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Republicans will face 'soul-searching moment' tomorrow, former governor says

The GOP might need to take a page from the business community and focus on marketing after Tuesday's election, Republican former presidential hopeful Tim Pawlenty said.

"The Republican party is doing well at the state and local level," the former governor of Minnesota told CNBC's "Squawk on the Street" on Tuesday. "But you can't be a national governing majority party when you consistently lose young people, women, Hispanics and Latinos, other minorities and modest-income and blue-collar workers. That is not a formula for a national majority. And if you keep pushing a product and you keep losing, you eventually got to get a better product or better marketing. So we're going to face a soul-searching moment here after tomorrow."

Pawlenty, who ran for president in 2012, now heads the Financial Services Roundtable, an advocacy group for industries such as banking, insurance, finance and credit card companies. He said that while he supports neither Hillary Clinton nor Donald Trump for president this year, he has some opinions on what the new president can do for the financial services industry.

Tim Pawlenty
Scott Eells | Bloomberg | Getty Images
Tim Pawlenty

"On the repatriation of foreign earnings, that's low-hanging fruit," Pawlenty said. "That's almost a consensus, unanimous thing that could get done as part of a package. ... It is only one-time money, but at least it would represent some progress on infrastructure."

But much also depends on the help of Congress, which is in flux as Republicans try to "barely hang on" to control of the legislature, Pawlenty said.

"There's always tension within the caucus on the Republican House side," Pawlenty said. "I don't think [Paul Ryan]'s going to be seriously challenged as Speaker, but he's going to have his feet held to the fire if he tries to ... compromise too much."

Pawlenty said the new president could put forth a package to appease both Democrats and Republicans in Congress.

"There's some Republicans that could vote on something like a reasonable increase in minimum wage," Pawlenty said. "You could do repatriation on some income for infrastructure, and in exchange, get something on tax reform. That could be a package."

Financial services regulations in Dodd-Frank could be another issue that requires balance, Pawlenty said. Republicans announced a plan in June to repeal and overhaul parts of Dodd-Frank. Meanwhile, Democratic Sen. Elizabeth Warren has pressed banks like Wells Fargo. Pawlenty called her attitude toward financial services "outright hostile."

"The banks and other financial institutions did things pre-crisis that needed a response," Pawlenty said. "And they got a response in the form of Dodd-Frank. But now we're six or seven years removed from that, and we want to strike the right balance between making sure things are properly regulated, but not going so far that you stifle capital formation and deployment."

Pawlenty said reforming parts of Dodd-Frank helps strike the right balance. Fellow Republican Jeb Hensarling, a representative from Texas, was more critical of the regulation.

"We've got to get our capital markets working, and unfortunately, Dodd-Frank has made capital less available and less expensive," Hensarling, chairman of the House Financial Services Committee, told CNBC's "Squawk Alley" on Tuesday. "It puts government bureaucrats between consumers and their credit cards and their mortgages."

While current Republican presidential nominee Donald Trump has called Ryan "weak and ineffective," Hensarling praised Ryan's efforts.

"I think under our speaker Paul Ryan, Republicans have put forward the most detailed plan for economic growth, for personal freedom, for constitutional government," Hensarling said. "I think I'd start off and go home and drink a cold beer if the election didn't go my way. And then once we get past that, we're never going to ... end trying to find some common ground."