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4 takeaways from Biden’s embrace of progressive banking policies

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WASHINGTON — A new document reflecting financial services policies that a Joe Biden administration could pursue may alarm some in the industry about a progressive turn for the Democratic candidate, but numerous analysts say its real-world implications are limited.

The former vice president and presumptive Democratic nominee released policy recommendations late Wednesday developed by a “unity task force” with Bernie Sanders, the Vermont senator and former Democratic presidential candidate. The document calls for the creation of a public credit reporting agency, banking access for marijuana businesses in states where the drug is legal, and enabling banking services through the U.S. Postal Service.

But it is unclear whether a Biden administration would be able to enact these financial policy goals, particularly if Republicans maintain control of the Senate or if Democrats only gain a slim majority. Rather, analyts said, the recommendations appeared aimed at appeasing progressive voters who initially supported Sanders in the primary.

Brian Gardner, an analyst at KBW, pointed out that the policy announcement “was light on specifics.”

Former Vice President Joe Biden, the presumptive Democratic presidential nominee, released policy recommendations developed by a “unity task force” with Bernie Sanders.
Former Vice President Joe Biden, the presumptive Democratic presidential nominee, released policy recommendations developed by a “unity task force” with Bernie Sanders.

“For financial sector investors who thought that a collaboration between former Vice President Biden and Senator Sanders would drag Mr. Biden sharply left, the report should be seen as at least a temporary reprieve,” Gardner said in a note on Thursday.

Here are a few key takeways from the Biden-Sanders unity document:

Biden campaign warms to progressive ideas

Biden prevailed in the Democratic primaries as a moderate, but his campaign is clearly attempting to cement support from progressive voters who supported Sanders as well as Sen. Elizabeth Warren, D-Mass.

That said issues like postal banking are no longer on the fringe of the Democratic Party. They have largely entered the mainstream.

Specifically, the 110-page document — which also includes climate change, criminal justice and health care proposals — calls for offering consumers access to banking through the U.S. Postal Service. It also supports reimposing Glass-Steagall’s separation of retail and investment banking.

“Democrats will support and encourage Congressional efforts to guarantee affordable, transparent, trustworthy banking services for low- and middle-income families, including bank accounts and real-time payment systems through the Federal Reserve and easily accessible service locations, including postal banking,” the policy announcement said. “Democrats will work to reverse the over-financialization of the American economy by maintaining and expanding safeguards that separate retail banking institutions from more risky investment operations.”

Both ideas so far have failed to make much headway, and are largely opposed by the financial services industry.

While Biden's oppenness to including them as part of the Democratic platform could give such proposals more traction, analysts said the campaign is also likely trying to ensure voter turnout in November.

“To us, this is designed to ensure progressives show up to vote for Biden,” Jaret Seiberg, a policy analyst at Cowen Washington Research Group, said in a note Wednesday. “On that count, it may work. For housing, Democrats want to spend more but also make it easier to sue lenders. Banks see a call for Glass-Steagall and Postal Banking. Neither are likely.”

Credit bureaus may be "biggest losers" in task force plan

With the credit bureaus TransUnion, Experian and Equifax dominating the credit reporting industry, the Biden-Sanders plan said Democrats will push to create a new government credit reporting agency housed within the Consumer Financial Protection Bureau.

The public credit reporting agency is an attempt “to provide a non-discriminatory credit reporting alternative to the private agencies,” the policy announcement said.

All federal lending programs would be required to use the public credit reporting agency to evaluate borrowers' creditworthiness, including for home lending and student loans.

“The biggest losers in the Biden/Sanders task force report were, in our view, the credit reporting agencies,” Gardner said in his note. “This could undercut the business of the current CRAs. It is too early to forecast with any confidence the prospects of this proposal passing Congress, but we think it would face an uphill climb even if Democrats sweep the 2020 elections.”

Francis Creighton, president and CEO of the Consumer Data Industry Association, said the industry opposes the creation of a national credit reporting agency, but is supportive of other measures to increase financial inclusion.

“America's credit reporting agencies have long supported the use of alternate and trended data to help expand credit access for consumers,” Creighton said. “While we disagree with the proposal for a government-run credit bureau, we agree it is imperative to have accurate and objective credit reporting.”

A Biden victory could strengthen the government's focus on affordable housing issues

Democrats are largely expected to emphasize affordable housing if they win control of the White House or the Senate, or both, in the November elections.

“Housing in America should be stable, accessible, safe, healthy, energy efficient, and, above all, affordable,” the Biden-Sanders policy document says. “No one should have to spend more than 30 percent of their income on housing, so families have ample resources left to meet their other needs and save for retirement.”

The recommendations include an increase in funding for the Housing Trust Fund, which is financed by Fannie Mae and Freddie Mac, “to greatly expand the number of affordable housing units on the market.”

The document also includes a “Homeowner and Renter Bill of Rights” to prevent mortgage brokers from leading borrowers into loans that “cost more than their credit history demands,” and would prevent mortgage servicers from pursuing a foreclosure when a homeowner is in the process of modifying a loan.

The Bill of Rights would give homeowners opportunities to seek financial redress from mortgage lenders and servicers that violate these protections and provide legal support for wrongful evictions.

“We see this as mixed for housing,” Seiberg said in his note. “Democrats want to spend a lot more money on housing, including affordable multifamily units and down payment help. Yet they also seem to be attacking risk-based pricing and they want to make it easier to sue lenders and servicers.”

Biden-Sanders cannabis policy would favor banks

For years, members of Congress representing states that have legalized marijuana for either recreational or medical purposes have pushed for state-approved cannabis businesses to have access to banking.

The House last year passed the SAFE Banking Act with the support of nearly all Democrats and more than 90 Republicans. That bill would bar federal regulators from penalizing a financial institution for opening an account for a cannabis business that is compliant with state law. However, it has stalled in the Republican-controlled Senate.

The Biden-Sanders plan appears to take a broader approach to cannabis, allowing states to determine their own cannabis laws. The Justice Department would not pursue cannabis cases in states where use is legal.

“That is a very broad statement that should offer some protection to companies that work with state-legal cannabis firms as well as for the state-legal firms themselves,” Seiberg said.

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