In the coming days, there will be no shortage of election
analysis. Indeed, CUNA will publish its
own analysis of the elections through the credit union lens shortly after the
major races have been called. As we
approach this historic election, however, we have given some high level thought
to the possible outcomes and the impact on credit union priorities.
When we began thinking about this after the major party
nominations had been secured by Secretary Clinton and Mr. Trump, we identified
four plausible scenarios: status quo,
conventional wisdom, Democratic trifecta and “Make America Great Again.” Days out from the election, three of these
remain plausible and another one may have emerged. We’ll explore the universe of the plausible
and what it means for credit unions.
Scenario #1 – Status Quo
The status quo scenario assumes that Secretary Clinton has
been elected president and the GOP retain control of the House and the
Senate. Under this scenario, the
electorate is uncomfortable with Trump as president and gives the keys to the
White house to Secretary Clinton, but tasks the GOP with providing checks and
balances. In the last several weeks,
we’ve seen a number of Republicans running for the House and the Senate run ads
essentially making this case. It is worth noting though that the Republican
leaders will likely control their respective chambers by much narrower margins.
For credit unions, this means that the gridlock in
Washington will ensue, and it could get even a bit worse. We don’t see a GOP led Congress giving
Clinton any quarter to advance an agenda.
Instead they will investigate her and her administration and continue to
advance repeal of Obama administration legacy items. In this environment, there may be opportunity
to use Congress to pressure the CFPB for improved rulemaking; there may be
opportunity to use structural changes to the CFPB as leverage for advancing
Clinton administration priorities. Given
the fact that Clinton will likely find it hard to advance her agenda without
compromise, it is within the realm of possibility that tax reform discussions advance.
For credit unions, this means that the gridlock in
Washington will ensue, and it could get even a bit worse. We don’t see a GOP led Congress giving
Clinton any quarter to advance an agenda.
Instead they will investigate her and her administration and continue to
advance repeal of Obama administration legacy items. In this environment, there may be opportunity
to use Congress to pressure the CFPB for improved rulemaking; there may be
opportunity to use structural changes to the CFPB as leverage for advancing
Clinton administration priorities. Given
the fact that Clinton will likely find it hard to advance her agenda without
compromise, it is within the realm of possibility that tax reform discussions
advance.
Scenario #2 – Conventional Wisdom
Scenario #2 is called the conventional wisdom scenario
because six months ago when we began thinking about this, it appeared to be the most
likely outcome. It may still be, despite
the considerable tightening of the race. This scenario assumes that Secretary
Clinton is elected president, the Democrats capture control of the Senate and
the GOP retain control of the House. For
this scenario to happen, Clinton will have solidified her support in swings states;
Democratic candidates running underneath her will have made few mistakes; and
GOP turnout will have been depressed, endangering incumbent GOP Senators. Some of these dynamics have emerged
throughout the campaign and in the polling.
Turnout is the key driver of success for this scenario.
Credit unions, under this scenario, may see the door open a
bit for charter enhancement. We will
have a supporter in the expected chair at the Senate Banking Committee, Sherrod
Brown (D-OH) and Clinton has indicated her support for member business lending
changes. Further, regulatory relief may
have new life in it given the strong support that Senator Brown and his
expected ranking member, Mike Crapo (R-ID), are strong supporters of community
based financial institutions. This scenario
may open the door a bit for CFPB reforms, particularly given the vulnerability
of several Senators banking committee Senators in 2018. The greatest challenge to moving these issues
may not be in the Banking Committee itself, but securing time on the Senate
floor. Twenty-five Democratic Senators
will be up for election in 2018; putting a banking bill on the Senate floor
could force uncomfortable votes for these vulnerable Senators.
Divided government also has the potential to create
compromise. With Congressional leaders
looking for victories, especially in advance of the 2018 election, and
President Clinton working to solidify her legacy there is the opportunity that
some in Congress may be willing to seek the middle ground.
Scenario #3 – Democratic Trifecta
Heading into the days of the cycle, this scenario does not
seem plausible any longer. There simply
are not enough House seats in play for Democrats to recapture the majority in
the House of Representatives.
Scenario #4 – “Make America Great Again”
As its name suggests, this scenario envisions the election
of Donald J. Trump as President of the United States. If this happens it will be because the electorate
is fed up with establishment, does not want four more years of Obama or
Clinton. This scenario also assumes the
GOP, either because or in spite of Trump, holds both chambers of Congress.
Under this scenario, the probability of Dodd-Frank reforms
increases significantly. A moratorium on
CFPB rulemaking enters the realm of possibility. And, given the recent court decision related
to the constitutionality of the CFPB, it is likely that President Trump would
try to fire CFPB Director Cordray. In
general, we would expect a slower regulatory flow under this scenario; however,
given how Mr. Trump has run his campaign, it’s hard to know for sure what to
expect from a Trump administration.
Scenario #5 – President Trump with a Democratic Senate
We didn’t think this was plausible several months ago, but
in the closing days of the election, a fifth scenario has presented
itself. It assumes that Donald Trump has
been elected president and the voters have handed the Democrats a slim majority
in the Senate.
The gridlock we have experienced in Congress is likely to
continue under this scenario. Democrats
would have much more control over the personnel in the Trump administration,
and at least for the time being, talk of the use of the nuclear option to move
Supreme Court nominations might be muted.
Democrats will also have a bit of leverage over the advancement of the
Trump legislative agenda, which could force the president to try to accomplish
more through executive action.
So what will happen?
We’ll find out Tuesday.
I’ve listed the scenarios above (excluding Scenario #3) in order of
probability from my perspective. But the
voters will decide, and regardless of outcome, we are well positioned to
represent credit unions in the new administration and the new Congress.