After a historic victory in the midterm elections for her party, Elizabeth Warren is expected to take over as chair of the Senate Banking Committee in January and renew her assault on perceived abuses in the US financial system.
Bank heads can expect to be summoned to hearings for a dressing down, and Warren may push legislation to limit share buybacks and cap interest rates.
President Donald Trump might endorse some initiatives from Warren and other Democrats in a bid to retain relevance (he has already called for a cap on credit card rates, for instance), but there is little chance of significant reforms being passed by a Congress that remains divided, with both parties featuring legislators who are susceptible to Wall Street lobbying. Trump can also veto legislation that is backed only by the Democratic majority.
More importantly for Wall Street firms, their big gains from Trump’s deregulation are effectively already in the bank.
Capital relief for the biggest US banks has helped turbocharge trading revenues this year and the main threat to this bonanza comes from a potential market crash, not another regulatory reverse.
Banks can quibble about the details of their regulatory relief – JP Morgan complained that Goldman Sachs and Morgan Stanley got an unfair boost from proposed adjustments to wholesale funding treatment compared with universal banks with big deposit bases, for example.
But the broad push to lighten the regulatory burden for banks is well underway and is unlikely to see significant changes.
That is in part because it is being implemented by supervisory officials who will remain in place despite the shift in control of Congress.
Kansas helps Wall Street
The supervisor making the biggest impact on big bank profits is Michelle Bowman, vice-chair for supervision at the Federal Reserve.
Before joining the Federal Reserve Board in 2018, Bowman was Kansas state bank commissioner, after working locally at Farmers & Drovers Bank.
Bowman is a rhetorical champion of America’s community and regional banks, but although she is sponsoring changes to help small lenders, her greatest contribution has arguably been in boosting trading profits for Wall Street dealers.
Bowman was receptive to financial industry complaints about the impact of Basel III “endgame” capital proposals made by her predecessor as Federal Reserve supervisory head Michael Barr.
She might be inclined to make tweaks to her current version of the proposals in the hope of completing bank capital reforms this year before Democrats take control of the Congressional agenda in January.
Kansas on Tuesday elected a Democratic senator for the first time in almost a century and Bowman will be aware that the mood in Washington is about to change.
The easing of capital requirements for US banks is essentially complete, however.
Crypto and prediction uncertainty
The future is less certain for regulation of developing markets such as crypto and prediction trading. Big banks may not get the legislative clarity they would like to expand into popular new markets, though they could benefit from attempts to place constraints on financial activity by nonbank players.
Commodity Futures Trading Commission chairman Michael Selig has been pursuing an almost comically laissez-faire approach to regulating crypto and prediction markets.
Selig worked on behalf of crypto firms as a partner at a law firm before becoming CFTC chair in December 2025, and in 2026 has devoted most of his energy to defending both crypto and prediction markets from attempts by states to apply some regulation.
Democrats will try to push Selig towards a different approach, but that is more likely to result in a regulatory impasse than a change in direction.
Democrats will have the ability to block confirmation of new regulators once they take control of the Senate and are likely to try to force Trump to fill vacant seats that were traditionally held by Democrat commissioners at agencies such as the CFTC and the Securities and Exchange Commission.
As with the prospects for new legislation, there is a chance that Trump will try to make a deal with Democrats over regulatory appointments, though a prolonged stalemate over confirmations is just as likely.
There is also a diminished prospect that a version of the Clarity Act will pass, proposing a regulatory framework for crypto trading in the US. Democrats are expected to investigate the crypto investments and side-hustles made by Trump and his family, which will complicate and probably doom the chance of fresh legislation.
All in on AI
Democrats are also likely to investigate and attempt to regulate the AI industry. That is where the biggest threat to Wall Street banks lies. Wall Street has effectively gone all-in on financing an extraordinary AI investment cycle, with estimates of capex requirements ranging from around US$5trn by 2030 to US$15trn over the next decade.
Confidence in the ability of the biggest AI borrowers and their lenders to finance this spending boom is already fragile.
Aggressive criticism of the AI industry, even if it is not accompanied by substantive regulatory or legislative change, could further undermine confidence in the sector and bring down global markets. Increased uncertainty for technology stocks could also test the ability of banks to manage what has so far been “good” volatility from a trading and risk management perspective.
More noise
Warren is a fan of performative hearings about financial industry practices and bank heads can expect to be berated by her in public while facing ongoing complaints from Trump administration officials about supposed debanking of Republicans.
Wall Street CEOs will probably try to dismiss that as noise and think of their bonuses.
Any political conflict in the coming two years of the 120th US Congress that threatens the AI financing boom would be treated differently.
The big gains for Wall Street from Trump’s deregulation are already banked and emerging competitors such as crypto-based fintech firms and prediction markets may see political constraints on their growth.
A collapse in global markets led by a loss of confidence in the AI boom would overshadow those gains.
