Beyond Build Back Better: The Busy Year Ahead

Beyond Build Back Better: The Busy Year Ahead

By: Cordell Eddings

January 16, 2022 — If you were hoping for a quieter, less contentious, more predictable 2022, we think you’ll be disappointed.

You, and everybody else. Social scientists and cultural critics have noted the rise in nostalgia during the pandemic—reflecting society’s desire to return to a more predictable and stable world. A recent Nielsen study tracking the effects of COVID-19 on entertainment choices showed that more than half of consumers reported finding comfort in revisiting television shows and music they enjoyed in their youth. Perhaps the never-ending series reboots, the return of Crystal Pepsi, and wired headphones making a comeback conjures up a simpler world before stock prices were driven by social media mobs, when work ended when people left the office, and we did not have to think about which mask to wear.

But there will be nothing simple about this year. We expect 2022 to be a year of action as November’s midterm elections and the Build Back Better Act—which we expect to pass by the end of Q1—drive top priorities of the Democratic legislative agenda.

But we do not expect the action to stop there. After two years of uncertainty, lockdowns, and partisan battles, the pressure is on policymakers to make sure the 2022 outlook is brighter. They have work to do. Across a number of sectors, we expect them to be busy, pushing for a number of regulatory and legislative initiatives that will present underappreciated policy catalysts.

Below we walk through some of the more underappreciated policy themes we expect this year—beyond Build Back Better—that we think companies, investors, and industry should be paying attention to. So, buckle your seatbelts and settle in for what promises to be a year of policy catalysts.

An Unprecedented Sustainable Energy Policy Push

We believe the Build Back Better Act’s slow progress through Congress is unlikely to deter an unprecedented policymaker push on expanding sustainability policy in 2022. A conservative US Supreme Court, coupled with upcoming midterm elections, has increased the urgency for climate action while Democrats control Congress. This expansion of sustainability policy will take two forms: 1) a heightened focus on resilience that will extend beyond grid reliability to topics such as renewable energy supply chain security; and 2) an intensified focus on sustainability outside of power sector decarbonization that will include issues such as the presence of “forever chemicals” in drinking water and the decarbonization of gas utilities.

Forced Hands and Regulatory Clarity in Crypto

This year will be a pivotal for shaping the landscape of crypto regulation as the Securities and Exchange Commission (SEC) and other agencies tackle problems in the rapidly evolving market. We think regulators will make the most progress on establishing rules for stablecoins and harmonizing treatment of crypto transactions with existing requirements for large cash transactions. But developing events, controversies, and plans from companies in a crypto landscape that is becoming ever more individual investor-facing, will force regulators to grapple with overseeing this burgeoning market. They also will have to confront questions raised by the ambitions of big companies with global footprints and entrepreneurs whose products will compel officials to consider whether, and how well, they adhere to laws in areas from securities to consumer protection.

Tech & Telecom Regulators Are Finally Ready for Action  

Federal agencies—better aligned and staffed up than last year—will be the primary driver of a stricter and more onerous technology regulatory push. We expect advancement on several Biden administration priorities, including antitrust, labor, marketplace platforms, and privacy actions as Department of Justice (DOJ) Antitrust Division Chief Jonathan Kanter and Federal Trade Commission (FTC) Chair Lina Khan coordinate their efforts. We also expect broadening worker classification standards, expanding their regulatory reach to firms that use a marketplace platform business model beyond DoorDash Inc. (DASH) and Uber Technologies Inc. (UBER). In addition, the Biden administration and a Democrat-led Federal Communications Commission (FCC) are likely to move forcefully on an array of telecommunications policy issues, including infrastructure funding for broadband, net neutrality, and spectrum availability.

Accelerated Fintech Regulation

Capstone believes financial technology firms, which have been forced to speed their pace of innovation amid the COVID-19 pandemic, will face a similarly accelerated pace of regulation in 2022 as President Biden’s team, no longer delayed by confirmation battles, begins addressing its priorities. We expect key regulators will be proactive in initiating or accelerating rulemakings and in pursuing enforcement action. For the Consumer Financial Protection Bureau (CFPB) that means pushing forward with key rulemakings on consumer financial data ownership and collection of small business lending data.

A More Aggressive SEC

The Securities and Exchange Commission will pursue an aggressive regulatory agenda in 2022 that presents meaningful risks and opportunities for companies across the financial services sector. In his first eight months on the job, SEC Chair Gary Gensler made clear that he plans to be a proactive regulator, directing commission staff to review several key areas for potential rulemaking—including market structure, digital engagement practices (DEPs), and most recently the legal treatment of special purpose acquisition companies (SPACs). With energetic regulators working in a Democratic administration, there will be more corporate losers than winners, with broker-dealers and market makers facing the biggest challenges.

A Consumer Finance Regulatory Inflection Point

Capstone believes 2022 will be an inflection point for federal regulation of consumer finance companies after the CFPB took relatively little action in 2021.The bureau will accelerate enforcement activity and rulemaking in 2022 focusing on equitable treatment of consumers by scrutinizing credit reporting practices, loan underwriting, and companies with significant market power.

Bipartisanship Is Not Dead

Despite the daily diet of political outrage and partisanship, we expect Congress will pass significant bipartisan legislation in 2022—particularly in healthcare. Congress will likely focus on broadly popular issues such as physician and hospital reimbursement, behavioral and mental health, and pharmaceutical and medical device development.

The new year will feature its share of risks, opportunities, questions, concerns, and uncertainties for companies and investors alike. We look forward to providing unparalleled service, helping clients navigate the tempestuous and uncertain waters to come.

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