October 25, 2024 - updated October 28, 2024. The following is a reissue of an article written for members of the Business Loans Coalition (“BLC”), LSTA’s grassroots advocacy affiliate. If you would like to see more articles like this, please sign up here.

While most eyes are on the presidential election, the LSTA is also closely following three Congressional elections that could be consequential for the corporate credit markets, as well as the financial services industry more generally.  The three races could also influence which party controls the House and Senate.  Senators Sherrod Brown (D. OH) and John Tester (D. MT), as members of the Senate Banking Committee, and Congressman Zach Nunn (R. IA), as a member of the House Financial Services Committee (“HFSC”), hold significant influence in shaping policy and legislation, and are in jeopardy of losing their seats in the upcoming Congressional races.  We provide a general update on the status of the races two weeks before election day, and explain why members of the Business Loans Coalition (“BLC”) and the LSTA should pay attention to the outcome of these contests.

What are the roles of the Senate Banking Committee and HFSC?

Both committees have initial jurisdiction over any legislation that impacts banking, securities and financial services generally.  They also have supervisory jurisdiction over federal regulators of financial services, such as the banking agencies, the Federal Reserve and the Securities and Exchange Commission.  Both committees routinely hold hearings on issues of importance to the credit markets, such as systemic risk, as well as with the heads of the various federal financial services regulators.

Sherrod Brown

Senator Brown is the Chairman of the Senate Banking Committee and in that capacity sets and controls the Committee’s priorities and agenda.  He is running for his fourth term and facing businessman Bernie Moreno in the most expensive Senate election campaign in history. According to recent polling, the race is deadlocked, with either candidate having an equal chance of prevailing.  An important variable is how the presidential voting could impact this race, with former President Trump polling about 8 points higher than Vice President Harris in Ohio.  If those numbers hold, it may be challenging for Senator Brown to retain his seat.  Given the current makeup of the Senate (51 Senators currently caucus with the Democrats to 49 for the Republicans), control of the Senate could ride on who wins this race.

John Tester

Senator Tester is a member of the Senate Banking Committee Subcommittee on Securities, Insurance and Investment and is also a member of the critical Senate Appropriations Committee.  He is seeking his fourth term and facing Tim Sheehy, a former Navy SEAL and successful businessman.  Sheehy currently leads in the polling by a margin of about 8 points, in a state where Trump leads Harris by a whopping 17 points.  The Cook Political Report recently changed its rating of this race from “toss-up” to “leans Republican”.  While Tester has long demonstrated an ability to win races in this deeply red state, prevailing over Sheehy in 2024 may be a bridge too far given the state of the presidential election.

Zach Nunn

Congressman Zach Nunn is a first term member of the House and sits on the HFSC Subcommittee on Capital Markets.  He has been unusually active as a first-term member and a strong supporter of the corporate loan market and pushing back on the SEC’s aggressive agenda.  Before joining Congress, Nunn spent almost two decades in the U.S. Air Force as an airborne intelligence officer.  His opponent is Lanon Baccam, a U.S. Army National Guard veteran and public service worker.  This race has attracted national attention and significant amounts of money because it is one of a small number of House races where an incumbent is in danger and, given the very small majority currently held by Republicans could influence control of the House. The Cook Political Report rates the contest as a “toss-up”.  Although current polling has Trump leading Harris by about 7 points, it is uncertain whether the presidential vote will significantly impact this local race.

Conclusion

In normal circumstances, these three close races involving key members of committees that supervise financial services markets would be of vital interest to market participants.  This year, these races may help determine which party wields control of the House and Senate in the next Congress. Considering their significance, we will follow these races closely over the course of the next two weeks.