First the good news, 9-in-10 financial industry experts are forecasting either a growth in profits or no change in profits according to a new survey conducted by the Financial Services Roundtable. Only ten percent of respondents, sampled from the senior executives at the largest 100 financial services companies in the country, forecast declining profits over the next six months.
But, the data holds several warning signs for Washington politicians. Contrary to expectations, "the economy" is not the greatest hindrance to growth. Rather, the number one challenge according to industry executives is "government regulation" (36.1%) followed by "fiscal uncertainty" (26.2%).
Unfortunately, business leaders are not optimistic about Washington getting out of the way anytime soon. There is near universal agreement (83.6%) that the cost of compliance will rise in the next six months.
With upcoming political battles surrounding sequestration, debt limit, and federal government funding, the next six months have the potential to be a very rocky time for financial services industry. Not only are there looming deadlines in Washington, but there is significant public pressure for politicians to address spending (88% say it is a high priority, WaPo/ABC, Jan. 2013) and reduce the budget deficit (72% say it is a top priority, PEW, Jan. 2013).
In addition, the newly created Consumer Financial Protection Bureau (CFPB) is already a leading policy concern for financial industry companies. Created over the objections of Congressional Republicans, President Obama used executive power to appoint the CFPB's Director, Richard Cordray, an appointment which is now cast into doubt due to similar appointments to the NLRB recently declared unconstitutional.
These latest developments confirm the concerns of the business community regarding government regulation and fiscal uncertainty illustrated in the survey. While addressing upcoming fiscal negotiations, leaders in Washington must be aware of these concerns and the pitfalls of regulation that could slow or impede business growth.
Sara Taylor Fagen is a partner at DDC Advocacy and a former Political Director for President George W. Bush. She is also a CNBC contributor.