smart spending

Obama's second term: Who wins?

Obama wins election | ASSOCIATED PRESS
Highlights
  • What will happen to mortgage rates in the coming months or years?
  • The CFPB will live on under the second Obama administration.
  • Higher-income investors will face higher taxes under Obama.

President Barack Obama has been re-elected president and is poised to move forward into his second term. When it comes to his policies on pocketbook issues, who is set to win, and who will lose? Following are some potential winners and losers under his administration.

Homeowners and homebuyers: Winners

The national housing market is a titanic economic force that isn't affected much by presidential elections. Housing seems to have bottomed out and has shown signs of recovery. Like your video game-addicted cousin, mortgage rates are expected to remain in the basement for months or maybe years.

Obama didn't talk much about the nation's housing problems during the election campaign, and we can expect the same mix of marginally effective aid programs for underwater homeowners who want to refinance and for troubled homeowners who want to get loan modifications.

Obama paid lip service to doing something about Fannie Mae and Freddie Mac, with no details.

CFPB: Winner

Under Obama, the Consumer Financial Protection Bureau will live on. And it may have a stronger bite now that the election season is over. Expect deeper investigations into the financial services industry and its handling of student loans, prepaid credit cards, credit scores, debt collection and other key financial products for Americans.

People without health insurance: Winners

A second Obama term means the Affordable Care Act, the sweeping health insurance overhaul that the president signed in 2010, can proceed toward its goal of expanding coverage to shrink the number of uninsured Americans by 30 million. Mitt Romney had vowed to repeal and replace the so-called Obamacare law, even though it resembles the Massachusetts health insurance reform that he spearheaded as governor.

Some of the biggest changes under the law are coming during the sixth year of the Obama presidency, in 2014. The "individual mandate" will take effect, requiring most Americans to carry health insurance or face a financial penalty. Also, state insurance exchanges where consumers will shop for insurance are scheduled to go online, and insurance companies will no longer be allowed to discriminate against people with pre-existing conditions.

Investors: Losers, when it comes to taxes

Higher-income investors will face higher taxes under Obama. He wants to increase the capital gains tax rate to 20 percent on high-earners and tax dividends at ordinary income, which could mean a rate as high as 39.6 percent. He also wants to institute the so-called Buffett rule, i.e., a minimum 30 percent tax on high-earners.

Higher-income taxpayers: Losers

The president is adamant that those making $250,000 or more pay higher income tax rates. He wants to use the top two rates before George W. Bush cut them in 2001; that is, the current 33 percent rate would go to 36 percent and the 35 percent rate would jump to 39.6 percent.

Student loan borrowers: Mostly winners

Those with student loans win under a second Obama administration because it will keep originating student loans through the Department of Education -- which has a strict set of lending standards in place. They also win because Obama backs the federal income-based repayment plan.

Students needing financial aid help could win if Obama carries through on his promise to expand the Pell Grant and make the American opportunity tax credit permanent. And those students living in the country without legal permission could win if Obama's Development, Relief and Education for Alien Minors, or DREAM Act, passes. It would increase college access and financial aid for some of these students.

Financial regulation: Winner

Obama's re-election means the implementation of the Dodd-Frank financial reform law will continue to move forward at the somewhat glacial pace it set in his first term. Hundreds of rules remain to be written, according to law firm Davis Polk's October "Dodd-Frank Progress Report."

That said, banks will probably begin feeling the effects of several of the law's biggest provisions next year, including enhanced capital requirements that force them to keep more money on hand, and the Volcker rule, which prevents banks from playing the markets with their own money.

Banks probably also won't see the rollback of regulations they had been hoping for with a Romney victory. Romney had pledged to begin the process of repealing Dodd-Frank in his first year of office.

Contributing authors: Holden Lewis, Claes Bell, Janna Herron, Kay Bell, Jessica Patel, Doug Whiteman and Katie Doyle.

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