How a Harris administration could be different for banks

Ting Shen/Bloomberg

The biggest story in the world is happening right now, but it isn't immediately clear what it means for banks.

This election is not about banking, because very few elections — with the exceptions of maybe 1930 and 2008 — ever are. In fact, with the possible exceptions of economics, health care and foreign policy, most policy arenas are afterthoughts on the national political stage — those smaller decisions like how much subsidy to offer soybean farmers or how much margin to require on cleared derivatives fall to agencies, and the distinctions in vision tend to be between Democratic and Republican administrations rather than between individual appointees. Put another way, banks can usually tell the difference between Democratic and Republican administrations, but not between one Democratic or Republican administration and another of the same stripe.

But at this moment, we have something that could actually be quite different. Vice President Kamala Harris stands poised to be the Democratic nominee at the party's convention next month, and will take the stage with a relatively clean slate. She has been active in the Biden administration, to be sure, but we know relatively little about what her policy preferences are or what her individual contributions may have been. She is free to either champion or disavow Biden's policies as she sees fit — and will likely be compelled to do so in the coming months — but aside from her time as California attorney general and senator, she's relatively unencumbered by her record or Biden's. She can paint the picture for voters that she wants to paint, and in doing so tell voters what she thinks they want to hear.

There are a couple of things that, if I were Harris, I would think people would want to hear. One is that there is a structural shortage of housing in the United States, and that problem is at the root of issues like homelessness, declining household formation and racial wealth disparities. Developing some kind of a plausible strategy to make housing stability and/or homeownership viable for more Americans — particularly younger Americans who are most locked out of the housing market — should be a top priority for the now-Harris campaign.

Another priority would be getting serious about mitigating the risks posed to consumers and the financial system by nonbank financial companies. Banks are regulated and supervised because if they aren't they can damage not only themselves but their customers and the broader economy. The same is true of many nonbanks, but their regulation is decidedly less stringent or consistent for the simple reason that they are not called banks. The Financial Stability Oversight Council has made some inroads in this arena in recent years, but the thrust of those initiatives have been more procedural and fact-finding in nature than they could be. With the recent demise of fintech middleware provider Synapse, leaving thousands of customers' savings in limbo, now is the time to put nonbanks on notice.

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Finally, I would pick my financial regulatory battles more carefully. The Basel III endgame proposal that came out almost exactly a year ago and that is almost certain to be re-proposed with drastic changes was a triumphant waste of time for all concerned. Some other initiatives, like the Consumer Financial Protection Bureau's $8 credit card late fee rule, could probably have been calibrated to meet the stated policy goal without so much friction with the banking industry. Not every battle is worth fighting, and Harris is in a unique position to reset the agenda in a more productive way.

When Donald Trump was first elected, I thought it was an amazing opportunity for him to do something new. No one had ever been elected president without holding public office before, and he won his party's nomination on his terms and without pledging fealty to the party's orthodoxy. What we got — at least in finance — was a mostly Republican administration indistinguishable from any other. Harris has a similarly unique opportunity to chart her party's course, so long as she doesn't throw away her shot.