The main question batted around at The Washington Outlook panel at the 2021 Options Industry Conference on Wednesday was whether President Joe Biden can realize his hope for bipartisanship on his agenda, given that a large chunk of his new American Families Plan proposal is anathema to Republicans – in particular the proposed tax increases on the wealthy that would pay for much of it.
The panel, moderated by Jill Sommers, a senior advisor at Patomak Global Partners and a former CFTC commissioner, started out attempting to predict what Biden would say in his address to a joint session of Congress Wednesday evening, and ended up mostly correct in that Biden discussed the progress in fighting Covid in his first 100 days, the climate crisis, tax increases, and jobs. Biden is presenting two proposals, the American Jobs Plan, which he introduced last month, and the newer American Families Plan. The Jobs Plan addresses infrastructure, clean energy, and corporate tax proposals, and the American Families Plan expands access to education and would cut the cost of child care and give more support to working women.
Biden campaigned on the idea of uniting Republicans and Democrats, Sommers said. However, although Republicans at the regulatory agencies and in Congress may be on board with some of the infrastructure components of the plan, they have little interest in spending billions for education and child care.
Ryan Jachym, a vice president at Goldman Sachs, and Walton Liles, a principal at Blue Ridge Law & Policy, said they thought the House Financial Services Committee and the Senate Banking Committee will be focused less on the technical regulatory landscape and more on broad issues such as diversity and inclusion, racial justice and inequality, as well as climate change.
But those are the issues on which new SEC Chairman Gary Gensler and the Republican SEC commissioners diverge the most. Liles said Gensler and the Republicans are more likely to agree on market-based issues such as cryptocurrency and shortening the settlement cycle for stock trades, and even on additional disclosure on payment for order flow. But the Gensler/Biden views on climate, ESG and corporate governance are very divergent from those of the Republican commissioners, Liles said.
“The Democrats want to be very bold; they want to pursue significant changes while they have control. But they know they have razor-thin margins [in Congress],” Jachym added.
“Pieces of the packages have broad support – the key is how to put them together and what mechanism you use,” Liles said. “The Covid relief package alone is more than $6 million – that’s a ton of spending. You can’t get it all done in a bipartisan way. It will be an issue of trade-offs.”
“I think bipartisan means decorum,” said Strunk. “Tax rates are a non-starter for Republicans. [And some of the tax proposals have little support from Democrats either.] Given the [narrow] margins in the House and Senate, it’s hard to see this coming together significantly. So Biden must really manage expectations.”
Sommers asked the panel what members of the Financial Stability Oversight Council (FSOC) and other regulatory agencies could do to further Biden’s agenda.
Jachym said that in the Treasury and the White House, climate change is seen from a “whole of government” approach, as Treasury Secretary Janet Yellen called it in remarks a week ago. The climate is a “critical piece for Treasury and internationally,” Jachym said. “Even the CFTC is looking at these issues as part of the whole of government’ approach.”
Yellen has also indicated that the Treasury may conduct reviews of market turmoil events over the past year. “Yellen has spoken about that relating to nonbank financial intermediation and even the Treasury markets. There is lots of discussion among the regulatory agencies on those issues,” Jachym added.
Liles also said he thinks some market-driven events like the GameStop phenomenon or the volatility of last year will drive the agenda. He said Gensler has some of his priorities at the SEC dictated for him by market events and politics but he has leeway in other areas, for example in the digital asset space.
“[Previous SEC Chairman Jay] Clayton focused on market data – there was a lot of bipartisan support behind that component,” Jachym said. “It will be interesting to see how Gensler can move that forward.”
As Liles pointed out, “If history is any guide, Republicans are favored to take the House back in the midterms. That makes for pressure on Democrats to go for a progressive agenda now, but it also makes it more difficult to do so.”
Jachym added, “The revenue-raising side will be very difficult, particularly as we go through an economic recovery. Getting support across the spectrum of Democrats in particular will be challenging.”