The Mid-Term Elections:
What They Mean for Major
National Policies
Mary Burke Baker, Darrell Conner, Stephen Cooper,
Daniel F. C. Crowley, and Tim Peckinpaugh
© Copyright 2014 by K&L Gates LLP. All rights reserved.
THE OUTLOOK FOR THE MIDTERM
ELECTIONS
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House Control Not at Risk (233-199*)
* 3 vacancies
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BATTLE FOR THE SENATE
Map from Real Clear Politics – as of October 30, 2014
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Health Care Policy
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THE POLITICS OF FEAR
 A recent survey found that 25% of the American
public believes that vampires and/or zombies
exist
 Another 35% to 40% believe that a plague, be it
Ebola or something else, is about to sweep
across America—probably resulting in a zombie
apocalypse
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THE POLITICS OF FEAR
 The Politics of Fear translates into isolationism—
both in foreign policy and health care
 The debate about how and when to quarantine
health care workers and others coming into the
country from Africa is driven by fear—not
science
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THE POLITICS OF FEAR
 In the not too distant past, newspaper editors
and TV news producers chanted “If it bleeds, it
leads”
 Today, media companies, engaging in fierce
competition for eyes, chant “Fear equals ratings”
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(I am sorry it doesn’t rhyme—but if you come up with a good rhyme, I will
buy you a cup of Starbucks coffee. I thought of “Scary wrongdoers means
more viewers”—but that isn’t really worth a cup of Starbucks coffee.)
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FEAR AND GOVERNING
 The public is so afraid, can a Republican
majority govern?
 What about 2016?
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FEAR AND THE ACA
 Death panels and commissars in your doctor’s
office
 Loss of health care coverage
 A job killer and double-digit premium increases
Aetna’s Chairman and Chief Executive Officer Mark
Bertolini told CNBC that the average person would see, on
average, a 32% premium increase
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Repeal, Repeal the ACA
What is really going to happen?
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THE DEMOGRAPHICS OF THE ACA
 It is probably best to start with the politics and
market demographics of both the Republican
Party and the ACA
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THE DEMOGRAPHICS OF THE
REPUBLICAN PARTY
The Republican base:
1) Is white
2) Earns between $30,000 and $75,000 per year
3) Lives in the suburbs, cities, and towns with
populations less than 50,000 or in rural communities
4) Is married with children
5) Is more likely to work for small employers not
offering health benefits than their “income”
counterparts living in cities with a population over
50,000
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THE DEMOGRAPHICS OF THE ACA
Under the ACA:
 A family with 2 children and an income between
$30,000 and $63,000 is eligible for premium tax
credits and reduced cost sharing
 A family with 3 children and an income between
$40,000 and $75,000 is eligible for premium tax
credits and reduced cost sharing
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If Republicans Win Control of the
Senate
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THREE BUCKETS FULL
Republican staff are filling three policy buckets
 The first bucket is the Republican wish list
 The second bucket is what is “doable”—able to
attract Democratic Senators and still pass the
House
 The third bucket is filled with odds and ends—
technical corrections and nonpartisan
amendments to the ACA
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THE FIRST BUCKET – THE DREAM LIST
 Repeal the ACA
 Eliminate premium support and cost-sharing
reductions
 Replace the current health care benefits system
with Health Savings Accounts (HSAs)
In all likelihood: unpassable
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THE SECOND BUCKET – THE DOABLE
 The second bucket will include amendments to
the ACA and changes to Medicare and Medicaid
that could pass the House and attract sufficient
Democratic votes, the 60 votes necessary to
move a bill in the Senate
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THE SECOND BUCKET
In all likelihood, this list will include:
1) The repeal of the employer mandate to provide
health care coverage
2) Amendments to the blanket prohibition against
denying or limiting coverage based on pre-existing
conditions
3) Changes to limits on “ratings” (particularly age
ratings—moving from 3 to 1 to 5 to 1)
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THE SECOND BUCKET
4) Amendments to the definition of full-time
employees (to a standard greater than 30 hours a
week)
5) Repeal the Medical Device Tax
6) Repeal the IPAB—the Independent Payment
Advisory Board
7) Greater flexibility for State Medicaid programs
8) Repeal the Cadillac Tax
9) Develop “copper” plans
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THE THIRD BUCKET
 Minimize reporting
 Private sector enrollment into Exchange plans
(e.g., insurance agents—not healthcare.gov)
 Modify hospital readmission penalties
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If Democrats Retain Control of the
Senate
Expect more of the same
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LITTLE ENFORCEMENT
Phyllis Borzi, Assistant Secretary for the Department of Labor's
Employee Benefits Security Administration (EBSA), recently said, “Lack
of resources is the biggest problem in enforcement. You have to pick
and choose the activities that you engage in.”
Over the next several years, the Administration will
not strictly enforce the ACA
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Tax Policy
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“MUST DOS”
 Lame Duck
 Extenders
 CR (IRS funding)
 Internet Tax Fairness Act
 114th Congress
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Highway Trust Fund
SCHIP
SGR (“Doc Fix”)
Extenders
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“WANNA DOS”
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Targeted Health Care Provisions (e.g., Medical Device Tax)
Jobs Bills
Anti-Inversion Legislation
Marketplace Fairness Act
Infrastructure Funding
Tax Reform
 Comprehensive/Business/Piecemeal
 Corporate
 International
 Pass-thrus
 Retirement/Benefits
 Tax Exempts
 Energy
 Infrastructure
 Entitlement Reform
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KEY PLAYERS
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White House
Senate
House
Presidential Candidates
Business Stakeholders
Advocacy Groups
Think Tanks
OECD/EU
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THE PLAYBOOK: GOP-CONTROLLED SENATE
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Extenders could include permanent provisions
CR funding shorter-term: impact on IRS funding?
Slim chance of movement on inversions
Focus on jobs and the economy
Significant work on tax reform—hearings, white
papers, options
 Votes on tax reform unlikely unless
Administration leads
 Seeking revenue for offsets
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THE PLAYBOOK: DEMOCRATIC-CONTROLLED SENATE
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Mark-up on miscellany?
Extenders package similar to the EXPIRE Act
Longer-term CR: IRS could fare better
Possible movement on anti-inversion legislation
Focus on income inequality/loophole closers
Significant work on tax reform—hearings, white papers,
options
 Comprehensive tax reform unlikely
 Seeking revenue for offsets
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PROCESS ISSUES
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Reconciliation
Dynamic Scoring
Amendment Process
Regular Order
# of GOP Seats in the House and TYPE of
Republicans Holding those Seats
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TRIPWIRES/UFOS
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Senate Control
Flurry of new inversions/Supersize DeLauro
Funding Battles – deficit/debt limit
One-Offs
Actions by EU/Member States, OECD
Budget
Candidate proposals
Tax Treaties
World Events
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Energy and Environmental Policy
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Impact of Election on Energy Policy
If Republicans take the Senate:
 Lisa Murkowski will chair the Energy & Natural Resources (ENR)
Committee
 Like current chair Landrieu, Murkowski will focus on oil and gas industry
priorities. But, with a Republican majority in the Senate, Murkowski will
face less resistance from her leadership in moving legislation
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Impact of Election on Energy Policy (cont.)
 Key oil and gas issues likely to see action with Murkowski as chair
include:
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Approval of the Keystone XL pipeline
Expedited approvals of export of LNG to non-FTA countries
Lifting of the ban on the export of crude oil
Streamlined permitting processes and fast track energy projects
Accelerated offshore drilling and revenue sharing for coastal producing
states
 Opening the coastal plain of ANWR
 Encouraging efforts to make oil shale and methane hydrates
commercially viable
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Impact of Election on Energy Policy (cont.)
If Republicans take the Senate, ENR will also:
Promote coal:
 Support clean coal development
 Facilitate coal exports
 Work with the GOP leadership (especially McConnell) and the
Environment & Public Works Committee to stop/delay proposed EPA
regulations, such as CO2 reduction and coal ash
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Impact of Election on Energy Policy (cont.)
Focus on following renewable energy issues:
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Define hydropower as a renewable resource
Support energy storage technologies to make solar and wind more
commercially relevant
Technology-neutral standards for clean energy development
Continued support of ARPA-E for advanced clean technologies and fusion
energy
Reform the Renewable Fuel Standard
Limit DOE’s loan guarantee program
Eliminate the Advanced Technology Vehicles Manufacturing program
Support potential Finance Committee efforts to phase out production tax
credit for wind and other renewables
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Impact of Election on Energy Policy (cont.)
Support expanded nuclear power, including:
 New technologies, like small modular reactors
 Resolving nuclear waste storage and disposal issues
 Support NRC licensing review of Yucca Mountain
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Impact of Election on Energy Policy (cont.)
 Upgrade energy delivery infrastructure, including
transmission lines to enhance electricity reliability
 Promote comprehensive energy efficiency, including
efficiency retrofits and integrated efficiency systems
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Impact of Election on Energy Policy (cont.)
If the Democrats retain control of the Senate
And Mary Landrieu survives her re-election:
 ENR will likely promote many of the same oil and gas priorities as
Murkowski, but will have a difficult time advancing legislation, given
the objections of the Senate Democratic leadership and the Obama
Administration
 Landrieu is likely to be less supportive of coal and more focused on
renewable energy support and preserving DOE programs that
promote clean energy
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Impact of Election on Energy Policy (cont.)
Or Mary Landrieu loses:
 Maria Cantwell would likely become the new committee chair
 Cantwell would focus on renewables and clean energy, and not be
as interested in promoting hydrocarbons, like oil, gas, and especially
coal
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Impact of Election on Energy Policy (cont.)
In the House:
The chairmen of the key committees and the GOP leadership team are
likely to remain the same

Energy & Commerce Committee: Fred Upton will still chair

Natural Resources Committee: Rob Bishop will probably chair and continue the
same focus on energy resource development on public lands

Appropriations Committee: Hal Rogers will still chair, and likely partner with
Republican friends in the Senate (like McConnell) in advancing legislative riders to
roll back environmental restrictions on coal development
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Impact of Election on Environmental Policy
If Republicans take the Senate:

Jim Inhofe will chair the Environment & Public Works (EPW)
Committee
 Inhofe has similar policy perspectives as David Vitter, the current ranking
EPW member
 However, Inhofe may get along better with Barbara Boxer, who will stay on
as the senior EPW Democrat

Focus will be on EPA’s proposed regulations
 Climate Change / CO2 mitigation
 New power plants
 Existing power plants
 Waters of the U.S.
 Slow down / De-fund
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Redouble efforts to pass TSCA legislation
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Aggressive oversight over EPA
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Financial Services Policy
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U.S. POLITICAL
AND POLICY LANDSCAPE
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114th Congress:
House Financial Services Committee
Jeb Hensarling (R-TX)
Chairman
Maxine Waters (D-CA)
Ranking Member
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114th Congress:
Senate Banking Committee
Tim Johnson
(D-SD)
Chairman,
113th Congress
Richard Shelby (R-AL)
Sherrod Brown (D-OH)
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Mike Crapo (R-ID)
Ranking Member,
113th Congress
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Executive Branch Officials
?
SEC Chair
Mary Jo
White
CFPB
Director
Richard
Cordray
X
Treasury
Secretary
Jack Lew
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FRB Chair
Janet Yellen
CFTC
Chairman
Tim Massad
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Key Members of FSOC
Treasury Secretary
Jack Lew
SEC Chair
Mary Jo White
FDIC Chairman
Marty Gruenberg
OCC Chairman
Tom Curry
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FRB Chair
Janet Yellen
CFTC Chairman
Tim Massad
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FINANCIAL SERVICES IN THE
POST DODD-FRANK ERA
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Key Areas of Dodd-Frank Reform
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Systemic risk
Bank regulatory structure
Consumer financial protection
Private funds
OTC derivatives
Investor protection
Municipal securities
Risk retention
Credit rating agencies
Executive compensation and corporate governance
Federal insurance regulation
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Major Financial Services Issues
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FSOC and SIFI Designations
Asset Management Review
Derivatives
The Volcker Rule
Qualified Residential Mortgage Rule
Money Market Mutual Fund Reform
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Financial Services Bills that Passed the
House with Bipartisan Support
 Retail Investor Protection Act (H.R. 2374)
 Capital Access for Small Community Financial
Institutions Act of 2014 (H.R. 3584)
 Mortgage Choice Act of 2013 (H.R. 3211)
 Business Risk Mitigation and Price Stabilization
Act of 2013 (H.R. 634)
 Swaps Regulatory Improvement Act (H.R. 992)
 Small Business Mergers, Acquisitions, Sales, and
Brokerage Simplification Act of 2013 (H.R. 2274)
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Housing Finance Reform
 First steps in government-sponsored enterprise
reform process:
 Senate: Corker-Warner, Johnson-Crapo
 Replace GSEs with FDIC-modeled government guarantee
 More robust role for private capital in assuming mortgage
credit risk
 House: PATH Act
 Eliminates GSEs and government guarantee in mortgage
market
 Movement in 114th Congress unlikely without Senate support
 Next steps depend heavily on new Senate
leadership
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2015 Regulatory Agenda
 Harmonization of fiduciary duty rule for
investment advisers and broker-dealers
 Total loss absorption capital and SIFI
“surcharge” bank capital rules
 Executive compensation rules
 Credit rating agency reform?
 New SEC stress testing rules for asset
managers?
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NEXT STEPS:
GLOBAL GOVERNMENT
ENGAGEMENT
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New Leadership in the EU
European Commission
President Jean-Claude
Juncker (S&D)
European Commission
Financial Services
Commissioner Jonathan
Hill (Conservative)
European Parliament
Economic and Monetary
Affairs Committee
Chair Roberto Gualtieri
(S&D)
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Government Relations Strategy
 No geographic barriers exist for financial services
 Regulators compare foreign regulatory schemes and dialogue on
domestic and international financial services regulatory policy
 A coordinated effort is necessary to achieve policy success for
multinationals
 Best strategy is worldwide proactive engagement
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 Captures U.S. and EU
financial services regulation
 Weekly updates on notices,
comment periods, and
agency meetings
 Subscriber access to
dedicated website
 Comprehensive resource
on regulatory developments
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Questions?
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Please join us for our next program:
Election 2014: Its Impact on Federal PolicyMaking in 2015
 Monday, November 3, 2014
 2:00 – 3:00pm EST
 Panelists will discuss changes on key Congressional
committees, the agenda for the 114th Congress and the
impact on the Obama Administration’s policies and
regulatory activities
 Panelists:





Bart Gordon, Former U.S. Representative
Slade Gorton, Former U.S. Senator
James T. Walsh, Former U.S. Representative
Emanuel L. Rouvelas
To register, please visit our Events page at www.klgates.com
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