As Democratic presidential candidate Barack Obama comes down the homestretch leading Republican rival John McCain, corporate America is bracing for what lies beyond the finish line.
After the election Tuesday, major changes look likely for many sectors of the U.S. economy regardless of who wins, but especially if it is Obama and the Democrats, analysts say.
A victory by Obama, an Illinois senator, coupled with big Democratic gains in the U.S. Senate, would put them in a position to pursue sweeping reforms across the economy — from banking and insurance to drugs and telecommunications.
Of course, any drive to strengthen regulation and close business tax loopholes would be constrained by the federal budget deficit, a weak economy and corporate lobbyists.
But change is in the air. Even if McCain wins and Republicans keep a powerful minority in the Senate, business will be on the defensive for some time to come, experts say.
“We believe that the 2008 presidential election and the potential political realignment in the Congress will prove more meaningful for investors than any since the Reagan revolution in 1980,” said Andrew Parmentier, policy analyst at FBR Capital Markets, a Washington-based investment banking firm.
Like many others, Parmentier projects an Obama victory and significant Democratic gains in Congress. If that plays out, he said, “Obama would enjoy a few months of effective unity with the Democratically controlled Congress in 2009 … to push an aggressive agenda of increased regulation and consumer protection initiatives.”
A regulatory crackdown on markets for credit default swaps and mortgage-backed securities looks likely, along with a restructuring of agencies that regulate banks and Wall Street firms such as Goldman Sachs and Morgan Stanley.
It is also probable there will be a revamp of government oversight of private-sector credit rating agencies, such as Moody’s Corp and Standard & Poor’s.
Mortgage finance is sure to change fundamentally, depending on what happens to Fannie Mae and Freddie Mac. The next administration also will inherit custody of the Bush administration’s $700 billion financial bailout program and other efforts to stabilize the housing and credit markets.
As a wave of bank mergers unfolds, increased concentration among healthy banks could draw new antitrust attention.
Widespread oversight reforms might result in the creation of the nation’s first federal regulator for insurers.
In terms of corporate governance, Democrats would likely push for giving shareholders more boardroom clout and more say in setting executive pay. The unprecedented bailout program approved by Congress included the first-ever limits on executive compensation for banks that accept a capital injection from the U.S. Treasury Department.
(Additional reporting by Kim Dixon, Lisa Richwine, Susan Heavey, Diane Bartz, Jim Wolf and Andrea Shalal-Esa; Editing by Susan Kelly and Peter Cooney)
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