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The writer is an FT contributing editor and executive director of American Compass
In the US House of Representatives, when Republicans are in the majority, the chair of the House financial services committee is among the most coveted. The HFSC’s arcane yet vital task of regulating Wall Street makes political controversy infrequent and fundraising a breeze.
It’s a role Congressman Patrick McHenry relished until recently. But, still in his first year as chair, McHenry has abruptly announced his retirement from Congress, which Fox News greeted last week with the caption, “Lame Duck Congressman’s Shameful Last Quack”.
The quack in question is McHenry’s steadfast opposition to bipartisan legislation that would necessitate US entities to notify the Treasury Department before investing in sensitive technologies in China. Traditionally, such opposition would have ended the matter. When a Republican committee chair says no to a bill in his or her jurisdiction, the GOP drops it. When the bill is one seeking to burden Wall Street, a Republican HFSC chair could typically count on his colleagues welcoming his obstruction.
So McHenry seems not to have made much effort preparing a plausible defence of his position. “If we oppose China’s state-run economy, we want more private investment — not less,” he wrote to Treasury secretary Janet Yellen. “And if we are truly concerned by China’s technology companies, we want as many Americans as possible steering them, spreading western standards, and complying with US laws.”
The argument seems outlandish, implying US investment in China undermines rather than reinforces a Chinese Communist party that already exerts tight control on capital flows and the companies receiving them. In fact, any investment the CCP does not want, it can block, or expropriate.
McHenry’s is the reasoning of someone who thought he didn’t have to give a reason. But the challenge posed by China has wreaked havoc with the market fundamentalism that once defined Republican orthodoxy on trade and finance. Open markets may function well among liberal democracies. Investment in a non-market economy dominated by a Communist party striving to overtake the US is a different matter.
In November, a coalition of prominent conservative organisations released an open letter to House and Senate leadership emphasising the importance of including outward investment limits in the coming year’s National Defense Authorization Act.
“Congress works for the American people, not Wall Street,” they wrote. The uprising grew with a bipartisan, bicameral letter four days later, co-signed by the chairs and members of the House select committee on the CCP and foreign affairs committee, and more than three dozen other members of Congress.
The end result has been a pyrrhic McHenry victory. At the beginning of December, Speaker of the House Mike Johnson sided with him on procedural grounds. But he dropped McHenry’s pet cryptocurrency currency legislation as well, and assigned him to work with the China hawks on an outward bound investment bill for next year. Within a couple of days, the HFSC chair said he would not seek re-election.
Back on Fox News, Robert Lighthizer, who served as US trade representative in the Trump administration, was excoriating. McHenry’s position “makes no sense at all”, said Lighthizer. “He’s had a very fine career and now to have this as your legacy . . . ”
Falling on your sword to protect Wall Street from merely disclosing investments in Chinese technology is ignominious, certainly. But we will recollect McHenry for playing the obstinate foil who helped show just how far conservatives have come from their days of providing a rubber stamp for capital, especially when it comes to China. That’s a legacy to carry with pride.
