WASHINGTON – After months of handwringing, large political donations and the most aggressive push in history by bankers against an incumbent president, the industry now faces a world almost exactly the same as the one before the election season started.
President Barack Obama will remain president, Republicans still control the House and Democrats – against all odds – actually added to their Senate majority.
This mostly status quo election is a severe blow to bankers, who had hoped Republican victories would help them revise the Dodd-Frank Act and usher in more bank-friendly regulations.
It also raises a host of questions about what happens next, covering everything from the mortgage interest deduction to a renewed legislative drive to break up the largest banks.
We offer the following critical questions facing banks in the post-election environment:
1. Will the election spur a big bank breakup?
One of the early predictions following Tuesday's election was that it may embolden lawmakers who favor capping the size of banks. Democratic Sen. Sherrod Brown, a key proponent of that idea, won reelection and will be joined by Elizabeth Warren, a longtime bank critic seen as sympathetic to a big bank breakup.
Yet the idea is also popular in some conservative circles, raising questions about whether Democrats and Republicans could actually work together on big-bank downsizing.
"Advocates of big-bank break-ups have gained a new edge," wrote Karen Shaw Petrou, managing partner of Federal Financial Analytics, in an e-mail to reporters. "Progressive Democrats don't agree with populist Republicans on much but their shared belief that big banks remain too big to fail. I think this will be among the most aggressive reform items on Congress' agenda early in the new year, one with considerable political potential."
Camden Fine, the president of the Independent Community Bankers of America, agreed.
"The idea of some sort of downsizing of the too-big-to-fail banks will gain much more traction, and if there is another major scandal … then I think there is a real possibility that the Congress would move to make structural changes in the too big to fail banks," he said.
