The 2026 Midterms and What Asset Managers Need to Know

"If voting made a difference, they wouldn't let us do it.” Mark Twain¹

At Dechert, we forecast a great many things. Election results are not one of them, and we take no position on which party should prevail. What we can forecast is what follows from either plausible outcome, and for CLO managers, CFO sponsors, structured credit ABL platforms, and insurers holding rated notes, that picture is more favorable, and more specific, than most election-season alerts are letting on, regardless of who wins which chamber.

Rolling In The Hearings, Not The Statutes

Good news first: on either plausible midterm outcome, we do not see anything legislative coming that will impact the structured credit markets. A divided government produces gridlock, not statutes, and the alternative outcome simply produces more of the same. The one truly unpredictable risk (i.e., a number of new laws and regulations being enacted) is highly unlikely. We say that because any bill restricting the structured credit markets would still need a presidential signature, and we see no realistic path to the veto-proof majority that would make a presidential veto irrelevant, which is solely a conclusion about legislative arithmetic, not a view on either party's agenda.

And if we are wrong and if restrictive legislation does eventually emerge from some future Congress with a different veto calculus, under either party, we will guide our clients through it exactly as we always have. We have built our structured credit practice on being a voice legislators and regulators hear before they act, not after, and we intend to make sure policymakers have our clients' input while today's hearings and rulemakings are still being written.

We have been here before. In 2011, the House flipped to face a president and Senate of the other party. That same year, Adele's "21" and "Rolling in the Deep" became the best-selling album and song in years. The regulatory soundtrack from that Congress is worth refreshing on as well.

When Republicans took the House in January 2011 opposite a Democratic President and Senate, the Oversight Committee of the 112th Congress sent over 760 letters, held 199 hearings, and issued 32 staff reports in two years. The 110th Congress ran the same playbook in reverse: when Democrats held the House opposite a Republican President from 2007-2008, the Oversight Committee held 203 oversight hearings. That symmetric dynamic is exactly what we expect again if either chamber flips.

But gridlock does not mean quiet, and it does not mean nothing of lasting consequence will happen this Congress. It means the action shifts to the tools a divided Congress can use without a floor vote: hearings, letters, and document requests. A hearing that cannot become law today can still build the public record, witnesses, and talking points for a bill introduced in a future Congress with different political arithmetic. Thus, it is worth monitoring what happens closely even though it might not lead to new laws now.

A Congressional Thread That May Resurrect Itself

One thread that we could see resurrected here relates to private credit. Specifically, in a May 2026 letter Senate Banking Committee Ranking Member Elizabeth Warren pressed Treasury and the Securities and Exchange Commission on insurer exposure to private credit and a possible Financial Stability Oversight Council stress test; similarly, in the House there was a push for a nonbank private credit stress test. A chamber flip in either direction could turn up the volume on this thread with more letters, more hearings, and more document requests. This is also an area where the industry should be prepared to show, with its own loss, recovery, and underwriting data, how the sector has performed to date — while acknowledging that idiosyncratic losses at individual managers are inevitable and do not by themselves indicate a broader problem.

Where Else Scrutiny May Land

Beyond private credit as a sector, we expect Congressional scrutiny to concentrate in a handful of other areas. On the sectoral side, that includes artificial intelligence and data center infrastructure as well as crypto and prediction markets. We also expect continued attention on anything tied to "affordability," such as housing, groceries and agriculture, energy, and healthcare. Media and other sectors that have so far seen a relatively light touch on antitrust and merger review may draw more scrutiny as well. There is also a more idiosyncratic risk for companies that become entangled in investigations touching on perceived Trump administration conflicts of interest, such as business dealings or significant contributions connected to administration-favored initiatives, or that have been associated with particularly contested administration policies, such as immigration enforcement and deportation efforts.

From the CLO industry's perspective, this is likely where the practical impact will be felt most: individual credits or sectoral profiles that are already operating at elevated leverage can find it harder to raise capital once they become the subject of an active Congressional investigation. We note this as a risk to be monitored, not as an invitation for scrutiny, but it is, in our view, the channel through which this Congressional activity could have the most direct effect on structured credit markets.

Rulemaking (Either Way) That Will Continue

Certainly, the fact that there is no Congressional rulemaking does not mean that the markets will be free from regulatory disruption. For example, the National Association of Insurance Commissioners (the “NAIC”), an insurance trade group, has a number of live initiatives under way that we have written about at length (link). These initiatives (intentionally and, in many cases, unintentionally) could impact large portions of the structured credit markets, including structured credit ABLs and CLOs. The NAIC’s initiative will progress unabated whoever ends up controlling Congress, which is why we have been actively involved on behalf of our clients, including filing our own comment letter.

The SEC Does Not Need Congress

Regardless of which party controls either chamber after the midterms, the executive branch agencies will remain in the hands of Trump administration appointees. That alone keeps the Securities and Exchange Commission's rulemaking agenda moving. More to the point, the SEC has been issuing proposed rules at a rapid pace, and we expect that to continue, both because Congress has limited practical means to stop it and because a number of the pending proposals sit in areas where there is meaningful bipartisan common ground. That includes efforts to modernize and streamline existing rules, such as the custody rule, as well as proposals addressing custody of digital assets specifically. Clients should expect this rulemaking activity to proceed on its own timeline, independent of the midterm results.

Regulators Are Just Getting Better Glasses

The Federal Reserve is updating bank reporting so examiners can finally tell a private credit fund from a hedge fund from an asset-backed issuer, building on existing data collection and new Senior Loan Officer survey questions. For anyone financed through a warehouse line, subscription facility, or back-leverage arrangement: expect more granular reporting requests at renewal. That's a planning item, not an alarm.

Conclusion

While as noted we are not prognosticators, we note that the concerns around systemic risk in private credit appear, so far, to be overstated, with even Jamie Dimon saying he isn't worried the risk is systemic. Similarly, CLO issuance has held near record levels through the volatility. That suggests a market absorbing scrutiny reasonably well, which is encouraging given that we expect more scrutiny to come.

A lack of new legislation is not the same thing as saying there will not be any questions, and "no bill this year" is not the same as "no bill ever.” We think the realistic outlook will be a lot like 2011: continued inquiry and groundwork-laying, whichever party is doing the questioning. Whatever eventually comes of it, clients can count on the same thing they always have from this firm: engagement with legislators and regulators across the political spectrum while the rules are still being written, and clear, practical guidance if and when anything actually changes.

This OnPoint addresses the US regulatory and legislative landscape only. It is provided for general informational purposes and does not constitute legal advice. It does not create an attorney-client relationship. For guidance on a specific structure or transaction, please contact the authors or your regular Dechert contact.