WASHINGTON: A victory for Democratic presidential nominee Joe Biden on Nov. 3 would spell the end of the party for the banking industry which has enjoyed more than US$40 billion in regulatory cuts under U.S. President Donald Trump's business-friendly administration.
But the industry is likely to keep many of its wins as Democrats prioritize more pandemic aid, healthcare, tax reform and financial rules that address racial injustice, environmental and inequality issues, rather than attacking banks, said nearly a dozen lobbyists and policy experts in Democratic circles.
Banks and investors were preparing for a Biden victory over the weekend after Trump tested positive for COVID-19 on Friday, in a blow for his campaign.
"A hypothetical Biden administration will be confronting an economy mired in COVID-19, an unsustainable climate policy, a healthcare system whose flaws were exposed by the disease," said Aaron Klein, a former Treasury Department official during the 2009 financial crisis that badly marred Wall Street's image.
"This is not 2009 where the stability and soundness of the financial system is the top priority for restoring the economy and the semblance of normalcy," said Klein, who is now a policy director at Washington think tank Brookings Institution.
From the relaxation of capital, leverage, liquidity, swap trading and speculative investment rules, to lighter-touch supervision and enforcement, banks have enjoyed a bonanza under the Republican-led Senate and Trump appointees who say the rules were overly burdensome, stymied lending and hurt the economy.
Biden, who was also accused of being too cozy with Wall Street as a senator and later Barack Obama's vice president, has rarely attacked Trump's financial giveaways and has said relatively little on financial reform more broadly.
As progressives pull the Democratic party to the left, policy experts expect a Biden administration to be tougher on financial firms than both the Trump and Obama administrations. Some liberal groups are already pushing Democrats to consider repealing several Wall Street-friendly rules.
But while Democrats may swiftly overturn some financial rules if they take the Senate, they are likely to focus legislative efforts on Trump healthcare, immigration, environmental and tax policies they hate more, said the sources.
That would leave most of Trump's Wall Street giveaways intact initially, and put financial policy in the hands of Biden's regulatory appointees who would get to choose whether to spend years unraveling their predecessors' work.
"The personnel appointed to draft and carry out these rulemakings will have particular importance and also far more independence than under the Trump administration," wrote D.C. research group Beacon Policy Advisors in a client note.
Progressive firebrand Senator Elizabeth Warren would hold sway over some appointments, particularly at the consumer watchdog which she helped create, and bank regulators.
Overall, though, lobbyists said they would expect a diverse mix of progressives and moderates, even though few are likely to come straight from Wall Street.
"I don't think you'll see the progressive liberals getting all the appointments they want," said Richard Hunt, CEO of Washington group the Consumer Bankers Association.
Biden's campaign, which did not immediately comment, has said he plans to use all available tools to reverse Trump's damaging policies. Warren's office did not respond to a request for comment.
RACIAL JUSTICE, EQUALITY
Progressives have criticized Trump's watchdogs for easing some post-crisis capital, liquidity and leverage requirements, changes which have saved banks more than US$40 billion, according to industry estimates. Many centrist Democrats believe, however, that those rules were ripe for review and are wary of getting bogged down rewriting them again, the sources said.
Appointees are expected to prioritize policies on which Democrats broadly agree - boosting consumer protections and measures to help tackle racial injustice, diversity, wealth inequality and climate change, said Graham Steele, a director at Stanford Graduate School of Business and formerly a senior Democratic aide on the Senate Banking Committee.
Those policies include boosting financial inclusion; cracking down on predatory lending, overdraft fees, and debt collectors; strengthening fair lending rules; overhauling the credit reporting system; halting Trump's housing finance reforms; and imposing corporate climate change risk disclosures and bank climate risk controls.
Some measures could put banks on the defensive. Others may offer opportunities for the industry, which has improved its standing in Washington by helping the government distribute more than US$500 billion in pandemic aid, said lobbyists.
"I'm not worried about being shut out," said Hunt. "We have so many people employed in every state and district and we provide so much to the economy."
(Reporting by Michelle Price and Pete Schroeder; Editing by Nick Zieminski)