By Kevin Drawbaugh
WASHINGTON, Oct 28 (Reuters) – If Republicans make big gains in U.S. Congressional elections on Tuesday, as expected, Wall Street and big banks will have sweet, but incomplete, revenge on Democrats who drove through sweeping financial reforms against industry opposition.
The likeliest outcome of Democrats losing control of one or both chambers of Congress will be divided government and two years of legislative gridlock on issues important to the financial services sector, said policy analysts and aides.
That means the sector’s regulatory headaches — near migraine level following the enactment in July of the Dodd-Frank Wall Street Reform and Consumer Protection Act — won’t get worse, but probably won’t get much better, either.
“We expect two years of deep gridlock … Nibbling at the edges of Dodd-Frank and some cosmetic changes to the new law are possible. Fundamental changes are highly unlikely,” said Brian Gardner, policy analyst at Keefe, Bruyette & Woods.
That outlook could shift if a new breed of far-right Tea Party activists being swept into power pushes the Republican Party to confrontational extremes, which is a possibility. One scenario might be an effort to strangle Dodd-Frank by depriving regulators of funding needed to implement it, aides said.