In the House, the Republicans picked at least six seats and now control the House by a minimum of 227-206 (with one race still to be declared and there is one Independent). This was the first election in the House since the 2000 redistricting maps were drawn and redistricting clearly was a factor in this election. Both Republicans and Democrats struck deals in virtually all states over the past two years to draft redistricting maps that would help incumbents, regardless of party. As a result only 10 percent of all of the 435 House seats were truly competitive forcing both parties to spend massive amounts of money to sway a relatively small number of voters.

It appears this incumbent protection strategy helped the Republicans more—especially in the South and the West—which are the areas of the country's most prolific growth. All of these districts have become increasingly dominated by Republican Party registration and the turnout this week demonstrated that.

Exit polls seemed to indicate that voters still had memories of the September 11, 2001 terrorist attacks on their minds, as well as possible military action in Iraq. Despite lackluster economic indicators, President Bush has remained one of the most consistently popular presidents of modern times. Republican candidates followed the President's lead by focusing on issues like fighting terrorism and confronting Saddam Hussein and it paid off for them. In nearly every region of the country homeland security and issues surrounding terrorism were the leading factors in the way in which voters cast their ballots.

The Senate
The Senate now stands at 51 Republican seats, 47 Democratic seats, one Independent, and one still yet to be decided seat in Louisiana. Although there remains a possibility that a recount will be held in South Dakota, Republicans will control the Senate when the 108th Congress begins in January. Senator Trent Lott (R-MS) will reclaim the office of Majority Leader and it appears that Senator Tom Daschle (D-SD) will be able to hold onto his leadership position within the Democratic caucus.

Congress is scheduled to return to Washington for a lame duck session in mid-November. It will take 14 days for Missouri to certify Jim Talent, a Republican who beat Senator Jean Carnahan (MO) and no one is certain how Dean Barkly, Governor Jesse Ventura's interim replacement for Senator Paul Wellstone, will organize until Republican Norm Coleman is seated in January.

The House
One of the uncertainties that now exist will be with the leadership of the Democratic Caucus in the House. The current Minority Leader, Congressman Richard Gephardt (D-MO), has decided not to seek reelection as Minority Leader from within his caucus. The logical choice to succeed him would be the current Minority Whip,Congresswoman Nancy Pelosi (D-CA). Pelosi is considered much more liberal than Gephardt and generally much less likely to compromise with the Republican House leadership. Her candidacy is being challenged by one other member of the caucus—Harold Ford of Tennessee. As a member of both the Congressional Black Caucus and the New Democratic Network (NDN), Ford will force some members who had previously pledged their support to Pelosi or Frost to reconsider their position. The NDN represents approximately 60 moderate Democrats who are more business-oriented than the remainder of the Democratic Caucus. While most observers believe that Congresswoman Pelosi will most likely win the vote next Thursday, a voting block of the Black Caucus with the NDN (and possible Democratic Blue Dogs) could make this election very interesting.

The Committees
The most significant change for NACM will be with the Senate Judiciary Committee. Senator Orrin Hatch (R-UT) will become the new chair of the Senate Judiciary Committee with Senator Patrick Leahy (D-VT) now the ranking member. Although the Republicans are now in control of the Senate, it still may be difficult to move critical pieces of legislation like bankruptcy reform without compromise on some provisions. For example, if the bankruptcy bill is not considered by the lame duck Congress, it will return to the Senate Judiciary Committee at the beginning of next session for re-introduction. Should that happen, we can anticipate that Senator Schumer will again insert his abortion clinic language and it would require 60 votes to stop him from filibustering the bill if his provision is not adopted. Similarly, it will remain difficult for judicial nominees to secure the 60 votes necessary to have their nominations considered by the full Senate. On the other hand, it would now require only 9 Democratic votes to team with the Republican voting block to enact cloture and stop any filibuster.

The other consideration in the Senate is the movement of Senator Richard Shelby (R-AL) to the chairmanship of the Senate Banking Committee. Senator Shelby is known for his independence in virtually all policy areas and the range of issues that will be considered by the Banking Committee in the next Congress is extremely broad. We anticipate that we will have increasingly more activity before this committee as issues such as electronic fund transfers, accounting standards modifications and follow up to financial modernization are all considered.

In the House, we will have our work cut off for us since Congressman George Gekas (R-PA), the principal champion of the bankruptcy bill on that side of the Capitol, was defeated in his run for re-election. As a consequence, it is unclear who will assume the chair of the House Judiciary Subcommittee on Commercial and Administrative Law. There are very junior members of the full committee who sit on the committee but most observers believe that a senior member of the full committee will move to the subcommittee and assume control. It is this subcommittee that has jurisdiction over a range of vital issues, including bankruptcy and intellectual property rights.

The Lame Duck Session
While there have been mixed messages regarding the scope of issues and legislation that will be addressed during the lame duck session, it is our belief that the session will be short and non-controversial. Senate Majority Leader Trent Lott has indicated that he would prefer to move only the appropriations bills remaining to be resolved—perhaps as a "continuing resolution". While there are several pieces of legislation that have attracted a great deal of interest (e.g., the energy bill, bankruptcy, homeland security, etc.), it is our sense that the Majority Leader would like to return in January with a new majority and a clean slate. We will have a better idea about this agenda by the end of next week.

November 25, 2002

Government Affairs Update

Last week, the Senate passed legislation that
would extend the application of Chapter 12, family farmer
bankruptcy protection, for an additional six months. The
six month period - and Chapter 12 protections - will now
end on June 30, 2003. The bill has previously been approved
by the House and the measure will now be sent to the
President for his signature.

There was language in the omnibus bankruptcy bill to make
the Chapter 12 provisions permanent. However, House Judiciary
Chairman, Jim Sensenbrenner (R-WI), who headed the House
conference on the bill, resisted efforts to move the Chapter 12
bill separately. Chairman Sensenbrenner introduced the temporary
renewal last September as a means of keeping pressure on the
conferees to complete the omnibus bill. Obviously, that strategy
met with limited success.

It is expected that the omnibus bill will be re-introduced early
next year. It is unclear if Senator Schumer will re-introduce his
abortion clinic violence language to the bill when it is re-introduced.