Democrat and former US vice president Joe Biden – declared winner of the US presidential election by major television networks on Saturday – is likely to take a different tack to Republican incumbent Donald Trump who had an industry-friendly stance on regulation.
While Biden is unlikely to prioritise a financial industry crackdown, he is expected to take a stricter line than Trump and his former boss President Barack Obama.
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Biden has tapped former derivatives market regulator Gary Gensler, who has a reputation for being tough on Wall Street, to work on a transition plan forfinancial industry oversight.
Here are some of the key areas his administration and agency picks will likely focus on.
THE COMMUNITY REINVESTMENT ACT
The pandemic has shone a harsh spotlight on America’s racial and wealth inequalities, galvanizing Democrats to use a range of policy levers to address the problems. Those include the 1977 Community Reinvestment Act, a fair lending law giving banks regulatory points for lending to low-income communities.
Biden has pledged in campaign materials to expand the rules to other sectors, including mortgage and insurance companies.
Addressing the country’s affordable housing crisis is a priority for Democrats and Biden. A Biden administration would probably try to halt a Trump plan to release housing finance giants Fannie Mae and Freddie Mac from government control, a move Democrats worry would increase the cost of mortgages for middle- and lower-income Americans.
Biden has also pledged to review rules by Trump’s housing regulator that are meant to guard against lending behaviour which disproportionately adversely impact racial minorities or other protected groups.
CONSUMER PROTECTIONS, CREDIT REPORTING
Biden has called for a robust Consumer Financial Protection Bureau (CFPB), created following the 2009 financial crisis to ensure banks did not take advantage of consumers. The agency has been less aggressive under Trump, and Biden has endorsed stricter oversight of consumer lending and called for a crackdown on discriminatory lending practices.
Among Biden’s most eye-catching policy proposals is the creation of a public credit reporting agency to compete against the likes of Equifax and TransUnion. According to Biden’s campaign materials, the new agency would aim to “minimize racial disparities” in credit reporting after some studies found the current system disadvantages and excludes minorities.
CLIMATE CHANGE RISKS
Influential Democratic lawmakers and policy experts are pushing hard for public corporations to be required to disclose climate change risks to their businesses and for such risks to be incorporated into the financial regulatory system. Biden has called for swift action to address climate change, and policy experts believe his agency picks will pursue these ideas.
In a policy about-face, Biden has adopted a bankruptcy reform plan pushed by consumer advocate Democratic Senator Elizabeth Warren which he previously opposed as a senator. The proposal would make it easier for Americans to pursue bankruptcy and shield assets like houses and cars from debtors during the process.
Such a plan, though, would require passage of legislation which would be unlikely without a Democratic majority in the Senate.
Biden has expressed support for a long-held progressive policy to get the US Postal Service to provide basic banking services. Progressives say the plan would reduce economic inequality by allowing “unbanked” Americans to access reasonably priced banking services and credit, and to avoid predatory lenders and expensive check cashing services.
The banking industry opposes creation of a taxpayer-funded competitor and would be likely to fight the plan.
PAYDAY LENDING, DEBT COLLECTION
Democrats including Biden cried foul in July when the CFPB stripped out a key provision in a payday lending role, first drawn up by the Obama-run CFPB, that would require payday lenders to ensure consumers had the ability to repay.
Lenders said that provision was so onerous it could kill their businesses.
Likewise, consumer groups have criticized the agency’s recent debt collection rule which they say would allow collectors to harass consumers with unlimited text messages and emails. A Biden administration is likely to try to rescind or rewrite those rules.