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Battle to Replace Barney Frank on Financial Services Could Be Contentious

The retirement of Rep. Barney Frank (D-Mass.) has put in motion a potentially brutal fight for the top Democratic slot on the Financial Services Committee, raising sensitive issues of race, seniority and ties to a vilified financial sector.

Allies of Rep. Maxine Waters (D-Calif.), a veteran member of the Congressional Black Caucus, are vowing “Armageddon” if her seniority does not land her the top slot. She is next in line after Frank on the panel but faces a potential challenge from Rep. Carolyn Maloney (N.Y.).

Waters made waves this year when she publicly criticized President Barack Obama, and she faces the possibility of an ethics trial next year.

Maloney is next in seniority after Waters. Representing the east side of Manhattan and western Queens, Maloney played a key role in addressing the financial crisis of 2008.

After the 2010 elections, Democrats passed over Maloney for the ranking member position on the Oversight and Government Reform Committee when Rep. Edolphus Towns (N.Y.) stepped down as ranking member. She was next in line in seniority.

Rep. Elijah Cummings (Md.), a member of the CBC with Towns, was picked over Maloney after a tense battle. The race split the CBC, and Towns eventually sided with Maloney.

The episode could hand Maloney an argument against adhering to seniority in this case because she was bypassed before.

Waters’ allies are confident she will prevail and are casting Maloney as too tied to Wall Street.

“This has the potential to be a real test of the values of the Democratic Party, whether you’re going to go with someone who’s consumer-oriented … or someone who has the interests of the banks,” an aide to a CBC member said. This same source predicted “Armageddon” if Waters was passed over.

CBC Chairman Emanuel Cleaver (D-Mo.), a member of the Financial Services panel, called speculation that Waters would be passed over “irrelevant” and said he expects her to secure full support from the CBC and Democrats on the committee.

“Make no mistake, she is a tough sister. But she also knows legislation and figuring out what’s best for the unprotected public,” Cleaver said.

Waters’ critics, however, ask in blunt terms whether she is capable of doing the job.

“If anything hurts her, it’s that people think she’s wacky when it comes to this stuff,” a Democratic lobbyist said. “The fine details elude her. … Could you envision a Dodd-Waters [financial reform] bill? A lot of people think probably not.”

“I resent any attempt by the financial services industry to prejudge Maxine Waters with no legitimate reason. I think that’s stupid,” Cleaver said. “They can’t say, ‘Well she doesn’t know the issues.’ They can’t say that she’s not going to put the time into the committee.”

During consideration of the Dodd-Frank financial reform bill, Waters banded with a group of CBC members to force the inclusion of $4 billion to help prevent home mortgage foreclosures, burnishing her consumer bona fides.

Waters’ ethics questions are another drag on her bid. She was hit by the Ethics Committee last year with three charges related to her actions on the Financial Services panel, including whether she arranged meetings with the Treasury Department on behalf of a bank in which her husband had been a director and owned stock.

A trial was scheduled but then delayed in light of new information.

Eventually, an outside counsel, Billy Martin, was hired to decide whether the case against Waters should proceed. Martin’s report is due Jan. 2.

“Waters has too many ethical problems to get it; this might get nasty,” a former Democratic House aide said.

Maloney also has issues. In 2008, she helped craft the Troubled Asset Relief Program, which remains deeply unpopular. She has fought for strict regulations on the credit card industry, which has made her few friends in that field.

Both women are close to House Minority Leader Nancy Pelosi (D-Calif.). They are on the Democratic Steering and Policy Committee, and Waters also is a member of the Democratic whip team.

“Maxine Waters and Nancy Pelosi are homegirls,” Cleaver said.

Beside serving as top Democrat on the committee, Frank leaves large shoes to fill for the remaining committee members, Democrats said.

“Looking at the Democratic committee roster, it’s an intellectually thin bench,” a second Democratic lobbyist said.

After Maloney in Democratic seniority are Reps. Luis Gutierrez (Ill.), Nydia Velázquez (N.Y.) and Mel Watt (N.C.).

One important question for those who work on financial services policy is whether Frank’s well-regarded staffers stay on to work for the next ranking member.

Waters praised Frank in a statement and said, “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.”

Maloney’s statement did not address whether she will make a bid for the ranking member slot.

She hailed Frank as “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.”

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