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Student loan forgiveness: Legal challenges don't have ‘a clear road,’ strategist says

BTIG Director of Policy Research Isaac Boltansky joins Yahoo Finance Live to discuss the midterm elections, the prospects of a GOP 'red wave,' flipping Senate seats, and the legal challenges President Biden's student loan forgiveness plan faces.

Video Transcript


AKIKO FUJITA: Well, let's move on to the agenda over in Congress, officially in recess until after the midterms, setting up for a November lame duck session. For more on this and other DC happenings, we've got BTIG director of policy research Isaac Boltansky.

Isaac, we're already looking ahead beyond the midterms. I want to start with the midterms. How are things setting up? I mean, it feels like so much of it was about this red wave that was coming through. We've seen a bit of a shift back to the Democratic side. We're just about a month away. How are things setting up?

ISAAC BOLTANSKY: Yeah. Look, I think the narrative was always sort of positioned for this reversal. If we go back six months ago, it was the massive red wave we should all prepare for. But I think there was always going to be a shift, in part because that's how politics works in terms of narratives going back and forth. But also there were some real shifts, both in Capitol Hill and in the macroeconomic and macropolitical discussion that were positive for Democrats, everything from passing a few pretty meaningful bills to finally seeing gas prices going down.

So what I'm telling clients is, look, sure, we've gone from a red wave to a red puddle or a red trickle, however you want to frame it. But I am still as confident as ever that the House of Representatives is going to flip. Republicans only need to net five seats in the House. I think they are going to do that with ease. And I think Republicans will be in control of at least the House, which means we will have divided government next year.

The Senate, to me, is still a toss-up. I think anyone telling you with confidence that they know what the Senate is going to do is lying at this stage. There are too many unknowns in some of these really nuanced races with some real characters on both ends of the ideological spectrum.

AKIKO FUJITA: What do you think that the Senate power hinges on? I mean, when you think about the policies that have been discussed in so many of these races, you could argue there's advantages to both parties. There's obviously, on the Democratic side, concerns around abortion, given the overturning of Roe v Wade. But then on the Republican side, the macro headlines have kind of been in favor of where they stand, given that inflation simply hasn't really started to come down to levels that the Fed would consider acceptable.

ISAAC BOLTANSKY: Yeah, look, I think what's noteworthy to me here is that Senate races are not as susceptible to some of those macro wave headlines, one way or the other, as House races are, which as you know, are very often gerrymandered to one end or the other of the ideological spectrum.

So Senate races have a lot to do with personality. And if you just look at the race that we have in Pennsylvania, for example, I think that's a great example, where let's see if we have debates and how those debates go. And it's, my opinion, a little bit too early to say with any confidence what's going to happen there.

And there's also the dynamic, Akiko, of are we going to have a lot of ticket-splitting, which is something we haven't seen in recent elections, whereby some of these more, let's say, moderate but frustrated voices say, hey, I'm going to vote for the Democratic candidate for governor in my state in Pennsylvania, but then I'm going to vote for Mehmet Oz, the Republican candidate for the Senate, hoping that splitting my ticket might help us find some middle ground?

And so look, there are reasons that you can pick and choose for either side generally. But it comes down to personality in a lot of these races.

AKIKO FUJITA: So let's look past the midterms in terms of what is on the agenda for Congress the rest of the year. One of the things you point out is student loans here. This is coming on the back of the first lawsuits that we saw challenging the Biden administration's policy of forgiveness. Where do you think that stands? Are we likely to see the scope of that forgiveness narrow in any way, or is this pretty much here to stay?

ISAAC BOLTANSKY: So look, I think that we should expect the Biden administration student loan forgiveness plan to still face a few legal challenges. There are at least two that we know of right now, one of which will have a hearing actually tomorrow. And so we're going to have to watch those.

And in my opinion, neither of those is a clear road because I'm not sure that they have standing. And this is what's super-interesting about what the Biden administration did. They tailored the program in a way, and continue to tailor it to this day, to avoid, in my opinion, tripping up any private actors in the market who may then try to sue.

We've got to keep in mind, this is all paper that Uncle Sam already owns. So since Uncle Sam already owns it, it means that it's more difficult to prove that any private entity has standing to sue for some harm, which keeps it out of the courts. And that's what you saw just last week when they tried to narrow it a little bit and actually made it more difficult for about 700 or 1,000 or so individuals to gain access to forgiveness.

So look, I think it's here to stay. We're going to watch the courts. If a case gets into the courts, then it's a different story. But for right now, they tailored it in such a way that it makes it hard for any private entity to get into the court system.

AKIKO FUJITA: Really quickly, Isaac, you point out that you're bullish on efforts to advance cannabis banking provisions during this session. 75% is where you put it at. What gives you that optimism?

ISAAC BOLTANSKY: Look, it takes a long time for anything on Capitol Hill to move. This is a bill that's been kicking around for about a decade. It's lead sponsor, Rep. Pearlmutter has been pounding the table and educating folks. I think that we finally, with each of these successive states legalizing it, see that this needs to be a business that is banked.

And sadly, the thing that I think that will get it over the finish line in the lame duck is we've seen a wave of crimes focused on some of these dispensaries, especially out West, because they're cash-heavy businesses that can access the banking system, which obviously draws the attention of the criminal element. And so look, I think Congress is finally ready to advance cannabis banking legislation. I think it happens in the fourth quarter of this year. And I think that that's something that is another positive step for the whole space.

AKIKO FUJITA: BTIG director of policy research, Isaac Boltansky, as always, good to have you on today.