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Republicans are celebrating the election results as the party retained control of the U.S. House and gained control of the U.S. Senate and the Presidency. However, the razor thin two-seat majority (with three seats undecided as of the drafting of this update) will be a challenge.
Small majorities plagued Republicans in the House during the current Congress, allowing small conservative groups to block legislation and even remove the Speaker. The dynamics have shifted allowing moderate Republicans to become the spoilers by opposing or demanding special provisions in party-line votes.
The Republicans’ ability to govern will be tested quickly with the return of the debt ceiling on Jan. 2. While the debt ceiling is the amount of money the US government is permitted to borrow and does not determine spending levels, some members of Congress see it as an opportunity to put limits on future appropriations.
Tax legislation will be a top Republican priority as many provisions in the Tax Cuts and Jobs Act of 2017 are set to expire next year. The law was enacted through the budget reconciliation process that allows Senate passage with a simple majority and requires most provisions to expire within 10 years. Republicans could reauthorize and update tax cuts without any Democratic support by utilizing the same process. Negotiations may prove more difficult this time around as provisions, such as the state and local income tax (SALT) cap, have become immensely unpopular in high-tax states and Republicans previously had a much larger majority that allowed 13 members to oppose the bill – a cushion that doesn’t exist this time. While much of the discussion is around tax cuts, Republicans will also be looking for ways to pay for the likely $4 trillion price tag.
FY2025 government funding expires on Dec. 20 and Congress is widely expected to pass another continuing resolution. It is currently unclear how long the extension will be, but Congress will likely need to address funding again early next year.
President-elect Trump has begun announcing nominations for his cabinet and those individuals will have a huge impact on the Administration’s direction and accomplishments. While a Republican majority in the Senate will likely support Trump’s nominees, the first Attorney General nominee has withdrawn from consideration under intense pressure.
The first Trump administration focused on Fannie Mae and Freddie Mac exiting conservatorship, and it is widely expected for that effort to be revived. This will require a strong focus by both the FHFA Director and the U.S. Treasury Secretary. Due to a Supreme Court ruling, this will be the first administration that will be able to remove the current FHFA Director immediately, which will allow Trump’s nominee more time to work through the complexities of ending conservatorship.
Use of the Congressional Review Act (CRA)
When Trump was first inaugurated in 2017, the Republicans controlled both the House and Senate. Republicans were able to overturn 16 agency rules using the CRA; the process has only been successful 20 times.
The CRA is a tool Congress can use to overturn certain federal agency actions. The CRA was enacted as part of the Small Business Regulatory Enforcement Fairness Act in 1996. A CRA joint resolution of disapproval is introduced in the same way as any other bill, but must be introduced during a 60-days-of-continuous-session period beginning when the rule has been published in the Federal Register and been received by Congress. If a CRA joint resolution of disapproval is approved by both chambers of Congress and signed by the President, or if Congress successfully overrides a presidential veto, the rule at issue cannot go into effect or continue in effect. In addition, a rule subject to an enacted joint resolution of disapproval “may not be reissued in substantially the same form, and a new rule that is substantially the same … may not be issued, unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution.”
The Congressional Research Service estimates that the Biden Administration rules submitted to the House or Senate on or after August 1, 2024, until the end of the second session of the 118th Congress, are likely to be subject to the CRA lookback provisions and will qualify for CRA review in the first few months of the 119th Congress.
New Leadership on Senate Banking Committee and House Financial Services Committee
Sen. Sherrod Brown (D-OH) has been the lead Democrat on the Senate Committee on Banking, Housing, and Urban Affairs since 2015 and the Chair since 2021. Following his unsuccessful reelection bid, Sen. Elizabeth Warren (D-MA) will become the Ranking Member while Sen. Tim Scott (R-SC) will become Chair in the 119th Congress.
Current Chair of the House Financial Services Committee Patrick McHenry (R-NC10) did not seek reelection. A handful of Republicans are campaigning for the position and Rep. Andy Barr (R-KY6) and Rep. French Hill (R-AR2) are widely considered the front-runners. Rep. Maxine Waters (D-CA43) will remain the lead Democrat.
CFPB Finalizes Personal Financial Data Rights
The Consumer Financial Protection Bureau (CFPB) finalized a rule implementing Section 1033 of the Consumer Financial Protection Act (CFPA) that will give consumers greater rights, privacy and security over their personal financial data. The rule requires financial institutions, credit card issuers and other financial providers to unlock an individual’s personal financial data and transfer it to another provider at the consumer’s request for free. Consumers will be able to more easily switch providers.
FDIC Chair Gruenberg to Resign in January
Martin Gruenberg announced that he will resign a day before the inauguration. Gruenberg has been Chairman of the FDIC Board of Directors since Jan. 5, 2023. He has been a member of the FDIC Board since August 2005 and previously served as Vice Chairman from August 2005 to July 2011 and as Chairman from November 2012 to mid-2018. Mr. Gruenberg has also served as Acting Chairman on a number of occasions.
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