SCENARIOS: Change agenda awaits business on election eve

WASHINGTON (Reuters) - As Democratic presidential candidate Barack Obama comes down the homestretch leading Republican rival John McCain, corporate America is bracing for what lies beyond the finish line.

After the election on Tuesday, major changes look likely for many sectors of the U.S. economy regardless of who wins, but especially if it is Obama and the Democrats, analysts say.

A victory by Obama, an Illinois senator, coupled with big Democratic gains in the U.S. Senate, would put them in a position to pursue sweeping reforms across the economy -- from banking and insurance to drugs and telecommunications.

Of course, any drive to strengthen regulation and close business tax loopholes would be constrained by the federal budget deficit, a weak economy and corporate lobbyists.

But change is in the air. Even if McCain wins and Republicans keep a powerful minority in the Senate, business will be on the defensive for some time to come, experts say.

"We believe that the 2008 presidential election and the potential political realignment in the Congress will prove more meaningful for investors than any since the Reagan revolution in 1980," said Andrew Parmentier, policy analyst at FBR Capital Markets, a Washington-based investment banking firm.

Like many others, Parmentier projects an Obama victory and significant Democratic gains in Congress. If that plays out, he said, "Obama would enjoy a few months of effective unity with the Democratically controlled Congress in 2009 ... to push an aggressive agenda of increased regulation and consumer protection initiatives."

Here's a look at some possible outcomes for various segments of the economy:

FINANCIAL SERVICES

A regulatory crackdown on markets for credit default swaps and mortgage-backed securities looks likely, along with a restructuring of agencies that regulate banks and Wall Street firms such as Goldman Sachs and Morgan Stanley.

It is also probable there will be a revamp of government oversight of private-sector credit rating agencies, such as Moody's Corp and Standard & Poor's.

Mortgage finance is sure to change fundamentally, depending on what happens to Fannie Mae and Freddie Mac. The next administration also will inherit custody of the Bush administration's $700 billion financial bailout program and other efforts to stabilize the housing and credit markets.

As a wave of bank mergers unfolds, increased concentration among healthy banks could draw new antitrust attention.

Widespread oversight reforms might result in the creation of the nation's first federal regulator for insurers.

TELECOMMUNICATIONS

In a key Internet policy issue, Obama favors "net neutrality," while McCain opposes it.

Net neutrality backers, including Google and Microsoft, say Internet service providers like AT&T and Comcast should be barred from charging higher fees for certain types of Internet traffic that need more bandwidth, such as movies. They also argue that providers should not be able to deny access to any legal Internet content. McCain favors a market solution to the issue rather than government regulation.

McCain has also backed proposals to require cable companies to sell individual channels to customers "a la carte," so they can get only programing they want, an idea strongly opposed by the industry.

PHARMACEUTICALS

Drugmakers could face a rush of health-care changes in the event of big wins by Democrats who favor negotiating lower prices in Medicare's prescription drug program, allowing generic versions of expensive biotechnology drugs and expanding health benefits to uninsured Americans.

Any attempt to expand health coverage could affect prescription drug sales. Use of medications may grow, but companies could face pressure to lower prices.

McCain, too, has criticized drugmakers in the campaign. Both he and Obama back letting the Medicare health insurance program negotiate lower prices for medicines, a move the drug industry strongly opposes.

The candidates also support greater use of cheaper generic drugs and importing of medicines from other countries.

DEFENSE

Both Obama and McCain have said they will take a hard look at runaway costs in defense programs. U.S. defense spending climbed more than 60 percent during the Bush administration, and will total at least $612.5 billion in fiscal 2009.

The U.S. armed services are maneuvering to defend big weapon programs as the economy softens and the government spends billions of dollars shoring up the financial system.

Experts say the Pentagon has a good chance of succeeding -- to the benefit of contractors like Lockheed Martin Corp, Boeing Co and Northrop Grumman.

CORPORATE GOVERNANCE

Democrats would likely push for giving shareholders more boardroom clout and more say in setting executive pay. The unprecedented bailout program approved by Congress included the first-ever limits on executive compensation for banks that accept a capital injection from the U.S. Treasury Department.

(Additional reporting by Kim Dixon, Lisa Richwine, Susan Heavey, Diane Bartz, Jim Wolf and Andrea Shalal-Esa; Editing by Susan Kelly and Peter Cooney)