Banks See Ways To Get Ahead In A Democratic Congress

For big banks, long aligned with Capitol Hill Republicans, a Democratic-controlled House or Senate could offer some unexpected opportunities.

The financial industry giants want Congress to restrict crypto companies from paying interest and write clearer rules of the road for AI. Democrats such as California Rep. Maxine Waters, the potential chair of the House Financial Services Committee, and even Massachusetts Sen. Elizabeth Warren, who could lead the Senate Banking Committee, could be potential allies, according to financial services lobbyists and bank insiders.

That collaboration would be surprising since Warren and Waters have for years been the megabanks’ loudest antagonists on Capitol Hill, even as they support smaller, regional lenders. Yet the two have aligned thinking on crypto rewards and AI regulation. Bank lobbyists and trade groups will be counting on them to help get industry-friendly legislation through a Democratic Congress.

“There are good possibilities for banks to work with Democrats in the committee on their priorities,” said James Ballentine, principal consultant at Ballentine Strategies, a government relations firm for financial services companies.

Lisa Peto, a partner at the advisory firm Mindset who was a longtime senior Waters staffer and regularly talks to Democrats on the Hill, said Democrats “realize that the banks are important players.”

“They will come in with an open mind and there could be some overlap with the banks as they look to guard against the risk coming from AI,” she said. “We have seen some collaboration in the past.”

Spokespeople for Warren declined to comment. Waters’ office did not respond to requests for comment.

Of course, getting any legislation enacted in an environment where Democrats control one or both chambers and Republicans run the White House will be an uphill climb.

And there is plenty that could put a damper on the banks’ mood. Oversight hearings, particularly if Democrats control the Senate, could force megabank CEOs to testify on their close ties to Trump administration regulators, who have pushed rules unwinding many of the curbs on banks imposed following the 2008 financial crisis. And Democratic backing for legislation to lower credit card swipe fees, a policy that President Donald Trump also supports, could punish their bottom lines.

Still, there are opportunities for collaboration, particularly on crypto.

Banks and crypto companies have sparred over whether crypto assets such as stablecoins should pay interest, with the banking industry concerned that returns on holding the digital assets would prompt customers to take their money out of traditional banks.

Banks scored a victory in September, with the collapse of a broad billknown as the Clarity Act, which banks said did not contain sufficient restrictions on crypto rewards programs. Most Hill Republicans and the Trump administration supported the bill.

With Democrats in control of one or both chambers, some in the industry feel that the banks will have a chance to get a new bill that’s more to their liking. Banks "are hoping that Democrats will reopen the fight," said a Washington-based bank strategist, granted anonymity to speak candidly.

Warren and Waters were adamantly against Clarity, for reasons beyond just the fight over rewards. Over the summer, as negotiations were underway, Warren called the bill “another industry handout that gives the crypto lobby exactly its wish list.”

Reps. Sean Casten and Bill Foster, both Illinois Democrats who are consideringchallenging Waters for the committee gavel, also opposed the bill.

The banking industry, which has been alarmed by the rise of AI agents crawling through customer accounts, could also turn to Democrats to set standards.

As AI regulation becomes central in Congress, Democrats may be more likely to have banks’ backs, said two of the bank officials. Waters, Warren, Foster and Casten have all called for regulating the emerging tech sector, and much of the Democratic caucus has called for more oversight.

“The threat is not coming. It is here,” Waters said last month, adding that the government needs to do more.

Foster introduced a bill in September to improve financial risk management as it relates to AI. Republicans in Congress have been less enthusiastic about regulation and oversight of the sector, echoing the White House’s more hands-off approach to AI.

“AI agents are making it easier for bots and crooks to impersonate you online and gain access to your accounts. Congress and regulators must step up their game to harden our financial system against these vulnerabilities,” Foster wrote on X last Thursday.

Other issues that Democrats might take up could split the banks, such as raising the cap on deposit insurance, which protects bank customers from losing their money if their bank collapses. Right now, federal deposit insurance covers up to $250,000 per depositor per insured bank for each account type.

A bipartisan proposal to raise that limit has languished in the House and Senate. Waters introduced a related bill in the House, and Warren has supported raising the cap.

Small and regional banks support lifting the cap, but big banks generally oppose it, saying higher limits would impose costs to their customers without commensurate benefits and may not prevent bank runs at their smaller rivals.

“I expect that there will be a push in the next Congress, particularly if the economy is more shaky,” said Paul Merski, executive vice president of government affairs for the Independent Community Bankers of America, a small bank trade group that supports lifting the deposit insurance cap.

Jasper Goodman contributed to this report.