US President Donald Trump would lose in a landslide if the election was held today, according to the analysis of Charlie Cook, editor and publisher of the Cook Political Report, who spoke in an exclusive virtual event for FIA members. As a result, there is tremendous uncertainty around key financial services issues given the chance of big changes in Washington come November
A full archived recording of the two-hour online discussion hosted by FIA on July 29 is available online for FIA members.
“If there's a word associated with American politics more than any other, it's ‘change,’” said Cook at the FIA event. “With partisanship and more ideologically driven parties in the US, it’s often hard to keep up. But 2020 has seen more change than usual in the political environment.”
Most recently, that includes a rapid erosion of support for President Trump since the coronavirus pandemic began in earnest this March -- and subsequently, a rising chance that voters will not just deliver a change in the White House but also in the Senate. That would deliver power firmly into the hands of Democrats come 2021 and mark a significantly different regulatory and legislative environment.
General political trends
In an hour-long discussion focused on polling data and historical trends, Cook made a strong case for why President Donald Trump is currently facing major challenges. Cook noted that there are two basic kinds of presidential contests: "choice" elections with two new candidates, or "change" elections where the incumbent puts his record against the chance of an alternative.
"With an incumbent president, it is a referendum," said Cook, who has published the non-partisan Cook Political Report since 1984. "It is, do we want to renew this president's contract for another four years -- yes or no."
Unfortunately for President Trump, the vast majority of polling shows Americans are not pleased with the direction of the country at present. And most importantly, Cook said the "cement is hardening" around that trend in the wake of the coronavirus pandemic and racial justice protests in the wake of the killing of George Floyd.
He pointed specifically to historical trends in polls that ask about the direction of the nation generally, noting that data shows an average of about 24% of Americans said the country was moving in the right direction under a losing incumbent president vs. 70% saying the country was on the wrong track. Under one recent poll, only 19% of Americans think the nation is on the right track under President Trump and 72% say it is on the wrong track.
"A strong economy was enough to offset Trump's liabilities" for the first three years of his presidency, Cook said, but "it's not a competitive race at this moment." He added that current projections put former Vice President Joe Biden on track for more than 350 electoral votes if the election were held today.
The trickle-down effect where voters move against the Republican president in large numbers also has called into question the makeup of the Senate, with Cook calling it a "toss up" whether the Democrats can run a "trifecta" in November by holding the US House of Representatives and taking control of the Senate and the White House.
Financial regulation and legislation
The second hour of the FIA event featured a panel discussion of industry and government insiders that delved into the current rush to finalize financial services regulation in the second half of 2020, before would could potentially be a November election that brings big change in Washington next year.
Fred Hatfield, a former Senate Chief of Staff, former commissioner of the US Commodity Futures Trading Commission and current ICE board member, said that the rate of legislative proposals in 2020 has remained "brisk" despite it being an election year, in part because of the need for an urgent pandemic response. However, he noted that in 2019 there were nearly 3,000 regulatory agency rulemakings compared with just over 100 or so Congressional laws. As such, it is crucial to focus on the agencies for the rest of 2020, as well as any potential changes in leadership next year as a sign of what the industry should expect.
"There's an emphasis on finishing important rules" at the CFTC, like those on Electronic Trading Principles and position limits, as the agency pushes ahead with the agenda laid out by Chairman Heath Tarbert, he said. However, the election will undeniably change the agenda, Hatfield said. He also noted that the Congressional Review Act passed in 1996 allows laws passed in the last 60 days of a prior Congress to be overturned by the incoming class of lawmakers, adding a sense of urgency to the current suite of proposals to finalize rulemakings as soon as possible.
One key proposal that remains outstanding is the reauthorization of the CFTC. Carlton Bridgeforth, professional staff at US House Committee on Agriculture, noted that the current measure was a "bipartisan bill that passed the Ag Committee on a voice vote." However, he conceded that the current focus on coronavirus relief and the chance of a political change in November makes it an uphill climb to advance the legislation with a full House vote in the near future.
Ryan Jachym, a vice president in the Washington office of Goldman Sachs, noted that "the non-partisan nature of American agriculture" carries over into the work of the House and Senate Agriculture Committees on legislation that affects the CFTC. However, when that legislation comes before the full House, the voting tends to be more partisan, she said, and the desire to "keep it non-controversial" has slowed down reauthorization efforts.
Bryan Dierlam, director of government relations at Archer Daniels Midland, said there's a chance a bipartisan bill will move through a "lame duck" session of Congress after the November vote, but noted that "if the political environment shifts dramatically in November, they [Democrats] may hold reauthorization over as a vehicle for reforms."
Among the items that could be on the agenda of a new Democratic leadership in Congress would be user fees or a financial transaction tax, either with an aim to fund the CFTC's operations or simply to raise revenue for the federal government. But Bridgeforth of the House Ag committee noted that Republicans have been vehemently opposed to those efforts, and "when one side doesn't want to do it as aggressively as they don't want to do it" it would demand such a high political toll that Democrats will think twice before pressing the issue.
Jachym of Goldman Sachs agreed, noting that the optics of such proposals would be bad for Democrats if they are really focused on rebuilding in the wake of coronavirus challenges as "it's hard to think of a segment of the economy that wouldn't be hurt by that search for revenue."
Hatfield, the former CFTC Commissioner, also noted that while many insiders expected President Trump and Republicans to make big changes in existing laws and regulations, there was "just tweaking" and that it may not be realistic to expect Democrats to embark on massive financial reforms. "It's not going to be Dodd-Frank 2.0, it's not going to be Glass-Steagall," he said. "Just some chipping around the edges."
Hatfield also noted that the industry may benefit by "other people in the crosshairs" if the Democrats win big, including the healthcare industry and big technology firms, taking pressure off financial services as the legislative agenda moves in that direction.