Waters Seen as Early Front-Runner to Succeed Frank

WASHINGTON — Within minutes of Rep. Barney Frank's surprise announcement that he planned to retire next year, industry insiders and political analysts were focused on who would take his place as lead Democrat on the House Financial Services Committee.

So far, Rep. Maxine Waters, an outspoken African-American liberal from California, appears to be the front runner, due to her position as the next most senior Democrat on the panel and her political ties to fellow Californian Nancy Pelosi.

"Number one, she's the most senior," said former Rep. John LaFalce, who preceded Frank as lead Democrat on the Financial Services panel. "Number two, she is a minority, and I think it would be very difficult not to appoint somebody who is both senior and a minority."

But Waters is no shoo-in, largely because she remains under an ethics investigation. If she does not get the top job, other contenders would include New York Rep. Carolyn Maloney, Illinois Rep. Luis Gutierrez and North Carolina Rep. Melvin Watt.

Waters' potential succession was already raising concerns among the financial services industry. While many bankers criticize Frank for the financial reform law he helped pass last year, he was a pragmatist known for his willingness to work with the industry on key issues to try and avoid unintended consequences.

By contrast, Waters is seen as more ideological, and has publicly criticized Frank for not being liberal enough - a position many bankers would view as ridiculous.

Waters wasted no time on Monday throwing her hat in the ring, releasing a statement that seemed designed both to stake her claim as Frank's successor while also assuaging financial services industry fears about her candidacy.

"As the next most senior member of the committee, the current ranking member on the Capital Markets subcommittee and the former chair of the Housing and Community Opportunity subcommittee, I hope to use my experience to continue and expand his work in the committee," Waters said in a press release, in reference to Frank. "I will continue to champion practical regulations, while making sure they work for consumers and the financial sector, a sector which has the right to be profitable but the obligation to be fair, two concepts which are not mutually exclusive."

Waters' chief obstacle to winning the position is likely to be an ongoing ethics investigation. Near the height of the financial crisis, Waters helped arrange a meeting between executives at OneUnited Bank, a minority-owned bank with which her husband had financial ties, and Treasury Department officials. Treasury later gave the bank $12 million in federal bailout funds.

Waters has repeatedly denied any impropriety, but the House Ethics Committee charged her in June 2010 with violating House rules and the ethics code for government employees.

Her trial was delayed, however, after questions emerged about the conduct of committee staff during the investigation. In July 2011, the committee hired an outside lawyer to investigate the committee's conduct and the case against Waters.

The outside counsel, Washington lawyer Billy Martin, has a contract with the House Ethics Committee until Jan. 2, 2012, but that contract could be extended.

Because Frank will not leave Congress until the end of 2012, Minority Leader Pelosi and other senior House Democratic leaders have an entire year to determine his replacement. Whether the Democrats gain control of the House could factor into the decision.

LaFalce said Waters' biggest challenge will be in reaching out to more moderate and conservative members of the Democratic caucus. But he said she would be hard to beat for the job.

He noted that the Congressional Black Caucus and the Congressional Hispanic Caucus have been zealous in protecting seniority in the House of Representatives.

"If anyone were to challenge Maxine, it would cause resentment within those caucuses to be sure," LaFalce said. "I can't see Nancy not going with Maxine. It would create too many fissures within the Democratic Party in California and the Democratic party nationally."

John Taylor, president and CEO of the National Community Reinvestment Coalition, said that Waters has the credentials for the job, and he expects that she would evolve into the leadership role.

"When you get elected chairman, if you expect people to work with you across the aisle, you've got to build bridges," he said. "Everybody brings an ideology. But when the jobs change, you've got to bring different skill sets to be effective at it."

House Democrats have generally rewarded seniority in determining the top committee jobs, but there is also some recent precedent for shuffling the deck. In 2009, Rep. John Dingell, the most senior member of the House Energy and Commerce Committee, was passed over in favor of Rep. Henry Waxman.

One potential alternative is Maloney, who represents part of Manhattan, and was the House co-sponsor of the 2009 credit-card reform law.

She entered Congress in 1992, two years after Waters, and currently serves as the top Democrat on the subcommittee on financial institutions and consumer credit. She is generally seen as more attuned than Waters to the concerns of the financial-services industry.

One industry source, who asked to remain anonymous, noted that during their time on the committee, Waters has focused on housing and low-income access to the financial system, while Maloney has been a thorn in the side of banks that issue credit cards and debit cards.

Still, the source added that some financial institutions might prefer to work with Maloney, saying: "She's a more predictable quantity than Maxine."

Maloney released a statement Monday that praised Frank while avoiding the question of who will succeed him.

"Barney Frank is an American original: a brilliant Congressman and a trailblazer for equal rights who ably steered the House Financial Services Committee through the worst economic downturn in our lifetimes," Maloney said in the press release.

If House Democrats are looking for other choices, they could turn to Gutierrez, a Hispanic who is the top Democrat on the housing and insurance subcommittee, or Watt, an African American who fought to include anti-predatory lending language in the Dodd-Frank Act.