WASHINGTON — Rep. Randy Neugebauer, R-Texas, is gearing up to play a leading role on the House Financial Services Committee next year — to ensure that regulators do not overstep their bounds while implementing the Dodd-Frank Act and to push for the privatization of the government-sponsored enterprises.
Neugebauer is the panel's vice ranking member, and in that role he has led weekly meetings with the top Republican, Rep. Spencer Bachus, who is the front-runner to be chairman next year, and other leading GOP lawmakers on the panel.
Though Neugebauer's official role next year is unclear, the conservative Texan and former banker is a contender to be a subcommittee chairman, and he wants to focus on regulatory oversight.
"The oversight piece and mortgage finance are probably the two areas that I have been focusing my staff and my attention on," he said in a sit-down interview Monday. "The theme for the 112th Congress in financial services is probably going to be oversight. We just passed this huge new piece of legislation, and now all these agencies and regulators that are impacted are going to be writing rules to implement that, and I'm very concerned."
Though Republicans have not yet chosen the next financial services chairman (Bachus is locked in a contest with Rep. Ed Royce, R-Calif.), Bachus is considering reconstituting the subcommittees to spread out the issues more evenly rather than concentrating the panel's focus on the financial institutions and capital markets subcommittees.
Neugebauer, who is supporting Bachus, said some reshuffling would be appropriate to better address the array of issues that need attention.
"I know that Spencer has got some ideas about maybe changing the mix a little bit, and I think that's a positive thing," he said. "I think that makes sense because there really is a lot of work to be done."
Neugebauer, who was appointed vice ranking member by Bachus in 2007, said that he believes Republicans will afford greater opportunities to lawmakers besides the chairman to weigh in on crucial issues. He said he expects Bachus to be more inclusive, for example, about letting committee members provide input on the panel's agenda by comparison with outgoing committee Chairman Barney Frank, D-Mass.
"One of the things that is different [in] Spencer's style [from] Barney's is that Spencer feels he has a deep bench on the committee and has thoughtful people who bring good ideas and thoughts to the table, and he lets those members take very strong roles, and he doesn't micromanage the process," Neugebauer said. "I think that was an effective tool for him and how we were able to come in with our own financial reform proposal. … Moving forward, I think you'll see the committee operate in that same manner even [with the GOP] in the majority."
Neugebauer came to Congress in 2003 after winning a special election and joined the Financial Services committee two years later. Before becoming a lawmaker, Neugebauer was a businessman and banker. He spent eight years as a banker at the First National Bank of Lubbock where he became a senior executive. He had started out as a real estate loan officer before moving over to the commercial lending side.
In 1983, he started a home building business called Prestige Homes Inc., and in 1987 he started a land development company called the Lubbock Land Co. Inc.
"I've been on both sides of that issue, and I understand from a transactional standpoint how the transaction works both from a consumer and from a lender perspective," he said. "I understand the practices of underwriting and all of this, and so I think it gives me a unique picture that I have looked at it from both sides."
Neugebauer said his banking background makes him particularly sympathetic to arguments that Dodd-Frank is overly burdensome.
"When I sit down with my community bankers I understand how much all this new regulatory mail is going to impact them and particularly the smaller community banks that don't have the big infrastructure for complying with all these new regulations," he said. "So it kind of grieves me to see capital and monies spent that won't really benefit the customer — which is what we all ought to be concerned about — but will probably raise the cost of capital for the borrowers and reduce the profitability of the financial institutions."
The congressman said the root cause of banks' failure to lend more to small businesses is the market uncertainty that has sidelined would-be borrowers.
Eric Sandberg, the president and chief executive of the Texas Bankers Association, said Neugebauer's experience is a crucial asset for the lawmaker.
"He knows what it takes to make a business run, and he knows what it takes for financial services to enable businesses to run," Sandberg said in an interview. "In my opinion, what happened with the Dodd-Frank bill is that it just darn near drove several nails in the coffin for small banks."
Sandberg said he is hoping Neugebauer will help lead the charge to address those concerns.
"We've talked to him about the problems with Dodd-Frank, and we've asked he and other members on the committee from Texas to take a look at it," he said. "We hope there will be changes, especially with the way the consumer bureau is handled, funded and managed."
In particular, Neugebauer would like to revisit the creation of the Consumer Financial Protection Agency by eliminating it, restricting its funding or separating it from the Federal Reserve Board.
Among the 435 House members, Neugebauer stands out. Clearly proud of his Texas roots, he wore cowboy boots with his suit for the interview, and his office is adorned with hunting trophies, including a zebra skin and a buffalo head.
"He's a true Texan, let me tell you that," said Sandberg. "He represents what I would consider to be a rural area. It's a pretty big area because the population base is small. It's still the type of area where, when people shake hands, that's as good as a written contract in many regards, and he's that type of guy."
Neugebauer said he was inspired to run for office when he found the government intruding too often in how he ran his business.
"When I first got into the land development business or the home building business, I spent about 90% of my time trying to sell somebody something," he said. "I realized one day, over time, with more government regulation, that I ended up spending more of my time trying to make sure I was in compliance with this or how I was going to mitigate that. … I realized I'm spending more of my time trying to comply with things the government wants me to do rather than spending my time trying to sell something, and I thought 'that's not right.' "
Married to his high school sweetheart, he said his overarching concern is that the government has expanded its reach too far.
"I began to get concerned that we were moving in a direction that we were limiting the opportunity for our future children and grandchildren," he said.
Examples he cited were Fannie Mae and Freddie Mac. He is working on a bill that would terminate the government-sponsored enterprises and foster the development of a fully private mortgage market.
"I know we had private-label mortgage securitization going on prior to the crisis," he said, "so I'm going off the premise: If we've done it in the past, you are going to have to show me why we can't do it in the future."
To bankers who argue that wiping out a government guarantee altogether would eliminate the traditional 30-year mortgage since it would be too expensive to fund, Neugebauer said he is unconvinced. "I've heard that same argument, but what I don't understand is, back all the way to the '60s and '70s, people were making 30-year mortgages that weren't going through Freddie or Fannie, so why all of [a] sudden [have] the rules changed?"
Neugebauer said that the housing market is too sluggish to put off GSE reform until 2012 when Republicans have a chance to gain control of the Senate and the White House.
"We can't afford to wait until 2012. I think we have to start putting some proposals on the table," he said. "We welcome the administration being at the table with us, … but what I think what we have to do is at some point in time make sure that we are doing everything possible to limit the exposure for the taxpayer, [and by] the same token getting a vibrant housing finance market back working again."
But Neugebauer is one of a handful of prominent GOP committee members who have taken heat recently for their stance on Fannie and Freddie.
A recent Wall Street Journal editorial called Neugebauer, Bachus and Rep. Gary Miller, R-Calif., "guardians" of "the destructive duo" — the GSEs.
In particular, it took aim at Neugebauer for a 2007 amendment he coauthored with Rep. Melissa Bean, D-Ill., that constrained the ability of the GSE regulator to limit their portfolios.
"Mr. Neugebauer, a leading ally of Mr. Bachus, joined with Democrat Melissa Bean of Illinois to offer an amendment on the House floor that gutted the power of Fannie's regulator to limit its risky mortgage portfolios. It passed 383 to 36, with Mr. Bachus voting with the majority, while even Mr. Frank voted 'no' to honor his deal with [former Treasury Secretary Henry] Paulson," the editorial said.
Neugebauer said that his views on regulation have been consistent. He argued that he has always preferred a focus on capital rather than overly prescriptive regulations for regulators.
"We have had a different perspective on Freddie and Fannie," he said. "Not that they didn't need strong regulations — I felt like they needed a stronger regulator. I've always felt like the best way to regulate these entities, and it's the same position that I took during Dodd-Frank, is not giving the regulators all of this prescriptive management control over these entities but really making sure that they have adequate capital."
He said his amendment had directed the GSEs' regulator to ensure that the enterprises have "adequate capital and analyze those businesses based on the kind of business they were in and the risks they were taking."
He added that he voted against the Troubled Asset Relief Program and every other measure that Republicans deemed a government bailout. "I didn't vote for any of those, so that's when people say I'm a 'guardian' of anything, the only thing I was the guardian of is the American taxpayers' money, and I voted against the Freddie and Fannie bailout, against the Tarp, against the stimulus, against the cash for clunkers," he said.
"If it was a bailout, I voted against it."
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