As predicted by most polls and political pundits, the midterm elections have delivered a Republican majority to the U.S. House of Representatives and have tightened the margin in the U.S. Senate. Given this composition change, will Republicans seek to repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Obama administration's landmark financial services reform law? Notwithstanding possible targeted efforts to repeal provisions of the law, wholesale gutting is unlikely. Rather, the new Republican majority may seek to limit the law's application by exercising its Congressional oversight authority or limiting funding. In the event repeal efforts are successful in Congress, targeted or wholesale, President Obama would likely exercise his veto authority, ultimately blocking repeal.

Who Are the Key Players?

Passage of Dodd-Frank is due in large part to its namesake, Chairman of the House Financial Services Committee Barney Frank (D-MA). With the change in majority, it is widely believed that the Committee's Ranking Member Spencer Bachus (R-AL) will become Chairman. A vocal opponent of Dodd-Frank who voted against the bill, Bachus has focused his attention on the Consumer Financial Protection Bureau and the Obama administration's pick to head the agency, Harvard's Elizabeth Warren. However, the day after the election, Representative Ed Royce (R-CA) announced that he will challenge Bachus for the Chairmanship. Royce, also an opponent of Dodd-Frank, has historically focused on the overhaul of Fannie Mae and Freddie Mac. Minority Leader John Boehner (R-OH), likely Majority Leader, suggested a moratorium on implementation of Dodd-Frank immediately after passage and has called for the law's repeal.

Although the Democrats held the majority in the Senate, Chairman of the Banking Committee Chris Dodd (D-CT) is retiring, leaving the Chairmanship vacant. Senator Tim Johnson (D-SD), widely viewed as the Committee's most industry-friendly Democrat due to the numerous lenders and credit card companies based in his state, is first in line to replace Dodd and would likely push the Committee to the right of Dodd. If he ascends to Chairman, most expect Johnson to take a slower, more cautious approach to changing Dodd-Frank, as he has stated his intention to let the regulators promulgate rules before fine-tuning them. Other candidates for Chairmanship could include Senator Chuck Schumer (D-NY), now freed from engaging in a separate battle for Majority Leader, and Senator Jack Reed (D-RI), who is next in line after Johnson in terms of seniority on the Committee.

Why Are the Key Players Important?

Contained within the text of the massive Dodd-Frank bill are requirements for various agencies to complete what is reported as approximately 240 rulemakings and 60 studies. This staggering amount of work that could eventually set our nation on the track toward economic recovery or wreak havoc on an already ailing system demands two things: resources and oversight. Congress, of course, has a hand in both through appropriations and its oversight authorities. How these powers are used depends on who is at the helm, making the composition of Congress a critical element in the way Dodd-Frank is implemented, modified and funded.

In order to fulfill the requirements of the new law, the Securities and Exchange Commission and the Commodity Futures Trading Commission are relying on increased budgets to hire an estimated 800 and 200 new staff members, respectively. The battle over appropriations will ensue when Congress returns after the midterms, but passage of the bills could be delayed again. Given that the Republicans will control the House in 2011, the funding fight could become even more contentious. See Appropriations.

In addition to appropriations, look for Congress to exercise its oversight authority, calling in regulators to take them to task over implementation of Dodd-Frank. Hot topics could include: the "orderly liquidation" provision, the Volcker rule, the Consumer Financial Protection Bureau, legal liability for credit rating agencies, and reform of the government sponsored enterprises—the latter of which is a key priority of Representative Scott Garrett (R-NJ), the likely new Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.