The 2024 US presidential election between Vice President Kamala Harris and former President Donald Trump is one of the most closely watched and analyzed in American history. It promises to be a historic election, as Harris would become the first woman to hold the office in the country’s history, or Trump would become only the second former president to return to office after losing a re-election bid. Beyond the millions of voters anxiously awaiting the outcome, leaders in many business sectors are trying to predict the impact on their companies.
The banking industry, in particular, could go one way or the other, depending on the election results. In his first term, Trump made good on his promise to remove as many regulations as possible. Meanwhile, the Biden administration that Harris has been a part of since January 2021 has made a firm commitment to regulations. While neither candidate for the office in 2024 has delivered detailed plans for financial sectors, the past histories of Harris and Trump—and their respective political parties—provide a few clues. How will the election impact the banking industry? Let’s take a look.
Short-Term Impact of the 2024 Election
Regardless of the election outcome, some market volatility and uncertainty will be normal. Fluctuations in stock markets (both in the US and abroad) are perfectly normal, as investors are unsure of how things will change once the new administration assumes office in January. However, this is less likely to be a factor this year due to the familiarity investors have with the candidates and their records.
During the Trump administration, the stock market hit record levels—even in 2020, during the COVID-19 pandemic shutdowns. Then, in the Biden/Harris administration, the stock market continued to soar, hitting new records in the weeks after Harris became the official Democratic Party nominee.
While the stock market is likely to be in good hands either way, the potential for regulatory environment changes is high, regardless of the winner. Harris’s experience as a prosecutor and the Attorney General of California means she has experience fighting financial fraud and, therefore, values financial regulations. Trump, on the other hand, would almost certainly roll back regulations once he assumes office.
Consumer and business sentiment may be cold after a Harris win, however. The inflation that has plagued consumers since the COVID recovery remains a weak spot for the Biden/Harris administration. Accordingly, polls show voters trust Trump more with the economy.
Long-Term Impact on the Banking Industry
The long-term perspective on a Harris win is that she will likely embrace more consumer protections in the banking industry. In 2023, both First Republic Bank of San Francisco and Silicon Valley Bank of Santa Clara collapsed.
Biden and Harris publicly blamed Trump’s rollback of consumer protection regulations for the failures. Combined with Harris’ record as attorney general, it’s understandable why some experts believe regulations could shape her financial policy. If Trump were to prevail, the banking industry would likely anticipate more regulation loosening, which could spur business in the long term.
The Federal Reserve’s trajectory on interest rates is at a crossroads leading up to the election. After years of slowly increasing rates to tame inflation since Biden assumed office, the Fed seems primed to finally start cutting interest rates. Either Trump or Harris is likely to benefit from the fact that the rampant inflation didn’t snowball into a recession. Still, it remains unclear if the Fed is actually committing to rate decreases.
The lending environment and the potential for economic growth will depend heavily on the Fed’s actions and where interest rates grow. Homeownership and business investments have declined since 2021, as rates have made them unaffordable for much of the middle class. Harris has made homeownership a central part of her campaign, although a rate decrease would almost certainly have to happen before the mortgage market recovers.
The Role of Political Appointments in Banking Policy
The Federal Reserve leadership position will be critical in any sort of lending recovery, regardless of who wins. It’s safe to assume that Harris will continue with similar leadership as Biden. After all, while analysts predicted a recession or full-scale economic collapse throughout 2021 and 2022, the markets remain healthy today, even if inflation still affects most Americans every day as everything seems more expensive.
Other positions to consider are leadership at the Department of the Treasury and the Financial Stability Oversight Council (FSOC). While Trump will likely embrace a free-market capitalism approach, most expect a Harris administration to deploy regulations targeting “too-big-to-fail” banks and related consumer protections.
Potential Diverging Paths Based on Party Control
Although the short—and long-term impacts of the 2024 US presidential election are mostly unknown, it seems safe to look to history for clues. We’ll likely see some predictable outcomes depending on the party in control.
A Democratic-controlled government would likely focus on stricter banking regulations, enforce consumer protections, and promote financial inclusion initiatives. A Republican-controlled government would surely implement deregulations and tax cuts for businesses and promote policies favorable to traditional banks and financial institutions wherever possible.
Leaders in the banking industry and other financial sectors should prepare for election impact by implementing flexible policies suitable to either party. They should also stay engaged with lawmakers to help shape future financial regulations.
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