John Heasley

John Heasley
TBA General Counsel

What a Biden victory may mean for community banks

Barack Obama was fond of saying “elections have consequences” and this will certainly be the case if there is a change in power in Washington.

Former Vice President Joe Biden is leading Trump in the polls in most states and in projected Electoral College votes. While most attention is being paid to potential changes in environmental policies, corporate taxation and immigration law, it is worth considering what may happen on banking issues in the regulatory agencies and on the legislative front.

One of the first actions the new president could take would be to replace Kathy Kraninger at the Consumer Financial Protection Bureau. The recent U.S. Supreme Court Seila Law decision allows a president to replace the CFPB director for any reason.

The CFPB is the brainchild of Sen. Elizabeth Warren and she has been a vocal critic of the CFPB’s actions in the current administration. The new director will be someone who has the trust of Warren. (It is also possible that Warren will be named as Treasury Secretary in order to placate the progressive wing of the Democratic Party, which has factions that believe that Kamala Harris is too moderate.)

Expect the CFPB to return to the activist profile it had when it was headed by Richard Cordray during the Obama era. It could again gain access to more than $600 million annually from the Federal Reserve and lawyer-up in a big way. Fair lending enforcement will again become a priority, and the Dodd-Frank provision for fair lending examinations for small business lending will be finalized.

The current acting head of the OCC will most likely be replaced by a Democratic nominee. The new CRA regulations recently rolled out by the OCC will be withdrawn. They have been criticized by community reinvestment groups and U.S. House Democrats. Community groups are also attempting to block the CRA regs in federal court in California. Jelena McWilliams at the FDIC and a few Federal Reserve appointees will be the only remaining Trump regulators.

For anything to happen legislatively, the Senate will need to have a Democratic majority. If Biden wins in a big way it could result in at least four new Democratic senators, giving the new majority 51 votes with the vote of the vice president or an outright majority. Sen. Schumer would become the new majority leader and Sen. Sherrod Brown of Ohio would chair the Senate Banking Committee. Senate Democrats have also discussed changing the 60-vote requirement to a simple majority of 51.

Democratic control of the legislative and executive branches will give them powers they have not enjoyed since 2009 and 2010. There is a lot of pent-up energy for progressive action. In an effort aimed at more racial inclusivity, they could expand upon a section in Dodd-Frank that established Offices of Minority and Women Inclusion in the banking agencies and apply the same standards to the banking industry.

One of the more ambitious proposals generating a lot of attention is requiring the Fed and the Postal Service to set up a government-run banking system. One of the Biden-Sanders Unity Task Forces published a document that encouraged Congress to pass laws that would “guarantee affordable, transparent, trustworthy banking services” for low- and middle-income families. The Federal Reserve system would be required to provide every American with an affordable banking account and payment services that could be accessed at all post offices.

Barack Obama was fond of saying “elections have consequences” and this will certainly be the case if there is a change in power in Washington.