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Outside the bubble

4 November 2016 By Gina Chon

Most of the world is focused on the Nov. 8 vote for the U.S. presidency. Beyond Democrat Hillary Clinton versus Republican Donald Trump, however, are a series of important ballots that will affect business and finance. Breakingviews ticks through five of them.

What is Wall Street watching?

Control over the U.S. Senate hangs in the balance. Of the 34 seats up for a vote, 24 are held by Republicans. If Democrats gain a majority, the chamber’s powerful banking committee, currently led by Richard Shelby, would be run instead by Sherrod Brown, a liberal from Ohio. Investment banks could expect more intense scrutiny and possibly additional regulations. Brown, for example, wants to raise capital standards on big lenders. The chairman controls the agenda, including which proposals come up for a vote and which chief executives or regulators get summoned to testify. That could mean the likes of JPMorgan Chief Executive Jamie Dimon and Federal Reserve Chair Janet Yellen face more heat.

What might determine Senate control?

It hinges on a few races in which Republicans are in tough fights to keep their jobs. One is Patrick Toomey of Pennsylvania, who has used the specter of Elizabeth Warren to rally support. Toomey recently told bank groups that some Democrats are reluctant to back rule changes that would help the finance industry out of fear of being criticized by his progressive colleague from Massachusetts. Toomey’s Democratic opponent, Katie McGinty, has attacked him for his previous career in the banking industry and the support he receives from Wall Street. The moderate Republican also has declined to say definitively whether he will vote for Trump.

And in the House of Representatives?

Republican House Speaker Paul Ryan is having problems with the most conservative members of his party. The Freedom Caucus, a group of about 40 conservative Republican representatives, has threatened to delay a vote on House leadership, scheduled for shortly after the national election. It isn’t big enough to determine who is speaker, but could stop Ryan from being re-elected. Even if he remains in the role, opposition from the group will constrain his ability to negotiate on policies such as corporate taxes and infrastructure investment both in Congress and with whoever wins the White House. The Freedom Caucus helped block House Majority Leader Kevin McCarthy from becoming speaker last year.

What about outside Washington?

Colorado is considering a ballot measure to create a $36 billion single-payer healthcare plan, which would establish universal coverage in the state. The tradeoff is a 10 percent increase in the payroll tax, shared by employers and workers. The proposal is seen as a possible solution to the growing problems with President Barack Obama’s signature healthcare program. Colorado residents will see a 20 percent increase in average monthly premiums next year, while 14 counties in the state will have only one insurer offering coverage on their healthcare exchanges. The state vote could signal whether a public option that establishes a government-run insurer to compete with private firms is a viable possibility on a national scale. Clinton has said she supports such a plan. Republicans broadly oppose the idea.

There seems to be a lot of discussion about weed

There are a record nine state ballot measures to legalize marijuana in some form. The most important one to watch is in California, where medicinal cannabis already has been approved and recreational usage is now under consideration. Hedge-fund billionaire George Soros and entrepreneur Sean Parker are among those backing the campaign. There would be a 15 percent sales tax on weed sales. Passage would help the burgeoning ancillary businesses around marijuana and could renew focus on payments, which are now almost entirely in cash. The drug remains illegal under federal law, making banks nervous about opening related accounts or processing transactions.

Doesn’t it all just link back to Clinton and Trump?

In a way, yes. A Clinton or Trump victory is bound to influence the makeup of both the House and Senate, though it’s hard to say how much. Democratic candidates are betting a big-margin Clinton victory will give them back the Senate. Republicans in tight races have vacillated over whether to endorse or disavow their party’s nominee. The most important factor for national and state ballots alike could be voter turnout. In that sense, Clinton and Trump really are the main event.

 

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