THE BIG PICTURE
After over a year of hard-fought campaigning, and in the midst of a once-in-a-century pandemic, tens of millions of Americans showed up at the polls on Tuesday and elected former Vice President Joe Biden to serve as the 46th President of the United States. Turnout in 2020 is projected to be the highest in 120 years, with an additional 100 million Americans having cast their ballots prior to Election Day through early and mail-in voting. On Election Day, all eyes were focused on the key battleground states that had handed the President his surprise victory in 2016, though delays in processing mail ballots precluded a definitive call on Tuesday evening. Millions of votes continued to be counted throughout the week as Election Day shifted into Election Week, and the race remained in flux. Democratic hopes that demographic shifts in Texas could flip the conservative stronghold fell short of expectations, while Arizona, Nevada, Georgia, North Carolina, and Pennsylvania remained too close to call for much of the week. The path for President Trump’s reelection narrowed as Biden overcame Trump’s early lead in the undecided states, largely due to his strength in mail ballots. By Saturday morning, the trajectory of the vote count in Georgia, Nevada, and Pennsylvania was sufficiently clear to allow the networks to call the race for Joe Biden and Kamala Harris. Harris will make history, shattering the glass ceiling as the first woman, and first person of Black and Asian American descent to serve as Vice President. President Trump has thus far declined to concede the race, and has promised court action to defend “legal” votes.
President-elect Biden and Vice President-elect Harris’ supporters took to the streets in cities around the country in jubilant celebration after the official call was made. The pair addressed the nation on Saturday evening, promising to work for all Americans, not just those who voted for them, and claiming a clear mandate to combat the pandemic, systemic racism, climate change, and to fix the economy. Transition work has commenced, and implementing a pandemic response strategy is of paramount importance. President-elect Biden is set to announce a 12-member Coronavirus Task Force to be co-chaired by former Surgeon General Vivek Murthy, former Food and Drug Administration Commissioner David Kessler, and Yale public health professor Dr. Marcella Nunez-Smith. Rumors are already swirling over potential nominees for cabinet positions and top administration roles, though those selections are not expected to be announced until later this year. President-elect Biden’s choices may ultimately depend upon the final composition of the Senate, which will be responsible for confirming or rejecting his nominees. A flurry of executive orders are expected shortly after the inauguration, undoing several Trump administration policies, including a push to rejoin the Paris climate accord, reverse the withdrawal from the World Health Organization, and repeal a ban on travel from certain Muslim-majority countries.
Democrats’ hopes for capturing control of the Senate were dashed after several challengers failed to unseat Republican incumbents. The bright spots for progressives on Tuesday evening were in Arizona and Colorado, where former astronaut Mark Kelly and former Governor John Hickenlooper emerged victorious. On the Republican side, GOP candidates were able to flip Doug Jones’ seat in Alabama, and hold on in Iowa, Kansas, South Carolina, Texas, and Maine, while both Georgia races are heading to a January runoff. Although the races in Alaska and North Carolina have not been formally called, Republicans are favored in both, and so it is likely that the Georgia races will ultimately decide which party controls the chamber in the 117th Congress. The January 5th contests between Democrat Raphael Warnock and Republican Kelly Loeffler, and Democrat Jon Ossoff and Republican David Perdue are certain to be the focus of intense efforts in the coming weeks, as Democrats pin their hopes on the outcome. Without majority control in the Senate, many of the more ambitious agenda items in the Biden-Harris administration, such as court reform, and action on climate change, taxes, immigration, and healthcare are likely to be moderated or face significant roadblocks. In such a scenario, executive actions are likely to be leveraged as the driver for policy.
While Committee leadership and the resultant panel agendas remain in limbo, Republicans are favored to remain in control. The Senate Commerce Committee will likely continue to be led by Senator Roger Wicker (R-MS) and have amongst its priorities work on a national privacy bill, as well as consideration of the liability shield provided to technology companies by Section 230 of the Communications Decency Act. The Senate Small Business Committee, currently chaired by Senator Marco Rubio (R-FL), may see a change in leadership, as Rubio may shift to chair the Senate Intelligence Committee with either Senator Rand Paul (R-KY) or Senator Tim Scott (R-SC) in line to assume the chairmanship. The Committee is set to continue oversight of the Paycheck Protection Program, though Republicans and Democrats on the panel disagree over the allocation of additional relief and resources. The Senate Banking Committee will likely be chaired by Senator Pat Toomey (R-PA), as current chair Senator Mike Crapo (R-ID) will likely shift to chair the Senate Finance Committee. A Republican-led Banking Committee will likely focus on housing issues, with particular attention to ending the conservatorship for Fannie Mae and Freddie Mac. Senator Jim Risch (R-ID) is set to retain control of the Senate Foreign Relations Committee, which will focus on the US-China relationship, arms control, and threats posed by Russia and Iran.
Democrats are poised to retain control of the House, but faced a more challenging evening than anticipated on Election Day, with Republicans flipping several seats that had been considered Democratic-leaning or toss-ups. In a sharp reversal from the blue-wave 2018 midterm elections where Democrats gained 41 seats, instead of expanding their majority in 2020, the net result will be a loss, including the reversal of several seats that were flipped in 2018, such as Debbie Mucarsel-Powell (FL-26), Donna Shalala (FL-27), Max Rose (NY-11), Kendra Horn (OK-05), and Joe Cunningham (SC-01). The results shocked Democratic leadership, and prompted a fracture between the progressive and moderate wings of the caucus that was evident during a phone call as lawmakers contemplated missteps and strategized on how best to move forward. House Speaker Nancy Pelosi has renewed her campaign to serve as Speaker in the next Congress, and, while she is likely to face increased competition for the role after the party’s poor showing, she is expected to maintain control of the gavel.
Despite their disappointment in the results, House Democrats are expected to retain leadership of the Committees. The House Small Business Committee, chaired by Representative Nydia Velazquez (D-NY) will remain focused on the COVID-19 pandemic’s devastating effect on small businesses, and its oversight of the Small Business Administration’s Paycheck Protection Program. With the retirement of House Appropriations Committee Chair Nita Lowey (D-NY), there is a three-way campaign to lead the panel between Representatives Marcy Kaptur (D-OH), Rosa DeLauro (D-CT), and Debbie Wasserman-Schultz (D-FL). The House Financial Services Committee will likely continue to be led by Representative Maxine Waters (D-CA), and continue its focus on legislation addressing the adverse effects of the pandemic, including pushing for rental and mortgage assistance.
Despite President-elect Biden’s victory, several of President Trump’s appointees will continue to serve out the remainder of their terms in various positions at the independent financial regulatory agencies. This fact may reassure Wall Street, which has favored the reduction in regulatory burdens promulgated by the current administration. President-elect Biden has reportedly tapped former CFTC Chairman Gary Gensler to advise him on Wall Street oversight during the transition.
There are currently two vacancies on the Federal Reserve Board of Governors. President Trump nominated Christopher Waller and Judy Shelton to those seats and each had their nomination approved by the Senate Banking Committee (18-7 and 13-12), but neither nomination has been forwarded to the full Senate. The terms for Chairman Jerome Powell and Vice Chair Richard Clarida are set to expire in 2022. Though Chairman Powell is a registered Republican, he is respected on both sides of the aisle, and it is uncertain whether President-elect Biden will seek to renominate him. President-elect Biden has pledged to focus on diversity, and included in his economic plan a promise to strengthen the Federal Reserve’s focus on racial economic gaps, including a requirement that it collect data and report specific metrics and actions taken to improve any disparities. If Republicans retain control in the Senate, the Federal Reserve may face increased pressure to provide additional monetary stimulus to support the economy through the pandemic if gridlock ensues and Congress is unable to pass meaningful legislation.
Current Securities and Exchange Commission Chair Jay Clayton’s term is set to expire in June 2021, and so President-elect Biden will have a relatively early opportunity to select his replacement. A Democrat-controlled SEC will likely seek to roll back some regulatory exemptions granted under the Trump administration, and amend the Regulation Best Interest rule by imposing a fiduciary duty on advisers, if not replace it entirely. A change in leadership will also likely herald a renewed focus on enforcement and inspections, particularly in the investor protection arena.
Current Commodity Futures Trading Commission Chair Heath Tarbert’s term is set to expire in April 2024, and he has indicated in recent days that the outcome of the election will not have a significant impact on the Commission’s overall agenda, though it may affect areas of emphasis. Under a Biden administration, Tarbert foresees climate change as a new area of focus, noting it is “exciting” to think about how the derivative, swaps, and futures markets “could have climate risk addressed in them and to allow innovation.” The agency will be full steam ahead on the implementation of the regulations it has released in the last 18-months, covering position limits, capital requirements, and swap data reporting.
The Consumer Financial Protection Bureau, which was created during the Obama administration by the Dodd-Frank Wall Street Reform and Consumer Protection Act, will almost certainly take a more active role under a Biden administration. The Biden-Sanders Unity Task Force included among its recommendations a boost to consumer protection regulations. Given the Supreme Court’s recent ruling in Selia Law LLC that the Director of the CFPB is terminable at will, President-elect Biden will likely appoint his own choice to fill the position shortly after the inauguration. Possible contenders include Rohit Chopra, who currently serves as a commissioner at the Federal Trade Commission and previously served as assistant director at the CFPB, Patrice Ficklin, the current Fair Lending Director at the CFPB, Representative Katie Porter of California, and Bharat Ramamurti, a member of the COVID-19 Congressional Oversight Commission, a congressional oversight body tasked with overseeing the Department of the Treasury's and the Federal Reserve Board's management of stimulus and loan programs mandated by the CARES Act. Areas of the CFPB’s future focus would likely include overdraft and payday loan fees, FedAccounts, a push for postal banking, data privacy, credit access, and the creation of a credit reporting agency within the Bureau.
While Federal Deposit Insurance Corporation Chairman Jelena McWilliams’ term does not expire until 2023, she may opt to not serve in a Biden administration. By law, the FDIC’s board of directors may not have more than three members of the same political party, and, given the likelihood that President-elect Biden will replace the leadership of the CFPB and OCC, both of whom sit on the FDIC’s board, McWilliams could find herself as a minority chair with a reduced capacity to effect change. If a change in leadership occurs, of particular focus would likely be the effort by the FDIC to revamp the regulations implementing the Community Reinvestment Act, particularly given the lack of consensus with recently adopted OCC regulations and a proposal by the Federal Reserve.
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