(Bloomberg) — Democrats on Wall Street welcomed Joe Biden’s choice of running mate Kamala Harris as a sign that party progressives who favor more aggressive bank regulation had been kept at bay. But her track record in the Senate and in state government might give the financial industry pause.
Harris’s political rise was paved with a strong post-crisis stand against big mortgage lenders as California attorney general in talks that forced lenders including Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. to pay $18 billion to settle claims they improperly foreclosed on borrowers.
“While Harris may be an ill-defined progressive, she’s still a progressive,” said Stephen Myrow, a former Treasury Department official who is now managing partner of Beacon Policy Advisors in Washington.
Before Biden selected Harris, bankers were concerned that he might have to pick a progressive as his No. 2 following high-profile campaigns by Senators Bernie Sanders and Elizabeth Warren that featured strong criticism of Wall Street. By comparison, Harris, California’s junior senator, was considered a safely moderate choice by bankers still wary of Democrats after tough regulations were imposed under President Barack Obama.
Harris’s work and policy positions haven’t garnered her the anti-bank reputation embraced by some of her Democratic colleagues. In fact, financial-industry professionals and their favored law firms have been among her steadiest sources of campaign cash. And when she was attorney general, critics from the left accused her of being unwilling to go after OneWest Bank, the California lender once led by now-Treasury Secretary Steven Mnuchin that was accused of improper foreclosure practices.
Transaction Tax
Still, during her campaign for the presidential nomination, Harris supported a tax on financial transactions such as stock trades and derivatives moves — an idea widely loathed on Wall Street. She saw the levy as a way to raise trillions of dollars to pay for her health-care proposals. Biden has expressed some support for a transaction tax, but he hasn’t yet included it in his proposals.
And while serving as California’s attorney general, Harris played a key role in leading one of the many investigations of Wells Fargo over the fake-accounts scandal that toppled two successive chief executive officers and continues to dog the San Francisco-based bank to this day.
It’s also notable that Harris in 2012 chose a little-known law professor to monitor the foreclosure settlement for California. That professor, Katie Porter, was elected to the U.S. House of Representatives in 2018 and has quickly become one of Wall Street’s most vociferous antagonists in Washington.
Prosecuting Bankers
Harris and Porter joined forces last year to push for legislation that would bolster states’ legal rights to prosecute bankers. Their proposal, which hasn’t advanced in Congress, would have given state law enforcement officials more power to help “protect consumers and prevent the type of illegal behavior that caused the Great Recession,” as Harris put it. She was also among critics of a recent bipartisan push to relax some banking regulations established after the 2008 financial crisis.
“She has demonstrated a clear willingness to stand up to Wall Street to protect workers and families from the economic harms inflicted by unchecked financial sector risk-taking,” said Gregg Gelzinis, a policy analyst at the Center for American Progress.
Harris’s ascent may represent a mixed bag for Wall Street, but Myrow of Beacon Policy Advisors said it’s too soon to know how she will affect the banking industry. Much depends on how much influence she would have on Biden’s policies and his choices of key industry watchdogs. She may find a role in the “reinvigoration” of the Consumer Financial Protection Bureau, Myrow said.
After Biden announced his choice, Jaret Seiberg, an analyst for Cowen & Co., wrote in a note that Harris’ addition to the Democratic ticket is “modestly negative” for the financial industry. He cited her record as attorney general and the likelihood she’d push for broader enforcement from the CFPB, but added that Biden was probably already going to head in that direction.
Harris’s actions in the Senate show that “she does not want to loosen any of the restrictions and rules that Team Obama put in place,” Seiberg added.
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