He's a politician who is passionate about privacy issues and is a tiger when it comes to investors' legal rights: He believes investors should be able to sue accountants and law firms that help corporations commit fraud. And he would bar big banks from expanding into real estate brokerage. If this sounds like your typical liberal Democrat, guess again: It's a Dixie Republican named Richard C. Shelby, Alabama's senior senator and the incoming Senate Banking Committee chairman.
Normally, the business community would be breaking out the Dom Perignon over the return of the banking panel to Republican rule. But since the GOP sweep in the Nov. 5 elections, financial industry lobbyists have been wringing their hands. Over the years, Shelby has been an unpredictable ally whose views sometimes put him at odds with Corporate America. He is a conservative Republican who backs a flat tax, pushes for regulatory relief, and favors curbs on immigration. But he also worries that some banks have accumulated too much market power, gripes that Wall Street firms are getting a free ride on deposit insurance, and would make defendants in securities fraud lawsuits liable for all damages, even if they played a minor role. In short, he's more Main Street than Wall Street.
In substance and style, Shelby, 68, will be a departure from the committee's previous GOP chairman, Texas Senator Phil Gramm. Both are conservative Democrats-turned-Republicans. But while Gramm has a doctrinaire, free-marketer's disdain for regulation, "Shelby comes from the populist strain of the Republican Party that has an equal distrust of big government and big business," says James L. Pitts, executive director of the Financial Services Coordinating Council, an umbrella group of financial trade associations.
Unlike Gramm, the courtly Shelby is tough to pigeonhole. He joins with liberal and consumer groups on privacy. He's leery of overconsolidation and plans hearings to explore whether banks are tying the availability or pricing of credit to investment banking services. "I do not believe that it is good for America for four or five institutions to run the whole country," he says. "It crowds out competition." But Shelby opposes efforts to expand the percentage of loans banks must set aside for low-income housing. And he has largely been silent while other Republicans have pushed to tighten government regulation of mortgage-financing behemoths Fannie Mae and Freddie Mac. "People who expect someone who fits easily into an ideological box will be scratching their head," says ex-New York Republican Representative Rick Lazio, now head of a financial services CEO group.
Being a thorn in the side of powerful interests doesn't seem to bother Shelby, an Alabama steelworker's son who served four House terms before winning a Senate seat in 1986. A former trial lawyer and prosecutor, he hails from a state that has no big financial institutions. What's more, Alabama is among a handful of Southern states friendly to product-injury lawsuits that are the bane of corporations. "You shouldn't be scared of the American system of jurisprudence," Shelby insists. Attorneys like that kind of talk, and over the past five years, lawyers and law firms gave him $538,036, far exceeding the $485,209 he received from securities firms, insurance companies, and commercial banks combined.
Shelby is not tipping his hand on what he'll do as banking chairman. He is likely to renew his quest to force banks to give customers more control over how their personal data are used. "It is going to be a huge fight," says Ed Yingling, chief lobbyist for the American Bankers Assn. Those who know him say he'll strive for consensus. "Richard Shelby is used to being in the courtroom, where you sometimes negotiate a settlement that may not be exactly pure but is the right thing to do for your client," says Senator Robert F. Bennett (R-Utah), soon to be the banking committee's second-ranking Republican. But Shelby has never been one to worry about philosophical purity.
By Amy Borrus in Washington