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Wall Street is freaking out at the thought of President Liz Warren

The 2020 election is still a long way off, but the nation’s big banks are already pricing in the possibility of an Elizabeth Warren presidency, their senior executives tell me. The picture ain’t pretty — for the banks or average Americans.

True, Warren isn’t the Democrats’ frontrunner, and a lot could happen in coming months. Because it’s early, financial stocks haven’t officially started to suffer. But the bank execs note that Warren is smart and driven, and they fear she may be starting to break out of the pack, where she can do some damage.

Her main rival for progressive voters, Sanders, is fading. And though they’d love a moderate like Joe Biden to step it up (and he might during Thursday’s debate), they also fear he can’t. And they know Warren has a built-in hatred for financial institutions and folks with wealth.

President Trump would destroy her, though, right? Not so fast, the bankers say.

The Trump economic boom is showing signs of some weakness, thanks to Trump’s trade war and conditions globally and the press’ refusal to publicize the memo that the economy is actually fine.

That’s why the GOP suffered all those mid-term losses in key blue-collar states that Trump’s trade policies were supposed to help. Voters have become more open to an alternative.

That alternative could be Warren, given her ability to define and distill complex financial issues and her go-for-the-jugular hostility toward banks. Those attributes have made her a progressive star, particularly since the 2008 financial crisis when she led the leftist rallying cry against Wall Street. And they may yet put her in the White House.

What’s so bad about going after the banks, which, after all, helped trigger that monumental debacle? Well, for starters, it won’t be bad for just the banks: There’s a significant risk they’ll suffer, they believe — but survive. For Americans looking to save and invest (aka: most of us), the damage would be far worse.

Here’s a CliffsNotes version of their thinking: Warren has spoken often about dismantling mega banks like JP Morgan and re-instituting the Depression-era Glass-Steagall law that separated their commercial lending and deposit operations from their Wall Street activities. She believes that combination proved deadly in the run-up to the financial crisis, because their risk-taking infected the consumer side, ultimately forcing a government bailout.

Yet the chances of a wholesale bank breakup would be low, the bankers admit. She’d need congressional buy-in, and there’s no firm Democratic consensus on the issue. (The banks were allowed to merge their operations under Democrat Bill Clinton).

Even if she did break up the banks, the damage would be contained. Internal analysis shows that if JP Morgan was forced to spin off parts of its businesses, shares of the various pieces might even rise, because large diversified companies are priced less than their various parts by investors.

Warren would also ramp up bank regulations and corporate taxes that Trump rolled back. That, too, would hurt, but the pain would be limited: Tightening capital requirements, for example, would squeeze profitability, but, argue the bankers, their stock price might not suffer too much, because banks would be considered safer. And corporations are notorious for finding loopholes around tax hikes.

Yet the biggest losers, they argue, would be their clients — average Americans — and when their clients feel pain, they do, too. People saving for retirement — i.e., those with money in stocks, a pension plan or a 401(k) — stand to lose big. Ditto with a wealth tax she might push.

Indeed, the shock of her mere proposals — far higher taxes, more onerous regulations — will cause tremendous market volatility. Her wild spending and corporate-governance proposals (health care for all and more) will make the already massive Trump deficits look quaint (and could lead to higher interest rates). Making corporate boards answer to unions and employees, in addition to shareholders, would mean companies would be required to serve many masters.

Why invest in a business whose management is working against your interest? Stocks would plummet, as would retirement savings — and not just for fat cats, but for every teacher, fireman and cop.

Again, it’s early. There’s no clear nominee for the Democrats, and despite President Trump’s low favorable ratings, he knows how to fight and win. But banks for all their faults are usually good at assessing risk, and they say the risk of a Warren presidency is real. They’re right to be scared — as the rest of America should be, too.

Charles Gasparino is a senior correspondent at the Fox Business Network.

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