An Election Guide for Wall Street

Wall Street is betting on a game-changing election. But the industry may not be so lucky, even if Mitt Romney wins.

Analysts and lobbyists have painted a murky picture of the campaign. While a Romney administration could help banks and hedge funds, a Republican victory could bring uncertainty, too.

At the same time, a second term for President Obama might not be a doomsday situation. In many ways, the industry has already adjusted to the new regulatory environment, and the administration might rein in its fervor for change. An Obama victory might also allow Wall Street to pivot its focus to the “fiscal cliff,” the dreaded package of tax increases and spending cuts slated to kick in on Jan. 1.

“The industry is probably not thrilled with an Obama win, but they know what they're getting,” said Brian Gardner, a Washington research executive at KBW.

After taking a rhetorical and regulatory licking from the Obama administration, Wall Street has t hrown its hopes and riches behind Mr. Romney. The industry has spared no expense to try to elect the former private equity executive, with Mr. Romney's top five donors hailing from the financial industry. Goldman Sachs and Bank of America lead the list, according to the Center for Responsive Politics.

The spending spree stems, in part, from Wall Street's fraught relationship with Mr. Obama. After helping to usher in Mr. Obama's election four years ago, Goldman and other firms became disillusioned with the president's regulatory crackdown known as the Dodd-Frank Act. Some executives also find Mr. Obama disengaged, while others never forgave the president for his pejorative depiction of them as “fat cats.”

“There's fatigue in the industry from being a target, and that will obviously color their views,” said Kenneth E. Bentsen Jr., a former Democratic representative in Congress who is now a senior Wall Street lobbyist at the Securities Industry and Financial Markets Association.

Wall Street will no doubt reap some benefits from a Romney presidency.

Mr. Romney will appoint new leaders at most financial regulatory agencies, including the Commodity Futures Trading Commission, an aggressive rule-writing bureau that has become the scorn of many bankers. Under Republican control, the agencies could also have a lighter touch, bringing fewer enforcement cases against big banks and hedge funds.

In a more significant move, a Romney administration is expected to pursue a makeover of the Consumer Financial Protection Bureau, the new consumer watchdog born out of the Dodd-Frank overhaul. Republicans hope to wrestle control from a single director, Richard Cordray, and refashion the bureau into a bipartisan commission. Mr. Cordray, whose term extends through 2013, was appointed by Mr. Obama during a Congressional recess.

Sallie Mae, the largest student lender in the nation, could be another winner if Mr. Romney is elec ted. During the race, the Romney campaign hinted that it would allow private lenders back into the system for distributing federal loan money. A Republican administration, some analysts say, would also abandon proposed reforms that would allow students to discharge loan debt in bankruptcy.

The changes could similarly extend to Dodd-Frank, leading authorities to prolong public comment periods for unfinished rules. Under a Republican president, some provisions passed in the wake of the financial crisis could be tweaked. One of the more hotly contested areas was the swap-dealer designation, which requires that banks increase disclosures to trading partners and hold additional capital. Should Mr. Romney win, bank lobbyists say the industry will focus on taming these rules, which are still being hashed out at the trading commission.

“The Republicans would control the pen, which is tremendous power,” Mr. Bentsen said.

Mr. Romney, the former governor of Mass achusetts and a longtime executive at Bain Capital, has vowed to “repeal and replace” Dodd-Frank. While Mr. Romney has not explained what would take the place of the law, his promise has fed Wall Street's election fervor.

But Wall Street's wager on Mr. Romney, the analysts and lobbyists say, is hardly a sure bet. Even if tens of millions of dollars in donations from the financial industry help push Mr. Romney into the White House, the Senate is likely to remain in the hands of Democrats.

That political stranglehold would prevent Republicans from passing a sweeping overhaul of Dodd-Frank. Regulators could also scramble to finish the most contentious Dodd-Frank policies, including the Volcker Rule, during Mr. Obama's lame duck presidency to safeguard their work from Republican second-guessing.

In a recent report, Dan Alamariu of the Eurasia Group noted that “financial regulation is for Republicans what the Patriot Act was for Democrats in 2008: somethin g disliked, but also something useful.”

And Mr. Romney may not prove such a friendly face to Wall Street in some cases.

In the first presidential debate, Mr. Romney took aim at one of the few Dodd-Frank provisions that Wall Street actually supports â€" a plan to unwind the “systemically important” banks. He derided the plan as “the biggest kiss that's been given to New York banks I've ever seen.”

Mr. Romney also promises to eject the Federal Reserve chairman, Ben S. Bernanke, who is beloved by many on Wall Street. Some financiers worry that Mr. Romney would also install Thomas M. Hoenig, a former Fed official who favors breaking up the big banks, as chairman of the Federal Deposit Insurance Corporation.

“The changes” that could come from a Republican victory, Mr. Gardner said, “are probably friendlier to community banks than the ‘too big to fail' firms.”