Wall Street fears a President Harris
If Kamala Harris were to take Joe Biden's place in the White House, Wall Street would not go unnoticed. In the past, she has repeatedly advocated for stronger regulation of the financial industry.
"Greed and abuse on Wall Street brought our economy to its knees in 2008. I will fight against any legislation that deregulates the big banks." This Social Media post from Kamala Harris in 2018 could be a sign of what Wall Street, crypto companies, and other market players can expect should the 59-year-old Democrat take the presidency.
Financial regulation is high on Joe Biden's agenda, to the dismay of the banking industry. A President Harris would likely continue this course, according to industry experts. "Harris is more left-leaning than Biden, but even the Biden administration has proven to be incredibly progressive," explains Isaac Boltansky, an analyst at Brokerage BTIG.
Harris is considered the favorite for the Democratic nomination for president, following Biden's withdrawal from the race and his pledge of support. The party hopes to have better chances of winning against the Republican candidate Donald Trump, who as a predecessor gave the financial industry more leeway.
A win for the daughter of immigrants would not bode well for Wall Street banks, which see their regulatory freedom being curtailed. Under Biden, certain credit card fees were abolished, stricter controls on shadow banks were introduced, more transparency was demanded of hedge funds, and capital requirements for banks were tightened. Crypto companies were also subjected to tighter scrutiny. Harris' plans for financial policy were not commented on by her spokesperson.
"We believe this increases the risk for financial assets and cryptocurrencies," writes Jaret Seiberg, an analyst at Investment Bank Cowen, looking at the possibility of a Democratic government under a President Harris. In addition to finalizing international Basel capital requirements for banks, there would be requirements for banks to hold more long-term debts, limits on account overdrafts, and limits on special bank fees. Seiberg also mentioned.
Tough stance against banks
As California's Attorney General, Harris took a tough stance against banks. She supported borrowers who were damaged by the loose lending practices of banks before the financial crisis. In 2016, her office launched a criminal investigation into the Wells Fargo scandal involving fraudulent accounts. As a US Senator, Harris voted against a law of the Trump administration in 2018 that rolled back regulations introduced after the financial crisis. The Federal Reserve later attributed the rollback of these regulations to the collapse of the Silicon Valley Bank in the spring of 2023.
As Vice President, Harris announced in 2023 an initiative of the Consumer Financial Protection Bureau (CFPB) by Harris to remove unpaid doctor and treatment bills of low-income Americans from credit reports of credit bureaus. Harris also supported a proposal of the agency that mortgage servicers should help creditors in payment difficulties. Large banks have repeatedly criticized the CFPB under its director Rohit Chopra nominated by Biden. They even took legal actions to repeal several regulations of the agency.
According to BTIG-analyst Boltansky, this power struggle would continue under Harris. The CFPB director would be accountable to the President. A Democrat in the White House would give Chopra significant leeway in dealing with the topics of credit cards, payment companies, Big-Tech firms, and everything else the agency deals with.
Among the prominent progressive Democrats who support Harris is Senator Elizabeth Warren, who helped shape Biden's financial regulation agenda. Warren had not hesitated in the past to criticize party friends who, in her view, were too lenient towards Wall Street firms. A former government official reported that Harris had taken a hard stance against banks in the past. However, on the topic of financial regulation, she is not as far left as Warren.
If Kamala Harris becomes the US President in 2024, as expected, she might maintain Biden's tough stance on financial regulation, potentially impacting banks, Wall Street, crypto companies, and other market players. As reflected in her past actions, Harris has shown a strong inclination towards strengthening financial regulations, as evident from her opposition to deregulation and her investigation into the Wells Fargo scandal. This stance could lead to stricter controls on banks, increased scrutiny of cryptocurrencies, and tighter capital requirements, as suggested by analyst Jaret Seiberg from Cowen.
