When the next US election is decided, it’s the big winner for the big banks
The next US presidential election will be decided by a majority of the population, and it will be the biggest winner for Wall Street banks, according to the latest analysis by the Financial Times.
A Wall Street victory would boost the fortunes of the biggest US banks by as much as $US30 billion ($35 billion) in the next four years, according the FT.
That is the biggest increase since the financial crisis and could boost the bank balance sheets of the big five – JPMorgan Chase, Citigroup, Goldman Sachs, Bank of America and Wells Fargo – by up to $US300 billion ($420 billion).
The FT said the outcome of the election could have significant ramifications for the global financial system, with the banks now estimated to hold around $US10 trillion in reserves.
The FT’s analysis, based on data from the US Federal Reserve Bank, shows that the biggest winners from the election would be the big three banks, with JPMorgan Chase and Citigroup accounting for around half of all the wealth created in the US over the last decade.
While Goldman Sachs would see its assets rise by $US2.5 trillion ($4 trillion), Bank of Americans would be worth $US1.9 trillion ($2.2 trillion), while the other three banks would each get $US600 billion ($800 billion).
But in a country where the median household income is only $US35,000 ($46,500) a household can only expect to accumulate $US70,000 in assets in a lifetime, the FT said.
In a country that is heavily indebted and the cost of servicing its debt is spiralling, the result of the next election could be a global financial crisis that could see billions of dollars of the $US400 billion ($450 billion) of debt held by US households being released into the markets.
The FT found that there is no guarantee that the next president will not be influenced by the banking industry.
“For the next President, there is an enormous risk that Wall Street will have influence on the election,” it said.
“The most likely scenario is that the current President is a Wall Street Democrat, and the next candidate is a Republican.”
In either case, Wall Street and the big four banks could wield enormous influence in the election.
“If they win, they could be more inclined to take on the next Administration’s policies, pushing it further in the direction of deregulation, deregulation of the financial system and further consolidation.”
The FT also highlighted the potential for a wave of populist populism sweeping the world following the election of Donald Trump, who is known for his protectionist stance.
It said that the election results could also have a direct impact on US trade policy, with an election in which Wall Street is a major winner could be interpreted by the US to have a negative impact on global trade.
If the next administration adopts protectionist policies, such as lowering tariffs, the impact on the US economy could be even more significant, according, the report said.
“The next President’s trade policy would be shaped by the influence of Wall Street, but in the event that the President does not adopt protectionist measures, Wall St will have an important role in shaping his or her policy agenda,” it added.
However, the US is not the only country where a populist wave has taken root.
In Germany, the populist Alternative for Germany (AfD) party has already been gaining ground, with around two-thirds of voters believing that their country should adopt the euro, the paper said.