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Bankers' nightmare? Think American bankers are thrilled with the rise of Richard Shelby as the new chair of the U.S. Senate Banking Committee? Think again. Long-time Washington journalist Robert Novak, who interviewed the Republican legislator and past supporter of consumer privacy rights, puts things in perspective

International Economy, The, Wntr, 2003 by Robert Novak

The Senate Committee on Banking, Housing, and Urban Affairs, one of the most important Congressional committees dealing with economic policy, is about to encounter its fourth chairman in five years. Each is a distinctive type.

Republican Alfonse D'Amato of New York, called "Senator Pothole" because of his affection for public works, was a devoted friend of the banking industry and generally a conservative who nevertheless drifted leftward in an unsuccessful effort to avoid defeat for re-election in 1998. His successor, Republican Phil Gramm of Texas, was a doctrinaire free-market conservative and de-regulator. When Democrats took control of the Senate in May, 2001, Gramm was replaced by Democrat Paul Sarbanes of Maryland, an archetypal big-government, pro-regulation liberal. With Republican recapture of the Senate in the 2002 elections, Sarbanes must be replaced by a Republican--but not Gramm, who is retiring from public life.

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The new Republican chairman, 68-year-old Richard C. Shelby of Alabama, is less easily classified. The son of a Birmingham steelworker, he earned a law degree from the University of Alabama in 1963 and stayed in Tuscaloosa to practice law. He became active in Alabama Democratic politics during the George Wallace era, was elected to the State Senate in 1970, and in 1978 at age 44, won election to the U.S. House of Representatives. In 1986, he unseated Republican Senator Jeremiah Denton, who as a U.S. Navy Admiral was the highest-ranking American P.O.W. during the Vietnam War.

Shelby ran against Denton from the left, attacking him for voting to cut Social Security benefits and owning two Mercedes autos. Once in the Senate, Shelby settled into the small and rapidly disappearing niche of conservative southern Democrats. In 1993, he attracted his first national attention by opposing newly inaugurated President Bill Clinton's tax increase. The White House declared Shelby persona non grata and sought to make a public example of what happens to a Democrat who opposes Clinton.

On the day after the Republicans won a Senate majority in the 1994 elections, Shelby crossed the aisle and became a Republican.

Shelby has been a member of the Banking Committee for sixteen years, from his first day in the Senate, but this has not been his first priority. For the last eight years, he has been a member of the Intelligence Committee (nearly all of this time as chairman or vice chairman) and has concentrated on his work there. He has not muted his criticism of the Central Intelligence Agency and its leadership, repeatedly calling for the replacement of George Tenet as director. Membership on the Intelligence Committee is rotated, and Shelby rotates off the committee in January.

Shelby's voting record was conservative when he was a Democrat and grew more conservative still as Republican. His ratings for 2001, the most recent year available, are 100 percent conservative (measured by the American Conservative Union) and 5 percent liberal (measured by the Americans for Democratic Action).

Nevertheless, bankers did not celebrate when the November 5 election returns indicated that Shelby would be replacing Sarbanes. The industry's lobbyists call him "undependable" and "erratic." Their real objection is Shelby's past support of consumer privacy rights against financial institutions who market the names of their depositors.

Immediately after the mid-term voting, banking lobbyists spread word that Shelby's Banking Committee seniority dated from his Democratic days and he should not become chairman based on Republican seniority alone. They suggested that the next Republican in line--Senator Robert Bennett of Utah, a conservative considered "dependable" by the banking industry--might be bumped up to get the chairmanship. That was just a trial balloon, and it crashed. Shelby is unopposed as chairman.

Chairman Shelby must deal with these questions: Will he strengthen, weaken, or leave alone the Sarbanes-Oxley Act? How can investor confidence be restored? What is his analysis of the economy? What are his views of bankers, both international and U.S.? How does he rate the performances of the International Monetary Fund and the Federal Reserve Board?

During the recent post-election lame-duck session of Congress, Senator Shelby left the Senate floor to sit down with me in his Senate Hart Office Building quarters. Tall and immaculately groomed as always, he responded to my questions in his soft Alabama drawl with candid, sometimes surprising replies.

NOVAK: Senator, how would you say that your chairmanship will be different from that of Senator Sarbanes?

SHELBY: Well, I think it will be different in several ways. Senator Sarbanes is a Democrat, and he's a lot more liberal than I am. I believe that we first ought to do no harm as far as looking at the markets--including capital markets. I would want to make sure that no one else in the market did harm to the rest of the market. I will probably be fairly active in oversight because I think if we pass laws and forget them and we basically ignore the regulations that flow from those legislative acts, that's irresponsible on our part.

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International Economy, The, Wntr, 2003 by Robert Novak

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