What credit unions need to know for Super Tuesday

March 3, 2020 5:00 AM

WASHINGTON — After 10 Democratic presidential debates, the candidates have uttered barely a murmur on their financial policy views as the campaign has been dominated by health care and other domestic issues.

But most of the Democrats still contending in the race, in the wake of the South Carolina primary and with Super Tuesday contests kicking off, have given some sense of their regulatory views either on their campaign websites or through past records.

With the front-runner Sen. Bernie Sanders supporting a dramatic restructuring of the banking industry, the results of the next wave of primaries could have a sizable impact on U.S. markets.

The Vermont independent has garnered the most delegates of any candidate so far, putting many in the financial services industry on notice.

“It appears to us that Sen. Bernie Sanders is not just solidifying his position but also could be a bigger threat to President Trump in the general election than the market appreciates,” Jaret Seiberg, an analyst at Cowen Washington Research Group, said in a note Monday. “That would represent a major threat to financials and housing as Sanders has the most punitive agenda for these sectors given his plans for taxes and regulation.”

Sanders is not the only Wall Street critic on the ballot. Sen. Elizabeth Warren, D-Mass., is a known entity to the financial services sector as a tough questioner in Senate Banking Committee hearings and as the architect of the Consumer Financial Protection Bureau.

The other five Democrats are seen as less hostile to the banking industry, though their potential presidencies would likely mark a shift from the deregulatory approach of the Trump administration. Under Trump, bankers scored a significant victory with the passage of a Dodd-Frank regulatory relief bill, known as S 2155.

But it’s unclear whether moderate Democrats will be able to stop Sanders from becoming the party’s nominee to challenge Trump in November.

Here is an update on the banking policy views of the top seven candidates still in the field.

Sen. Elizabeth Warren

The Massachusetts senator is synonymous with the Consumer Financial Protection Bureau, an agency the financial services industry often criticizes and that Warren first proposed and helped launch after Congress passed the Dodd-Frank Act in 2010.

Warren is known for her tough questioning of bank CEOs and Trump-appointed regulators as a member of the Senate Banking Committee, and she has been one of the most vocal critics of Wells Fargo after its phony-accounts scandal in 2016. She even pressured the Fed to push out several Wells board members she said were responsible for failing to prevent the scandal.

She also publicly criticized the 17 members of her party who supported the passage of S 2155, a reg reform package championed in the credit union sector. And like Sanders, she has opposed nearly all of President Trump’s regulatory nominees.

In a plan to overhaul the CRA – which, among other things, would have subjected credit unions to the rule – Warren proposed subjecting nonbank mortgage originators to the law, though she dropped a provision that would force credit unions to comply.

Warren also wants to establish a 21st-century Glass-Steagall framework to break up the big banks and create a “wall between commercial and investment banking."

As a senator, Warren has introduced legislation that would require mandatory penalties against credit reporting agencies when data breaches compromise consumers’ personal data.

Former New York City Mayor Michael Bloomberg

Mike Bloomberg surprised many in the banking industry with a fairly robust plan to tighten regulations on an industry that expected him to be the most sympathetic Democratic candidate.

His comprehensive plan for Wall Street includes reforms to strengthen the CFPB and a financial transactions tax. He calls for a merging Fannie Mae and Freddie Mac as part of a housing finance reform plan. And Bloomberg says he wants to reform anti-money-laundering rules.

Bloomberg also calls for tougher stress tests for the largest U.S. banks, and reviving the Fed’s power to judge participants on "qualitative" grounds. He would also subject systemically important nonbanks, such as insurers that have been de-designated by the Financial Stability Oversight Council, to more heightened scrutiny.

While Bloomberg’s Wall Street reforms appear relatively strict, some analysts say that his plan seemed to be aimed at quelling concerns from progressives that he is too cozy with Wall Street, and that he likely would not spend much political capital on getting it implemented if he were elected president.

Former Vice President Joe Biden

Former Vice President Biden is forever linked to the Dodd-Frank Act, which was the signature financial services legislation of the Obama administration and which the banking industry decried as overly burdensome. But he has also been criticized for his close ties to the credit card industry.

When he was a senator from Delaware, Biden’s single largest contributor was the credit card issuer MBNA Corp., which was later folded into Bank of America. His son, Hunter, was also employed by the firm as a lobbyist. Biden has been hit by progressives over his support for a 2005 bill aimed at preventing consumers from abusing the bankruptcy system. Some say that bill was harmful to indebted consumers.

Biden’s campaign says he would double the funding for the Community Development Financial Institutions fund, which supports local, mission-driven financial institutions in low-income areas around the U.S. and a key source of funding for some credit unions. Biden is also calling to expand the Community Reinvestment Act to apply to mortgage and insurance companies, and to add a requirement for financial services institutions to provide a statement outlining their commitment to the public interest.

Biden’s campaign website says his administration would restore the CFPB fair-lending office’s authority to enforce settlements against discriminatory lenders. And he would create a new public credit reporting agency within the CFPB to provide consumers with a government option that seeks to minimize racial disparities and accept nontraditional sources of data, including rent and utility bill payment history, to establish credit.

Sen. Bernie Sanders

Sanders is the current front-runner in the Democratic primary and has been one of the most vocal critics of Wall Street during his tenure in Congress. For years, the Vermont senator has called for a breakup of the largest U.S. banks, reinstating Glass-Steagall and capping credit card interest rates at 15%.

Sanders has also introduced legislation that would cap a financial institution’s total exposure at 3% of the nation’s GDP, saying at the time that "the four largest financial institutions in this country are on average 80% larger than they were before we bailed them out” in the financial crisis.

He was an ardent opponent of the regulatory relief bill S. 2155 in 2018, saying “at a time of massive concentration of ownership in the financial sector, now is not the time to deregulate banks that have more than $3.5 trillion in assets and lay the groundwork for another massive financial collapse.”

Credit unions were generally in favor of that legislaton.

Sanders has also advocated for postal banking, which some in the industry have pushed back on, suggesting credit unions already provide banking services than the USPS could offer.

Sanders has also opposed nearly all of President Trump’s nominees to financial regulatory posts, including Federal Reserve Chairman Jerome Powell and Federal Deposit Insurance Corp. Chairman Jelena McWilliams, who both received strong support from Republicans and Democrats in their confirmations.