Editors' pick: Originally published Nov. 2.
With less than a week before voters head to the polls to select their local congressional candidates -- and presidential nominees Hillary Clinton or Donald Trump -- there is a real possibility that Democrats could retake the Senate.
If they do, it would give Democrat Sherrod Brown the banking committee chairmanship he needs to advance his capital-raising, break-up-the-banks legislation and agenda -- representing the largest risk to the biggest U.S. financial institutions.
Brown would be in a position to spotlight legislation he co-sponsored with Louisiana Republican Sen. David Vitter that would raise capital buffers at banks to levels that would push big banks to divest assets.
"The real focus has really been putting higher capital levels on the largest financial institutions based on their mix of business and that is the gist of the Brown-Vitter bill...," said Independent Community Bankers of America vice president Paul Merski. "There would be a greater focus on getting that over the winning line in a Brown committee."
The largest banks, including Bank of America ( (BAC) ), JPMorgan Chase ( (JPM) ), Wells Fargo ( (WFC) ), Citigroup ( (C) ), Morgan Stanley ( (MS) ) and Goldman Sachs ( (GS) ), are most likely to be hit with tougher rules.
And the lack of discussion about Wall Street during three Clinton vs. Trump presidential debates suggests that influential legislators on Capitol Hill, including Brown, will be in the driver's seat when it comes to financial regulation legislation, including as efforts to break up the big banks.
A Brown banking panel would give progressives, including Sen. Elizabeth Warren, D-Mass., a member of the banking panel, a great deal of influence over a Clinton presidency. For example, Brown is more likely to give Warren a greater platform, through hearings and other means, to drive legislation she introduced that would seek to re-impose a version of the 1933 Depression-era Glass-Steagall Act, effectively breaking up the largest banks by separating their investment banking units from the commercial bank divisions.
"We also believe it opens the door for enactment of legislation to re-impose the Glass-Steagall separation between commercial banking and trading. This is the one issue that unites the far left and the far right," said Cowen Washington Research Group analyst Jaret Seiberg.
And while outright approval of break up legislation is unlikely, there are other avenues. One possible route for a break up provision would be to include it in a budget appropriations process that includes concessions to both parties. If the Democrats take the Senate Sen. Bernie Sanders would become Senate Budget Committee Chairman, giving the former Democratic presidential candidate who has been an outspoken opponent of large banks a greater government role.
Should Republicans maintain the Senate, the banking committee would likely be chaired by Sen. Mike Crapo, R-Idaho. A Crapo banking panel would be less of a thorn in the side of either a Clinton or a Trump administration than one overseen by Brown.
Will Hollier, president of Hollier & Associates and former chief of staff to Crapo, said that he wouldn't expect Crapo to take an adversarial role as banking chief. Crapo, he added, would work on legislation to provide regulatory relief for community banks and credit unions and other financial institutions and hold hearings on the post-2008-crisis Dodd-Frank Act as it pertains to the activities of large banks.
"He knows how to work both ways. He doesn't say my way or the highway," Hollier said. "He's never supported breaking up the big banks. That's a political statement. How do you break them up? He is more likely to gather more information, hold hearings and focus on the effectiveness or lack of bank oversight..."
On the House side, the scenario for big banks isn't great either. Republicans are expected to maintain control of the chamber, putting Rep. Jeb Hensarling, R-Texas, back in charge of the House Financial Services Committee. Seiberg argues that one possible mechanism that could drive a separation of commercial banking and trading could be modeled after Hensarling's Financial Choice Act, which includes a provision requiring big banks that want to trade to keep 10% leverage capital at their holding company level.
In addition, it is unlikely much legislation gets approved in a Trump administration with a split Congress. "This is a recipe for grid lock," Seiberg said. "Senate Democrats will do everything possible to prevent Trump and the GOP House from enacting legislation or confirming regulators who are not as committed to consumer protection as Senate progressives will demand."
Nevertheless, it is unclear how a Trump administration would respond to Democrat-backed legislation pushing big banks to slim down. Like Clinton, Trump included a provision in his party platform recommending that lawmakers reinstate Glass-Steagall. However, many observers contend that the measure was included to help drive Sanders supporters to the Republican nominee.
A Clinton administration with Democrat control of both the House and Senate, while unlikely, would represent the largest risk to big banks and open the door to a financial transaction tax, which would drive down trading on Wall Street. Rep. Maxine Waters, D-Calif., would become House Financial Services Committee chairman on the off chance that Democrats retake the House. A Waters panel would result in large risks to the biggest banks - the California Democrat told reporters last month that she is committed to breaking up Wells Fargo through legislation after the bank was fined $185 million by state and federal regulators for setting up phony consumer credit card and savings accounts.