Post-Election Policy Outlook: GOP Trifecta
November 19, 2024
Republicans will have the lawmaking “trifecta” of the Presidency, Senate, and House in January 2025. CREFC updated its scenario analysis with the outcomes, the highlights of which are summarized below.
Why it matters: The trifecta will make legislating on tax and budgetary items easier, though not a walk in the park as the House majority will be narrow (see story below). The 53-47 GOP Senate will make it easier for some Trump nominees to get confirmed, but the filibuster means 60 votes are needed to advance most legislation, outside “reconciliation” (more below).
Go deeper: For CRE and multifamily finance the largest impacts will be tax related, but a change in regulatory policy could have positive effects as well.
- Reconciliation: Republicans will use budget reconciliation to enact tax legislation with a simple majority in the Senate, thus bypassing the filibuster for items related to government taxing and spending. The GOP used the procedure for tax in 2017, and Democrats employed it for the American Rescue Plan and the Inflation Reduction Act. While reconciliation legislation must have a nexus to spending, both parties have sought to push the bounds of what can qualify under the rules.
- Tax: The starting point is a reauthorization of the expiring provisions of the Tax Cuts and Job Act (TCJA). However, deficit-minded Members of Congress may seek to offset tax cuts with spending reductions or other tax hikes. The 199A pass-through deduction, which impacts real estate businesses, is a key item expiring. However, the deduction has strong GOP support. Speaker Mike Johnson (R-LA) has said other proposals, like no tax on tips, would need to be “paid for” with offsetting spending cuts.
- GSE Conservatorship: President-Elect Donald Trump’s forthcoming nominees for Treasury Secretary and Federal Housing Finance Agency (FHFA) Director will be key figures in implementing any administrative exit from the conservatorship. While legislative action on GSE reform has been nonexistent over the past several years, there are rumblings that some lawmakers may be looking to use reconciliation to advance reform efforts.
- Regulatory Freeze: A new president usually implements a pause on new regulations to allow new appointees time to have input on the final rules. While the edict does not necessarily apply to independent agencies, the Congressional Review Act (CRA) allows Congress and the President to disapprove recently finalized regulations with a simple majority in the Senate. With a GOP trifecta, lame-duck regulations are in danger of repeal, which adds teeth to the freeze. As such, the Basel endgame capital rules are unlikely to be finalized near term.
Financial Regulator Shuffle: The scenario analysis includes a complete chart on key financial regulator term expirations.
- We highlight some immediate impacts when Trump takes office on January 20.
- The Senate may confirm cabinet level officials early and the other vacancies may be filled by acting officials until a nominee is confirmed.
Of note, the Federal Vacancies Reform Act lays out default filling vacant positions. According to the Congressional Review Service: “As a default rule, the first assistant to a position automatically becomes the acting officer. Alternatively, the President may direct either a senior agency official or a person serving in any other [Senate-confirmed position] to serve as the acting officer.”
- Treasury and HUD Secretaries: While there is no term of office, a Secretary traditionally steps down with a new administration or could be removed by the new president.
- FHFA Director: The President can fire Director Sandra Thompson and designate an acting Director who is Senate confirmed or selected from the order of succession in the agency. Thompson was acting director by virtue of being a deputy director after President Joe Biden fired Mark Calabria.
- Comptroller of the Currency (OCC): Michael Hsu is the acting comptroller for the Office of the Comptroller of the Currency (OCC) He could be replaced with a different acting official. The Comptroller serves on the Federal Deposit Insurance Corp. board, and the OCC is an independent agency that coordinates federal banking regulation with the Fed and FDIC. A quick switch here ensures the Trump administration will have an immediate say on bank regulation.
- CFPB Director: Consumer Financial Protection Bureau (CFPB) Rohit Chopra will likely be removed by President Trump and replaced with an acting official.
- SEC Chair: The Securities and Exchange Commission (SEC) Chair, Gary Gensler, is expected to resign, as is traditional with a change in administration. Trump would name an acting chair from one of the two GOP commissioners, Hester Peirce or Mark Uyeda, in the interim period.
- The Fed: The Board of Governors is full, and the earliest terms expire in 2026 (unless someone steps down first). Speculation is rampant that President Trump will fire Jerome Powell. However, Fed Chair Powell confirmed earlier this month he will not step down and does not believe the president has the power to fire him.
The bottom line: The Republican trifecta and forthcoming regulatory transitions will allow Republicans and the Trump administration to move quickly on tax legislation and unwind or stop recent regulations, but other priorities will require bipartisan support or time for new regulators to take their seats.
Contact David McCarthy (dmccarthy@crefc.org) with questions.