Politics & Planning

2020 Election Has Muted Effects on Structured Finance

Amidst the changes to economic and policy issues that will accompany our new President-elect

New report from Fitch Ratings describes the potential implications of a divided government for structured finance sectors.

Fitch Ratings-New York-16 November 2020: The 2020 federal election results and their bearing on key economic and policy issues involving healthcare, fiscal stimulus, financial and environmental regulation, taxes, trade and tariffs will have varied but limited effects on structured finance sectors, Fitch Ratings says.

We assume President-elect Biden’s policy priorities will be restrained by a Republican-controlled Senate, and we describe the potential implications of a divided government for structured finance sectors in a new Fitch Wire+ report 2020 Election Results Effects on Structured Finance.

Under a Biden presidency we anticipate a more aggressive federal government pandemic response, which will be helped by a successful rollout of an effective vaccine. Improvement in containing the virus would boost consumer confidence and support longer-term decision making by consumers, businesses and financial institutions. Additional lockdowns would have a further negative effect on employment and already struggling sectors.

A ‘More Limited’ Stimulus Package

Fitch expects a more limited stimulus package in the short term, likely no more than $1.0 trillion, which may be passed in the lame duck session. While smaller federal aid would provide a short-term boost, it would have a muted effect on structured finance credit, providing temporary relief to consumers and businesses.

A Republican-controlled Congress would make it more difficult for President-elect Biden to enact transformational policy reform in areas such as environmental regulation and student loan forgiveness, and bipartisan support will be necessary for major tax and spending measures. Biden has emphasized consumer protections and may use executive orders to effect policy change, although financial regulatory reform will be a longer-term undertaking and is likely to face hurdles in a Republican-controlled Senate. Changes to trade and tax policy are expected to have a modest effect on structured finance sectors.