it's hard to predict what the president actually will sign. I don't want to be vague here, but we're kind of sorting through those bills right now. … We're going to be developing that list here pretty quickly and it will be pretty transparent where we're headed. You can go back and look at some of those bills that passed with pretty bipartisan support in the committee, and I think those would be ones that are going to be on our list.

What about proposals that would be seen as helping out the bigger institutions? Is that something the committee's going to try to tackle?

What we're trying to ascertain right now is prioritizing it. Our priority right now seems to be more focused on the smaller ones. The big folks have a little more latitude to do some things.

In the area of the big banks, one of the things we are going to have on our radar scope is the harmonization of these capital standards, trying to impose European standards on our financial institutions at the same time of us putting another layer on there. I am all for capital, but I think we have the strongest financial institutions in the world, and I don't think we need to be importing bank regulations from Europe. I think we need to be exporting them to Europe. So, I want to make sure that we're treating both our bank and our nonbank financial institutions appropriately.

This is your third subcommittee chairmanship on Financial Services. Would you ever like to run the full committee?

That wouldn't be a bad job, but I'm very happy with the job I have right now. I'm very blessed. I was the vice ranking member, then I chaired oversight, I chaired housing and insurance and now I'm chairing financial institutions. It's something I love because this is really my background. This is what I did. I've been a banker. I've been in the real estate business. … One of my sons is in the private equity business. The other one's in the energy business. The Neugebauers are business and finance kind of people. So, we really feel comfortable here.

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