Financial firms are looking to regroup and adjust to a new political landscape in Washington that will bring one of their harshest critics to the U.S. Senate.
Big banks will have to spend the next four years working with a president they tried to oust in favor of Republican Mitt Romney, and are preparing to deal with a familiar adversary in Sen.-elect Elizabeth Warren (D-Mass.).
“She may become the No. 1 senator in anti-bank rhetoric, even beating out Sen. Dick Durbin [D-Ill.], which is hard to do,” said Richard Hunt, president and CEO of the Consumer Bankers Association. “There’s no question that Elizabeth is a major hurdle in our way.”
Nevertheless, the financial industry is hoping to make a push next year to get Congress to revisit some provisions of the financial overhaul while steering negotiations on the fiscal cliff and deficit reduction.
But first, the industry will have to mend fences with a president who won reelection despite its best efforts to defeat him.
Wall Street firms, bristling over new regulations pushed by the president as well as his verbal jabs at the financial industry, flocked to Romney as he built his campaign. In 2008, employees with financial giants Goldman Sachs and JPMorgan populated the lists of top donors to Obama’s campaign. By 2012, the top six groups to donate to Romney’s campaign were big banks and their employees, according to the Center for Responsive Politics.
“The president came after banks pretty hard, and it was hard for people to support the president after he called us fat cats,” said Hunt. “That was pretty difficult for many people in New York to support him a second time.
Hunt was referring to a December 2009 interview in which Obama described Wall Street traders as “a bunch of fat-cat bankers.”
But despite the lingering tensions, the financial industry remains hopeful that the new year will bring opportunities on Capitol Hill and in the White House.
“At the end of the day, there’s a mutual goal between the administration and the markets, which is to have a robust and dynamic financial-services sector,” said Ken Bentsen, head of the Washington office of the Securities Industry and Financial Markets Association (SIFMA). “Everybody’s adults here.”
One executive said that, public rhetoric aside, the two camps still rely on each other for insight and expertise, and there is no reason to expect that to change any time soon.
“In private, both sides need each other because, for better or worse, we’re the experts here,” the executive said. “We need Treasury and Treasury needs us.”
Industry leaders did find a silver lining in Tuesday’s results. Hunt pointed out that while Democrats made gains in the Senate, some of those incoming members, like Chris Murphy of Connecticut and Joe Donnelly of Indiana, are viewed as pro-business.
And Sen. Jon Tester (D-Mont.), who backed banks in a nasty lobbying battle with retailers over debit card fees, narrowly won his reelection bid against Republican Rep. Denny Rehberg.
There is also a sense that as the financial crisis fades from view, there could be an opportunity to make inroads as entrenched political positions on Dodd-Frank fall by the wayside.
Sen. Mark Warner (D-Va.), a Banking Committee member, said in October that he thought Congress should take up a technical corrections bill to address errors in Dodd-Frank in the new Congress. A new ally could also emerge at the Treasury Department, where Timothy Geithner is preparing to depart after serving out Obama’s first term.
Further regulatory shake-up at the Securities and Exchange Commission, Commodity Futures Trading Commission or the Federal Reserve could further reset the debate on financial reform.
For the time being, it remains to be seen whether Warren will win a seat on the Banking panel, where she would directly oversee efforts to alter Dodd-Frank.
Two Democratic spots are opening up on the panel thanks to the retirements of Sens. Daniel Akaka (Hawaii) and Herb Kohl (Wis.), but some have speculated Warren could end up on the Judiciary Committee as well, where her legal expertise in the bankruptcy code could be put to use. Or, if she wants to broaden her portfolio, she could seek out spots on panels working on foreign policy.
Either way, Wall Street’s representatives say they are willing to work with her so long as she is willing to work with them.
“I’m sure we will have our disagreements,” said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable. “She’s already said that ‘I want to talk and work with anybody,’ and we look forward to working with her.”