While Republicans battled Democrats (and Democrats battled themselves) over healthcare, not much of anything else got done. Not reform of the financial system, not serious action on jobs (the $18 billion “jobs” bill that Congress did pass isn’t even a down payment), not climate change, not appropriations bills, not deficit reduction.
For investors the most important effect of the House’s vote last night to send a healthcare bill to President Barack Obama for signature (and simultaneously a package of amendments to the Senate) is that Congress will finally be able to move on to other legislation.
What other legislation?
My guess is that Congress isn’t about to tackle climate change. Democrats can read the polls: the issue is even more complex than healthcare and the public is deeply divided. If you’ve just tied your party into knots over healthcare, I don’t think climate change is the next thing you decide to tackle. (This just raises the stakes in legislation intended to get the Environmental Protection Agency to either slow down its regulations (the Jay Rockefeller, D-West Virginia approach) or to block the EPA from regulating at all (the Lisa Murkowski, R-Alaska approach.)
No, I think what we’re going to see is more on jobs. Senate Majority Leader Harry Reid has already moved to put the rest of the proposed $85 billion jobs bill that wasn’t covered in his $18 billion carve out on the road a vote. Democrats know that a large number of voters are angry that healthcare came before job care and for Democrats positioning for the November mid-term elections a job-creation effort that their candidates can run on is critical. (What will Republicans do? Depends on their calculations about whether it’s better to take ownership of a bi-partisan bill than to try to deny Democrats a success.)
And more on financial reform.
Voters would like to see bankers drawn and quartered and then impaled on stakes so while Democrats fear that a financial package could be criticized by Republicans as overly complex (more waving of a 2,000 page bill) and compromised (why should pay-day lenders be exempted), the topic itself is a political winner.
The effect on financial stocks will depend on who gets regulated in a final bill and by whom. Get ready for a new daily soap opera that asks:
“Will the Fed get to keep regulatory power over the big banks?”
“What kinds of derivative contracts won’t be regulated?”
And “How much of the shadow banking system—now larger than the regulated banking system—will remain unregulated?”
I can hardly contain my excitement.