There's little love lost between Wall Street and Sen. Elizabeth Warren. But for the vast majority of banks and bankers, Warren is more friend than foe.
The Massachusetts senator has been a vocal supporter of community banks, advocating for more challenger banks based in the communities they serve. Smaller institutions, she argues, have a far better understanding of what customers want, and their presence reduces the concentrated power of the so-called Big Four banks.In order to level the playing field, she has recommended a two-tiered, simplified regulatory system that would relieve smaller institutions of unnecessary burdens.
Underlying these policies is Warren's understanding that a more competitive market for financial services works to the benefit of consumers. Back in 2010, she wrote an op-ed pointing out that while community banks take stands against pricing tricks, they often lose ground to larger competitors with less consumer-friendly practices.
In short, what Warren wants is to break up concentrated power in the financial industry and induce more competition and diversity in the marketplace. This works to the benefit of the financial services industry as a whole.
It's also in banks' best interests to support Warren's push for increased consumer protections. For example, Warren has emphasized the need to clean up practices among previously under-regulated payday lenders and debt collectors. Increased oversight of these industries will help prevent Americans from becoming trapped in a cycle of debt, thereby lessening the credit risks that prospective borrowers pose to banks.
Moreover, Warren's populist policies should appeal to us all. The problems of middle-class Americans hardly exist in a vacuum. People with stagnant wages and heavy student debt burdens are less likely to qualify for or pursue mortgages and small-business loans. That has an impact on banks' bottom line. Just look at home lending, which fell 36% in 2014 to the lowest levels since 1997.
This issue cannot be reversed while consumers are still feeling the financial pinch. Policies that improve the economic prospects of a majority of Americans will have the added benefit of making them far more attractive to the financial services industry.
Warren suggests that increasing the minimum wage could help take the pressure off American households and increase their spending and saving power. She also recommends refinancing student debt to give young people a fighting chance of being able to sustain their finances and take control of their futures. A heavily overindebted citizenship has a costly effect on the economy, so we should take bold moves to reduce their number.
Warren's policies aim to put more money in people's pockets and deliver them from unmanageable debt. If people in the U.S. become more prosperous, they will in turn fuel economic growth and investment in areas like housing. Put another way, the confident consumer is a banker's best friend. The changes for which Warren is campaigning would cement that relationship.
Carl Packman is a writer, researcher and blogger. His latest book is Payday Lending: Global Growth of the High-Cost Credit Market, published by Palgrave Macmillan in 2014. Follow him on Twitter @CarlPackman.