Senate may be (almost) as important for banks as presidency in 2024

Bloomberg News

Covering a story as big as the 2024 presidential election for an audience of bankers is harder than it may sound. On the one hand, there is a great deal of source material: Presidential campaigns never really stop anymore, one candidate or another is out there every day trying out some new issue or angle, there are always new polls, and there is always some new problem that gets the public worried about the state of affairs.

But banks and banking, which were very top of mind for the general public from 2008 until maybe 2016, have largely faded into the background, despite having experienced a decent-sized banking crisis less than 12 months ago and President Biden's efforts to make "junk fees" happen. 

None of that is to say the election doesn't impact banks — it most certainly does. But the direct effect is secondary to what happens at the top of the ticket and comes in the form of whom the next president picks to run bank regulatory agencies. 

In the broadest strokes, banks might reasonably expect a second Biden administration to look quite similar to the first, finalizing and cementing rules that are currently only in the proposed stage, many of which are quite unpopular with banks. A Trump administration, meanwhile, could reasonably be expected to rescind those proposals and replace them with new ones that are more amenable to banks' priorities. Trump and his allies have hinted at a desire to roll back some of the independence within federal agencies — a firewall that bank regulators enjoy to an uncommon degree — and if that desire were to come to fruition, it could lead to new problems, but that's a column for another day.

So regardless of who becomes president, a significant constraint on the winner's ability to get appointees confirmed is whether his or her party controls the Senate — and even then, it's not necessarily a slam-dunk.

The Senate is currently controlled by Democrats by a 51-49 majority, but three of the seats that make up the majority are the most competitive in the 2024 election cycle — and all three have ties to the Senate Banking Committee. Democrats can lose one — but only one — of those seats and retain control of the Senate if they also keep the White House. Republicans' most vulnerable seats are held by Sens. Marco Rubio, R-Fla., and Ted Cruz, R-Texas, whose reelections are still pretty safe bets. 

To compound the bad news for Democrats, the Senate races they have to win are on increasingly red turf. Senate Banking Committee Chair Sherrod Brown, D-Ohio, is a third-term progressive who has made populist suspicion of big banks a centerpiece of his political brand. By contrast, fellow committee member Sen. Jon Tester, D-Mont., has cut a more moderate profile, contributing his input and support for a 2018 regulatory reform bill and more recently expressing skepticism of regulators' Basel III endgame proposal. And then there's the seat held by Sen. Kyrsten Sinema, I-Ariz., (formerly of the Senate Banking Committee), who may or may not even run again, and would be competing in a three-way race if she did.   

But there is reason to think that the Republican takeover of the upper chamber is not as inevitable as it may seem. One reason for that is, despite increasing polarization in the American polity, candidate quality does seem to matter a lot more than whether there is an R or a D at the end of the candidate's name.

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Brown won reelection in 2012 and 2018 by roughly the same margin — about 300,000 votes — against relatively weak candidates, while Tester also won in 2012 and 2018 by roughly the same margin, a squeakier 20,000 votes. But accounting for the overall number of votes cast, those margins are a little less squeaky — 4% in Tester's case and 5% to 6% in Brown's. Population growth in Montana and Ohio has also been concentrated in more densely populated areas that would theoretically benefit Democrats. So both of these candidates — who have very different political profiles — have managed to develop durable constituencies in their states that continue to pull the lever for them over time, even if they split their votes across party lines to do it.  

What is more, Brown and Tester are both apparently facing opponents that are on the more beatable end of the spectrum. Tim Sheehy, a 38-year old former Navy SEAL and entrepreneur who has not held elected office before, appears to be beating out Rep. Matt Rosendale, R-Mont., for the privilege of taking on Tester in November. But he may have liabilities: Sheehy grew up in the Minneapolis suburbs and only came to Montana in 2014, opening him to the kinds of carpetbagging accusations that sank Dr. Oz so effectively in 2022. 

Likewise, the Republican Senate primary in Ohio seems to be favoring car dealership owner Bernie Moreno over Secretary of State Frank LaRose and state Sen. Matt Dolan. Moreno, who has not served in elected office before, also grew up in Colombia before emigrating to Florida at age 5 and emigrating again to Ohio in 2005. The owner of a successful car dealership franchise, Moreno also has faced litigation over denying employees their overtime pay — precisely the kind of liability that a homegrown populist like Brown can use to their advantage.

Then there's Sinema's seat, the contours of which are far less straightforward. Sinema herself has managed to enrage Democratic voters over the course of her first term to the point that she left the party in 2022. The race already is pitting Rep. Ruben Gallego, D-Ariz., against former Republican Arizona gubernatorial candidate Kari Lake, so entering the race — again, not yet a foregone conclusion — would necessitate Sinema drawing votes from both Republicans and Democrats. If she doesn't run, the race is more likely to be influenced by the top of the ticket, but Arizona as a whole is a lot more purple than it used to be.

All of this is to say that the most consequential outcome of the election for banks is who is calling the regulatory shots, and those choices come from the president. But they also require the Senate's consent — which is not always forthcoming — and in those races, politics is still local.