Menendez scandal may stymie flood insurance, other Senate Banking business

Senator Bob Menendez, D-N.J., arrives in the capitol with Senate Banking Committee ranking member Tim Scott, R-S.C. Menendez’s indictment on federal bribery charges may complicate committee efforts to pass a standalone flood insurance bill in this Congress, but other legislative priorities will likely be unaffected.

Bloomberg News

WASHINGTON — The indictment of Sen. Bob Menendez, D-N.J., is an unwelcome wrinkle in the debate to renew flood insurance, and could hold up the work of the Senate Banking Committee in other areas, experts said. 

Menendez, who was indicted on charges that he took bribes from New Jersey businessmen, including a former community bank executive, remains the No. 3 Democratic lawmaker on the Senate Banking Committee. He has, per Senate Democratic rules, stepped down as chairman of the Foreign Relations Committee. 

Several Democratic senators have called for him to resign from the Senate, including Senate Banking Committee Chairman Sherrod Brown, D-Ohio, who said that Menendez has “broken the public trust.” 

Sen. John Fetterman, D-Pa., also on the Senate Banking Committee, was the first senator to call for the resignation, saying that Menendez “cannot continue to wield influence over national policy, especially given the serious and specific nature of the allegations.” Along with Brown and Fetterman, the Democratic lawmakers on the Senate Banking Committee calling for Menendez to resign include Jon Tester of Montana, Elizabeth Warren of Massachusetts and Raphael Warnock of Georgia. 

A central part of the Menendez indictment is his relationship with a former banker, Fred Daibes, who at the time he allegedly made gifts to Menendez faced federal bank fraud charges that could have come with a decade-long prison sentence. Daibes founded and was formerly CEO and chairman of the $414 million-asset Mariner’s Bank in Edgewater, New Jersey, which was bought by nearby Spencer Savings Bank in 2021 for an undisclosed cash payout.

To remove Menendez from the Senate Banking Committee, he would likely need to resign from Congress entirely. Senate committee assignments are fixed, and require unanimous consent to change. 

“Senator Menendez continuing to stay in the Senate but being functionally crippled could complicate Chairman Brown’s ability to move legislation and nominations through the committee,” said Aaron Klein, a senior fellow in Economic Studies at the Brookings Institution. 

One of the major concerns with Menendez’s continued presence in the Senate is a pending flood insurance program, whose funding runs out Sept. 30. The extension for that program is tied to the spending bill, which looks increasingly stuck and likely to lead to a government shutdown next week.

“The problem is the extension is tied to the spending bill, which is stuck,” said Jaret Seiberg, an analyst at TD Cowen Washington Research Group, in a note. “Push now is for separate legislation, though there is no clear path forward for it.” 

Menendez was meant to chair a subcommittee hearing Wednesday on “The State of Flood Insurance in America” in his capacity of chairman of the subcommittee on Securities, Insurance, and Investment. That hearing, after the indictment was made public, was postponed indefinitely. 

“Flood insurance is a complicated issue politically and substantively,” Klein said. “Geography of key members plays a major role. New Jersey is a coastal state, recently impacted by [Superstorm] Sandy. Passing legislation, whether reforming the program or keeping it going as is, requires time, effort, and political skill. Having a key member impaired will hurt the process.” 

At least on cannabis banking, experts don’t anticipate Menendez’s legal troubles to play a significant role. Don Murphy, a longtime cannabis lobbyist, said that he expects Menendez to vote for the SAFER Banking Act, which is up for a markup in the Senate Banking Committee on Wednesday, by proxy. Menendez is a co-sponsor of the legislation, but the bill already has a large number of Democratic and Republican co-sponsors and support in the Senate, he said. 

Even if Menendez were to step down, Murphy said that it’s unlikely that the New Jersey governor would appoint a replacement senator that disagrees with Menendez’s stance on marijuana legalization and banking.