WASHINGTON — For Eric Hovde, a bank is like a gas station.
"We are the entities that provided the liquidity and cash to the economy," he told American Banker in an interview. "Like a gas station, if banks aren't operating well, the traffic on the road is going to slow down. If prices are too high, traffic is going to slow down."
Hovde is the CEO and chairman of Sunwest Bank, and he's running —
He's closer than ever to winning. While he started well behind incumbent Sen. Tammy Baldwin, D-Wis. — who is seeking a third term — recent polls show the race tightening with less than a month to go until Election Day.
Baldwin still has the edge, but it's possible that in one of the most closely watched races in the country, Republicans could flip the seat Red for the first time since Joseph McCarthy last won it in 1952.
Like many Republican candidates for seats throughout the country, Hovde is making his vision on the economy a central part of his pitch to voters. And his role as a banker, Hovde said, gives him a level of financial savvy that he hopes Republican party leaders would tap should he come to Washington D.C. as an elected official.
"I understand how our financialized and globalized economy works, and I've developed a knowledge base not just of the banking system, but of the economy and our financial markets," he said. "The banker understands it: We're choking our economy."
The banking pitch
Hovde said that he hopes to bring "financial sophistication" to the U.S. Senate, specifically around issues like the debt crisis.
"That's a big reason I got into this race," he said. "We're bankrupting our country, we're putting our financial system at risk."
He would also make deregulation a priority, he said.
While Wisconsin doesn't traditionally have a seat on the Senate Banking Committee, it's possible that Hovde would get a seat due to his experience in the industry. That would make him a powerful voice on banking issues on Capitol Hill.
"I've spent most of my career around the banking industry, turning around dozens of banks," he said. "I've seen over 30 years the amount of resources, the amount of people and time just to comply with regulations, it's gone up exponentially."
That kind of expertise, Hovde said, would come in handy during times when the banking industry is at the forefront of the news of the day. For example, when Silicon Valley Bank failed, Hovde said that his experience could have been helpful in understanding the extent to which the bank's management didn't adequately address interest rate risk, and the shortcomings of the regulators that were meant to oversee those risks.
"I would have known how miserably they failed," he said. "Ultimately, it's on the management and board, but it's also a complete failure by the regulators."
Hovde didn't pledge any specific regulation rollbacks, but cited the volume of anti-money laundering reporting and changes to the Community Reinvestment Act as areas where regulations might be burdensome to banks.
"It's never just one regulation," he said. "It's the enormous amount and the complexity of regulations across the system and at all levels."
He also said that he has "problems with aspects of Dodd-Frank."
"It puts community and regional banks at a competitive disadvantage, he said. "I'd want to level the playing field for the banking industry."
For Wisconsin bankers themselves, issues like deregulation are top of mind.
Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association, said that the Consumer Financial Protection Bureau's small business data collection lending rule is something bankers in the state would like to see Hovde push back on in Washington.
"We've seen the pendulum swing too far in the direction of overregulation," she said. "Really just extreme regulations."
Marijuana banking is also a top issue for Wisconsin bankers, she said.
"Wisconsin happens to be a state that does not allow any kind of legalization of marijuana. However, all our border states do — and banks, of course, cross state lines in today's world," Oswald Poels said. "So being able to safely bank without fear of liability businesses that have that are legal in their respective states for cannabis, dispensaries and other related industries would be another issue that we'd want to work with him on as well."
The politics of it all
Hovde still faces an uphill battle and a long few weeks until Election Day.
Baldwin is a popular incumbent, and tends to do the best of any Democrats in Wisconsin, said Michael Wagner, a professor at the University of Wisconsin-Madison who focuses on political communication throughout the state.
"She has an advantage that's built in, largely because she's more popular than most Democrats in the rural parts of the state," he said.
Still, Hovde is doing better than Baldwin's last opponent, and is spending a lot of his own money to be on the air and compete with her in advertising.
Baldwin has also historically relied on people splitting their ticket when they vote.
"But as partisan politics becomes more acrimonious in the state, there are fewer and fewer people who split their ticket," Wagner said. "She has the advantage, but part of her party's fear is that she can't take that to the bank."
Hovde has also come up against some political challenges related to his position as a banker. Campaign ads have targeted his residency, pointing out that he owns a home and spends time in California, where Sunwest used to be headquartered. (The institution is now based in Utah).
The Democratic party in the state has also questioned the ownership of his bank, asking whether that presents a conflict of interest should he receive confidential briefings from regulators, or hold oversight or confirmation power over them in his potential role on the Senate Banking Committee.
"Hovde is a walking conflict of interest who the people of Wisconsin cannot trust to work for them and only them," said Arik Wolk, a spokesperson for the Democratic Party of Wisconsin, in a statement.
Hovde said that he would step down in his day-to-day roles at Sunwest, but wouldn't commit beyond that.
"I made it very clear that when I win this U.S. Senate seat, I'm going to step away from the bank," he said. "As it pertains to selling my bank, no I don't think I would sell the bank."
But he would explore options such as holding it in a trust.
"That's an expensive process to go through," he said. "It would be putting the cart before the horse to engage with that prior to being successfully elected."
This has been a problem for Hovde's campaign, as has the perception that Hovde is a "California banker."
"He's already being painted with the brush of someone who doesn't mind a conflict of interest," Wagner said.
Even so, that brush may not be enough to stop him from emerging victorious on election day.
"This is the state with historically high voter turnout in an election where both sides are very energized," Wagner said. "Things can happen outside of what we expect in the polling, and he's making it more of a race than we might have thought."
