NEW YORK (TheStreet) -- While Wall Street bankers abandon the city for summer homes in the Hamptons, lawmakers and judges will be stuck in the nation's notoriously humid capital, making decisions -- or not, as the case may be -- that Goldman Sachs(GS) - Get Report predicts will move markets here and around the world.
The New York-based bank identified six of the summer's hot-button political issues in a report last week and gauged some of the probable outcomes.
1. -- The House is likely to vote in favor of Trade Promotion Authority in the next few weeks.
Trade Promotion Authority, also known as "fast track," allows the president to negotiate trade agreements with foreign partners within parameters set by Congress. Once the agreement is negotiated, Congress gets a yay or nay vote on the agreement but it cannot make amendments to the terms. The procedure is designed to make passing trade agreements faster as any potential holdups between the President and Congress are ideally settled before negotiations begin and has been enacted several times since 1974.
The Obama administration is relying on Republican support to pass the bill, but by Goldman's measure, the president will also need the support of 10 to 20 Democrats. It's particularly important now, since the administration is wrapping up discussions for the Trans-Pacific Partnership trade agreement, which includes 12 nations in the Pacific Rim.
The measure has at least one advantage that may help win passage: "Republican congressional leaders, who support Trade Promotion Authority, can time the vote for when support appears to be sufficient and can make multiple attempts if necessary," Alec Phillips, U.S. Political Economist for Goldman Sachs, said in the report.
2. -- The Supreme Court will rule on Affordable Care Act subsidies by the end of June.
It appears that just four words in the Affordable Care Act may determine whether federal health insurance subsidies are paid: As written, the law allows subsidies only on an exchange "established by the state."
A literal reading would mean that the 34 states with federally run exchanges would lose their subsidies. According to the New York Times, writers of the law -- both Republicans and Democrats -- say that the wording was a mistake and blamed it on confusion due to multiple drafts of the bill. The error may cost 13 million people their subsidies.
While Goldman Sachs doesn't speculate on how the high court will vote, the bank does assess what may happen if the subsidies are struck down.
"There is a high probability that Congress would reinstate some form of financial assistance, but the process would create significant uncertainty and would probably involve changes to the health law beyond simply reversing the effect of the court's decision," Phillips writes.
3. -- Senate banking legislation is not likely to win friends.
Last month, the Senate Banking Committee approved legislation that would roll back several provisions of the Dodd-Frank reform bill passed after the financial crisis. Since the revisions were supported only by Republican committee members, however, winning a majority from the full Senate will be tough. And if it does pass, the final version is likely to be significantly different.
Goldman Sachs highlighted provisions of the proposed bill that would:
-- loosen mortgage lending standards by providing banks with a "safe harbor" from qualified mortgage rules for loans that they originate and hold entirely in their own portfolio, along with other criteria;
-- (2) increase the threshold for financial institutions to be automatically designated as "systemically important" by the Financial Stability Oversight Council from $50 billion to $500 billion in assets; the council would still retain the ability to designate institutions below that level;
-- require the president to nominate and the Senate to confirm the New York Fed president, and
-- prohibit the Treasury from disposing of the preferred stock it holds in Fannie Mae and Freddie Mac without congressional approval.
4. -- Transportation funding shortfall is likely to receive a patch instead of a solution.
Instead of passing a long-term transportation infrastructure spending program, Congress has relied on a series of patches to fill budgetary shortfalls, and the latest is set to expire July 31.
By Goldman Sachs' calculations, the highway program spends more than it takes in through the gasoline tax, which will result in an estimated $11 billion shortfall by the end of 2015. The bank believes, however, that Congress will continue to kick the can down the road. This time, the patch is expected to last through the end of 2015 and include a mix of spending cuts, tax increases, and funds transferred from Treasury.
5. -- Tax reform is going to be tabled.
If the hold-ups in transportation spending are any indication, the likelihood of Congress moving forward on any meaningful tax reform is off the table. In fact, Goldman Sachs doesn't see anything happening in tax reform until after the 2016 election.
"The lack of progress thus far and the short time left before other political distractions take over suggest that the political opening that tax reform seemed to have early this year has just about closed," Phillips writes.
At the start of 2015, both parties expressed hope that Congress would be able to put together an agreement that combines long-term infrastructure spending with corporate tax reform. The corporate tax reform portion of the agreement would tax repatriated foreign earnings to fill gaps in the highway funding program.
6. -- The Export-Import Bank's charter will be renewed ... after expiring.
The Export-Import Bank of the United States (Ex-Im Bank) provides financing to overseas companies importing American products. Its charter is due for renewal in June and lawmakers plan to tack that on to other legislation, such as the highway funding bill Goldman Sachs highlighted.
That may create another problem, however: "Since the highway program's authority does not expire until July 31, such a strategy would also raise the probability that authority for the Ex-Im Bank to make new export credit loans and guarantees would expire at least temporarily," Phillips writes.