What banks need to watch with two weeks until the midterms

October 27, 2022 9:00 PM

WASHINGTON — Republicans are gaining ground as concerns about the economy remain fresh in voters' minds, while the momentum Democrats enjoyed earlier this summer from their support of reproductive rights appears to be waning.

Most recent polling shows the Republican chances of taking over the House of Representatives — which they were already favored to do — have improved, and Democrats' advantages in key Senate races are also being mitigated. Which party controls either or both chambers will have big implications for the future of financial policymaking. That's especially true now that key players in the Democratic party, who have helped shape the party's views on topics like digital assets, appear to be in jeopardy.

The president's opposition typically gains ground in midterm elections, so Republicans have had the wind at their backs throughout the current election cycle. The Supreme Court's decision to overturn Roe v. Wade, combined with legislative victories for Democrats and lackluster candidates prevailing in Republican primaries seemingly changed this dynamic in the summer and early fall, but more recent polling shows that the economy and inflation — issues for which Republicans are traditionally favored — are at the front of voters' minds as the campaign season comes down the final stretch.

With two weeks to go before election day, Democrats are scrambling to show they're doing something on one of the voters' top concerns: rising prices. This is where financial institutions are most likely to see themselves pop up in political debates, as this week's presser from the Consumer Financial Protection Bureau and President Biden showed.

Here are some of the biggest trends and races bankers should watch as Nov. 8 approaches.

Consumer protection on the ballot?

President Biden made perhaps his most explicitly political move on financial policy this week, standing with Consumer Financial Protection Bureau Director Rohit Chopra as the bureau said it would crack down on junk fees.

The press conference was significant in two ways. First, it showed that the Biden administration sees some messaging advantage in pressing banks on consumer protection issues. Biden talked a lot about the frustration of American consumers who are getting hit by high prices and fees, and how pressing banks on fees would help.

One of voters' top issues this election cycle is the economy, and banks have always stood in to some degree as a proxy for that anxiety. That speaks to an underlying fear among financial institutions: that broader economic worries will once again turn them into a political punching bag.

Second, Biden's moment with Chopra demonstrates that the White House stands behind the agency, even as its work is threatened by judges appointed by former President Donald Trump. The CFPB will have a long legal fight ahead of them, and Biden has signaled that his administration has incentive to help them with that battle.

Sean Patrick Maloney on the bubble

He's not on the House Financial Services Committee, but Rep. Sean Patrick Maloney (D-N.Y.) could have a large impact on digital assets policy if he manages to get reelected.

The Cook Political Report recently moved the suburban New York City district to a toss-up, largely as his opponent Mike Lawler has attacked Democrats on inflation and crime.

Maloney is a kingmaker, as he leads the party's House campaign arm. But now he finds himself in an awkward position, where Republicans are investing heavily to defeat him, and the party's resources are needed elsewhere in the country for the increasingly difficult political climate for Democrats.

Maloney would likely continue to have a large voice in how digital-assets policy is shaped should he return to Congress. He chairs the Commodity Exchanges, Energy, and Credit Subcommittee and has been active on the issue of whether the Commodity Futures Trading Commission or the Securities and Exchange Commission should spearhead oversight of digital assets.

Maloney introduced the "Digital Commodity Regulation Bill" that he said would "provide the CFTC with oversight of the digital asset commodity market, adding registration requirements for market players and trading platforms, establishing a clear regulatory framework for the digital commodity spot market, and establishing an important funding regime to ensure that CFTC has the resources necessary for robust oversight of this industry."

Georgia Senate race tightens

The two key races that will decide if Democrats give up seats on the narrowly controlled Senate still involve Democrats on the Senate Banking Committee.

The first, Sen. Raphael Warnock (D-Ga.), is up against Herschel Walker, a former football player who's come under scrutiny for a Daily Beast article claiming the pro-life candidate paid her to have an abortion. Still, rising prices remain the central issue in the race.

"There's no question that people are feeling pain at the grocery store, at the pump, at pharmacy counters," Warnock said at the only debate between the two. "I stood up for ordinary hardworking Georgia families time and time again."

Warnock currently has a 2-point lead against Walker, within the margin of error of the East Carolina University poll.

Along with a seat on the Senate Banking Committee, Warnock chairs the Agriculture Subcommittee on Commodities, Risk Management and Trade. That's an influential seat in financial policy, but he's used his actions there as an advantage on the campaign trail, especially to try and win over wavering voters in the state's rural heartland.

Heritage crops, apparently, are typically a good bet for rural Georgia voters. One of Warnock's buzziest ads this election season was one touting the state's peanut production.

"That's nuts," Warnock said.

Early voting in Nevada begins

In the other toss-up Senate race, Catherine Cortez Masto remains locked in a neck-and-neck race with Trump-backed candidate Adam Laxalt, a former state attorney general.

The race is coming down to mobilizing Latino voters in urban Las Vegas and Reno areas, while Lexalt presses his advantage on the economy. Tourism states like Nevada were some of the hardest hit in the COVID-19 shutdowns, and they've experienced some of the fastest rising gas and food prices across the country.

State political expert Jon Ralston wrote in his blog that, based on early voting trends, it'll come down to how many Republicans turn out on election day.

"The numbers look pretty good for the Dems in urban Nevada, where 170,000 ballots have now been tallied," he said. "Caveat: It's only 5 days in, and we have to see if the mail continues to overwhelm the early in-person vote, as it did two years ago. And we still don't know if there will be unusually large GOP turnout on Election Day, which obviously could change the dynamic."