Bloomberg Businessweek November 16, 2020 pp38 |Finance|”Wall Street Prepares for Biden” “Industry critics may get key posts and have a major impact on financial regulation”. THE BOTTOM LINE “President-elect Biden can change the direction of financial regulation installing Democratic allies in top federal posts”
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Summary of Article
· Biden’s Treasury Secretary will be key for negotiating more COVID-pandemic stimulus with congress. They will also look to mend relations with U.S. trading partners and potentially resurrect some regulations eliminated recently. Mention for Treasury is Lael Brainard (Currently Governor of the Federal Reserve) and Heather Boushey (CEO of the Washington Center for Equitable Growth) as director of the National Economic Council.
· PRIVATE EQUITY Most likely change will be eliminating the ability of Private Equity partners to have profits taxed as capital gains rather than ordinary income which are taxed at a higher rate. The current practice is called the “Carried Interest Loophole.”
· CONSUMER FINANCIAL PROTECTION BUREAU (CFBP) Progressives will push for tougher “policing [of] mortgages, credit cards and other products.” Rohit Chopra, an FTC commissioner “who helped set up the CFPB and has worked there” is mentioned as candidate to lead CFBP.
· FINANCIAL STABILITY OVERSIGHT COUNCIL (FSOC) The FSOC role is spotting financial risks to the economy. They can add additional scrutiny of companies that are designated as “systemically important”, and services/financial products that are “too risky.” Four of five prior appointees will remain for at least one year potentially slowing any change temporarily.
· SECURITY AND EXCHANGE COMMISSION (SEC) SEC is high profile and most important to investment banking and will “be at the center of the fight between progressives Democrats and moderates over the direction of financial regulation.” Several candidates thought to being in consideration include Kara Stein (Former SEC commissioner), Gary Gensler (Obama administration regulator) and Preet Bharara (Former top federal prosecutor in Manhattan). Stein the liberal favorite could call for “more restrictions on products such as leveraged exchange-traded funds”, Gensler “crafted tough rules on over-the-counter derivatives” and Bharara pursued major financial crime cases.”
· REGIONAL BANKS Regional banks like U.S. Bancorp, PNC Financial Services Group, and Truist Financial were relatively unscathed recently with the major focus on investment banks. Seem not much will change for Regional Banks as they have bipartisan support even on the impact of “potential mergers.”