Big List For Financials, Crypto and Housing Policy

The TD Cowen Insight

Our Big List 2023 report focuses on the policy risks for banks, consumer finance, crypto, housing, markets, and cannabis. Divided government means the spotlight will be on regulators, which is typical for year three of a presidency. We expect action across the board with higher bank capital requirements, crypto enforcement, and debt default worries. CFPB’s future also is in play.

Our Thesis

• Policy risk is rising for banks, markets, crypto, and housing.
• Threat from Washington is easing for consumer finance.
• We are neutral on policy risk for cannabis.

Our Big List

This is our Big List, which we have published since the financial crisis hit 15 years ago. See 2022’s big list here. It covers in one note all the major Washington challenges for banks, consumer finance, crypto, housing, markets, and cannabis.

Financial and Industry Implications

Banks

We see regulators raising capital requirements via reform of the stress test, the adoption of Basel 3’s final phase, and a Countercyclical Capital charge. In addition, regional banks face TLAC and Single Point of Entry, which will drive up costs.

Consumer Finance

We see the threat ebbing as the CFPB has not advanced a regulatory agenda that could be adopted before the next election. Enforcement is still a concern, but rule changes are less likely.

Crypto

We expect SEC enforcement as the agency uses litigation to establish regulatory requirements for the trading platforms and for tokens. Legislation is less likely in 2023 though there may be a path forward for a stable coin bill.

Housing

Some correction in home prices is inevitable given the COVID-19 run-up and today’s interest rate environment, but we do not see a crisis. Fannie and Freddie are likely to remain in conservatorship.

Markets

SEC has a broad agenda with risk to retail trading, SPACs, and climate change disclosures. We see the agency finalizing rules in 2023 to ensure they take effect before the election.

Cannabis

Hard to see a GOP-controlled House passing cannabis legislation. It is why we put the most focus on the courts. Administration changes to how cannabis is scheduled will take years, not months.

Macro

The chief risk comes from a need to raise the debt ceiling this summer.