Election results as they affect issues of concern to Financial Corporation

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From a very long newsletter:
Federal

The Bush Administration will view the election results as a clear mandate for a continuation of the President’s policies on both domestic and foreign policy. A lame duck president also enjoys a measure of freedom from individual electoral accountability.

Congressional Outlook

The added GOP strength, will increase prospects for action next year on legislation ranging from asbestos litigation reform to tax legislation and on issues intended to shore-up support for the GOP in 2006 and stave off possible losses that would cause Republicans to lose their majority. We would anticipate tax reform to be at the top of the list. Concern about deficit reduction would probably take a back seat to spending whatever is necessary to retain the majority.

Several committee chairmanships will change with the new Congress in 2005. Senator Arlen Specter (R-PA), who was comfortably re-elected to another term yesterday, will take over the helm of the Senate Judiciary Committee, which has jurisdiction over asbestos litigation reform. Senator Ted Stevens (R-AK) will take over the helm of the Senate Commerce Committee, which shares jurisdiction with the Senate Banking Committee over insurance regulatory reform. Additionally, the Senate Budget Committee and the Committee on Health, Education, Labor and Pensions (HELP) will face transitions in chairmanship.

The leadership changes are expected to be minimal in the House of Representatives; at least those driven by external events.

Legal reform issues

Bill Frist (R-TN) will no longer be negotiating with Daschle over the details of asbestos litigation reform. The two Senate leaders had taken over direct responsibility for the legislative negotiations on the measure to create a trust fund for asbestos claims, but were unable to reach agreement. With Daschle gone, and with potentially a 55 seat majority that makes it harder for Democrats to filibuster legislation, Frist will recommit himself to pushing for asbestos litigation reform and class action reform early in the next Congress.

Tax Issue Outlook

Tax issues do not appear to have been the primary issue on the minds of voters. Even so, proposals for additional tax cuts and tax reform will continue to be advanced, with expected "reform" as to permanence of the tax cuts and benefit limits enacted in 2001; permanent estate tax repeal or reform; savings account proposals; Social Security private accounts; and potentially even broad scale tax reform of the income tax system, all guided by President Bush’s vision of an “ownership society”. The GOP may not be adverse to hidden tax increases, known as revenue offsets, such as tax changes on financial products. Virtually all individual and institutional products offered by the Financial industry are arrayed around the tax code. We will push for tax Incentives to promote a guaranteed stream of income in retirement through lifetime payout annuities, so as to protect the GOP from disaster stories while keeping the funds under institutional control, plus less generous pensions to replace the remaiimg defined benefit plans that have not been terminated and replaced by 401ks, which will be called "comprehensive pension reform", including clarification of the legality of "hybrid" (or cash balance") pension plans.

Financial Services Outlook

The GOP will be hesitant to pursue federal insurance regulatory reforms that weaken the role of the states, and unlikely to pursue an optional federal charter proposal. In the 109th Congress, House Financial Services Committee Chairman Mike Oxley (R-OH) may continue to push for his state-based insurance regulatory reform proposal, which he and Rep. Richard Baker (R-LA) released in draft form earlier this year. It is unclear whether that effort will be overtaken by the current debate over insurance brokerage commissions, and whether the legislation will be changed to reflect the issues raised by various state attorneys general.

Likewise, neither the Senate Banking Committee nor House Financial Services Committees are inclined to focus on that issue at present. However, if further controversies emerge in the coming months, it is possible that Congress may examine issues such as the McCarran Ferguson antitrust exemption for insurers, as well as removing the current law restriction against the Federal Trade Commission examining the insurance industry as two targeted insurance reforms.


The State Update

Eleven states held elections for Governor. Two states with Democratic governors (Missouri and Indiana) turned over to Republicans hands. In Missouri, the incumbent Democrat was defeated in the primary, and the general election pitted Claire McCaskill, the Democratic state auditor, against Matt Blunt, the Republican secretary of state. In Indiana, former White House budget director Mitch Daniels beat acting Governor Joe Kernan, who took over last year following the death of Governor Frank O’Bannon. On the other side of the ledger, governships changed from Republican to Democratic in New Hampshire and Montana. In West Virginia, Democratic Secretary of State Joe Manchin will succeed Democrat Bob Wise. The gubernatorial race in Washington remains too close to call.

Most state legislative races were tilted heavily in favor of incumbents, with few surprises. Republicans did assume control of the House of Representatives in Georgia for the first time since Reconstruction, and Democrats assumed control (by at least 4 seats) of the House in North Carolina.