Several prominent critics of the banking industry won election or re-election Tuesday. The most obvious person to start with is Sen.-elect Elizabeth Warren, a Harvard professor who in the past championed, and ultimately took over the creation of, the Consumer Financial Protection Bureau.
"The election of professor Warren and re-election of New Jersey Sen. Robert Menendez and Ohio Sen. Sherrod Brown allow Democrats to flex their muscles on pushing rule-writing and funding for the CFPB and other parts of Dodd-Frank," says Mayra Rodriguez Valladares, mananging partner at MRV Associates, a financial regulatory and capital markets firm.
Beyond Dodd-Frank, Brown also may push for higher reserve requirements for banks considered "too big to fail," Valladares says. That may help them ride out the next financial crisis, but it will also force them to keep more cash in low-yielding, risk-free investments, she says.
If the past several years are any indication, the combined effect of increased regulatory scrutiny could be a continued upward march in fees and other negative consequences for bank customers.
But that may not apply equally. There's a growing consensus, reinforced by this election, that main street banks and credit unions should be treated differently from the big banks on Wall Street, Valladares says.
Paul Merski, executive vice president of congressional relations for the Independent Community Bankers Association, agrees.
"I think there's been a growing recognition of the dramatic difference between a handful of the trillion-dollar institutions versus the more basic traditional model of community banking, and I think the incoming makeup of the Congress understands that," Merski says.
As a result, customers at community banks and credit unions may continue to see the availability of free checking, low bank fees and rewards improve compared to the megabanks, as has been the case since small institutions got an exemption from the Durbin Amendment in 2010, Valladares says.
What do you think? Will Warren and other victors in the election stick it to the megabanks?
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