On Capitol Hill, the Senate is sometimes called the place where House bills go to die. The fate of a Labor Department investment advice rule could hinge on whether Senate Democrats intend to make the upper chamber the graveyard for efforts to repeal the regulation.
Unlike the cumbersome regulatory process required to replace the rule or the vagaries of the courts, a legislative move is the quickest, cleanest route to its demise.
But Senate Democrats are likely to hold together well enough to ensure the rule is modified rather than taken off the books.
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, already
has his guns blazing at the measure, which would require financial advisers to act in the best interests of their clients in retirement accounts.
His bill overhauling the Dodd-Frank financial reform law contains a provision that is essentially a bill written by Rep. Ann Wagner, R-Mo., that would halt the DOL rule until the Securities and Exchange Commission proposes a similar regulation for all retail investment accounts. Yeah, right.
Mr. Hensarling's legislation — or some other measure to kill the DOL rule — likely will sail smoothly through the Republican House. But then it will enter a Senate with a Republican majority that is too slim to repel a Democratic filibuster.
Democrats have at least 48 members in the next Congress. The threshold to get most legislation through the Senate is 60.
It will be nearly impossible for Republicans to peel off eight Democrats. For one thing, Sen. Elizabeth Warren, D-Mass., will likely try to whip her Democratic colleagues into alignment against DOL fiduciary threats.
“We take comfort in that we have several stalwarts on this issue who we believe are willing to go to the wall to support retirement savers,” said Micah Hauptman, financial services counsel at the Consumer Federation of America.
That doesn't mean financial industry lobbyists won't find fertile ground among Senate Democrats.
For one thing, three of them
who voted earlier this year for a resolution to kill the rule — Joe Donnelly of Indiana, Jon Hester of Montana and Heidi Heitkamp of North Dakota — are all up for re-election in states that voted for President-elect Donald Trump. In fact, Democrats have 25 members up in 2018, compared to only eight for the GOP.
In order to protect their seats, Democrats might take a page out of Mr. Trump's playbook by appealing to people who feel left behind by Washington and Wall Street.
“They will see [supporting the rule] as a political winner for their constituents and they're going to try to make early contrasts with the Trump administration on populist grounds,” said Brian Gardner, managing director of Washington policy research at Keefe Bruyette & Woods.
Indeed, the political path through the working class that Mr. Trump took to victory is giving supporters of the rule leverage to try to keep Democrats on board.
“To the extent this election was a shift toward populism, it's a no-brainer to serve constituents who are saving for retirement by supporting this rule as opposed to doing Wall Street's bidding,” Mr. Hauptman said.
Perhaps vulnerable moderate Democrats will persuade their caucus to negotiate with Republicans to change what they see as the most burdensome parts of the rule. But they likely won't be able to get it to acquiesce to a death sentence for the measure.
The tussle over the DOL rule is one more example of why the Senate should always preserve the filibuster. It makes legislative life so much more interesting.
