This report provides FedFin’s first analysis of the impact of the 2014 mid-term on financial-policy considerations. In short, it’s big. Several major initiatives with far-reaching market impact will advance in 2015 and may only be averted with a Presidential veto, putting tremendous pressure on U.S. regulators even if their statutory mandates remain more or less intact. The ability of the U.S. to participate in global agreements such as all of those that now under-pin financial regulation and resolution will grow far more uncertain even as pressure for a more hawkish foreign policy puts renewed pressure on sanctions and their enforcement. Anything big that small banks hate will face a firing squad in Congress, meaning that regulatory standards will continue not only to carve out small banks, but now also exempt larger ones beneath the G-SIB asset threshold that will increasingly become the dividing line for tough capital standards and other costly rules. Given the White House’s plans to give a major Presidential address early next year on what is being called the “next round” of reform, Democrats may now become more populist on matters like big-bank pay and penalties, mobilizing an unusual, but potent coalition on an array of issues germane to the 2016 election.
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