What a Joe Biden win could mean for financial policy

By Pete Schroeder and Katanga Johnson

(Reuters) – Democrat and former US Vice President Joe Biden was declared the winner of the US presidential election by several major television stations on Saturday, beating Republican President Donald Trump who took a pro-industry stance on the matter regulatory.

While Biden is unlikely to prioritize a crackdown on the financial sector, he should take a tougher line than Trump and his former boss, President Barack Obama.

Biden has brought in former derivatives market regulator Gary Gensler, who has a reputation for being tough on Wall Street, to work on a transition plan for financial sector supervision.

Here are some of the key areas his administration and agency will likely focus on.

THE COMMUNITY REINVESTMENT ACT

The pandemic has shone the spotlight on racial and wealth inequalities in the United States, prompting Democrats to use a range of political levers to resolve issues. These include the Community Reinvestment Act of 1977, a fair loan act giving banks regulatory points for lending to low-income communities.

Biden has engaged in campaign material to extend the rules to other industries, including mortgage and insurance companies.

HOUSING FINANCING

Tackling the country’s affordable housing crisis is a priority for Democrats and Biden. A Biden administration would likely try to halt a Trump plan to free housing finance giants Fannie Mae and Freddie Mac from government control, a move Democrats fear will increase the cost of mortgages for Americans middle and low income.

Biden also pledged to review Trump’s housing regulator rules that seek to guard against lending behavior that disproportionately impacts racial minorities or other protected groups.

CONSUMER PROTECTION, CREDIT STATEMENT

Biden called for a robust Consumer Financial Protection Bureau (CFPB), created in the aftermath of the 2009 financial crisis to ensure banks don’t take advantage of consumers. The agency was less aggressive under Trump, and Biden endorsed tighter monitoring of consumer loans and called for a crackdown on discriminatory lending practices.

One of Biden’s most eye-catching policy proposals is the creation of a public credit bureau to compete with Equifax and TransUnion. According to Biden campaign documents, the new agency would aim to “minimize racial disparities” in credit reports after some studies found the current system disadvantages and excludes minorities.

RISKS OF CLIMATE CHANGE

Influential Democratic lawmakers and political experts are pushing for SOEs to be required to disclose climate change risks to their businesses and for those risks to be built into the financial regulatory system. Biden has called for swift action to tackle climate change, and political experts believe his agency picks will pursue those ideas.

BANKRUPTCY REFORM

In a political about-face, Biden adopted a bankruptcy reform plan pushed by Democratic Senator Elizabeth Warren, a consumer advocate, whom he had previously opposed as a senator. The proposal would make it easier for Americans to pursue bankruptcy and protect assets such as homes and cars from debtors during the process. Such a plan, however, would require the passage of legislation that would be unlikely without a Democratic majority in the Senate.

POSTAL BANK

Biden has expressed support for a long-standing progressive policy to get the U.S. Postal Service to provide basic banking services. Progressives say the plan would reduce economic inequality by allowing “unbanked” Americans to access reasonably priced banking and credit services, and avoid predatory lenders and expensive check-cashing services.

The banking industry opposes the creation of a taxpayer-funded competitor and would likely fight the plan.

CREDIT ON SALARY, COLLECTION OF RECEIVABLES

Democrats, including Biden, screamed scandal in July when the CFPB removed a key provision in a payday lender role, first drafted by the Obama-led CFPB, that would require payday lenders to guarantee that payday lenders consumers have the capacity to reimburse.

Lenders have said this provision is so onerous it could kill their businesses.

Likewise, consumer groups have criticized the agency’s recent debt collection rule which they claim would allow collectors to harass consumers with unlimited text and email. A Biden administration is likely to try to overturn or rewrite these rules.

(Reporting by Pete Schroeder and Katange Johnson in Washington; Editing by Nick Zieminski, David Gregorio, Peter Graff and David Holmes)

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