With the midterm elections only six-odd weeks away, control of the US House is one of the questions that will shape the next Congress. I wanted to think a little about what a future Democratic House might mean in terms of policymaking for banking, fintech, and financial services.
New Sheriffs with Old Badges
The biggest difference could be in the leadership of various House committees. For example, the House Financial Services Committee is currently chaired by French Hill, a Republican from Arkansas. Maxine Waters, a Democrat from California and the committee’s current ranking member, previously chaired the committee. If the Democrats control the House, Waters could again become chair.
As chair, Waters previously emphasized consumer protection, affordability, diversity/inclusion, and congressional oversight. More recently, she has raised concerns about bank safety and soundness, cybersecurity and the financial risks associated with AI, as well as cryptocurrencies and digital assets.
What could the committee accomplish? Oversight would be one of the committee’s most significant tools, along with the ability to issue subpoenas and compel testimony from banks, other financial institutions, and regulators. Hearings, investigations, and committee reports could provide additional opportunities to examine financial policy and bring those issues before the public and the press.
Community Banks and Regulatory Clarity as Common Ground
Given the acrimony between the parties, are there any opportunities for a Democratic House and the Trump Administration to work together on banking policy?
While Democrats and Republicans have very different priorities when it comes to banking and finance, there are some areas of potential compatibility. Both Democrats and Republicans have said that they support efforts to help reduce regulatory burdens on smaller financial institutions. The devil is in the details, but it is not impossible to imagine a compromise in which reduced regulatory burden on community banks and credit unions was paired with a commitment to continued, if not intensified, oversight when it comes to the big banks and larger financial institutions. In fact, Hill and Waters actually worked together on the bipartisan 21st Century ROAD to Housing Act, which included provisions benefiting community banks.
Providing fintechs with greater regulatory clarity over issues like bank-fintech partnerships, for example, is another area where a Democratic House and the Trump administration may be able to find commonality. But one major sticking point might be crypto, where there is a great deal of suspicion about the role of digital assets—including meme coins—among many Democrats, as well as concerns and questions over President Trump and his family’s own involvement in the cryptocurrency industry. As such, policies focused more on stablecoins, which occupy a more specific policy and payments question compared to digital assets as a whole, represent a more fertile ground for bipartisan discussion..
Policy Debates and Paradigm Shifts
Most importantly, Democratic control of the House of Representatives next year would set the stage for a broader debate on the country’s financial priorities. Under the Trump administration, deregulation and lowering compliance costs have been central, along with limiting the authority of regulatory agencies such as the Consumer Financial Protection Bureau (CFPB). For Democrats, fortifying these agencies is a major goal, as is restoring an emphasis on consumer protection, financial stability, and regulatory independence.
What is interesting to me is how current concerns and controversies—the pace of AI development, the proliferation of prediction-market and gambling activity, concerns over government ethics and conflicts of interest, and the broader affordability debate—could interact with the traditional stances politicians on both sides of the aisle have championed and defended. How much will concerns about the longer-term risks of AI change the debate over regulation in financial services and other sectors? And, in a divided-government scenario, where will there be enough common ground for Congress and the administration to address specific problems facing banks, fintechs, and their customers?
Photo by terry bazemore iii
