For the first two weeks of President Trump’s administration, it seemed as though White House senior strategist Steven K. Bannon was calling the shots. With his protectionist stance on trade and immigration, Trump appeared to be hewing exactly to the protectionist, nationalist economic policies that Bannon has espoused.
That changed on Friday. Trump ordered a reconsideration of some of the rules imposed on Wall Street in 2010 after the mortgage crisis, signaling an approach at odds with Bannon’s views. The former Goldman Sachs banker has argued for stricter regulations, and he has had scathing words for financiers.
.. Bannon faulted greed for the financial crisis, “much of it driven by the greed of the investment banks.” He went on to say that bankers should have forfeited their bonuses and equity and faced criminal charges.
“The people who ran the banks and ran the hedge funds have never really been held accountable for what they did,” Bannon said. “That’s what I think is fueling this populist revolt.”
.. Bannon railed against the federal rescue of major financial institutions in 2008, calling it contrary to “the underpinnings of the Judeo-Christian West.” He complained that banks were borrowing too much, and suggested that they should focus on lending to businesses, rather than trading on financial markets.
.. During the campaign, the president was not that sympathetic to big banks,” Cramer said to Gary Cohn, director of Trump’s National Economic Council. “What happened between campaign Trump and President Trump?”
Cohn responded that the president was allowing his advisers leeway to pursue a deregulatory agenda, in response to arguments from the business lobby.
“He’s heard from over 50 CEOs that regulatory issues are what’sslowing them down,” Cohn said. “He is giving us the latitude to fix what we think is wrong.”
But Eisman, who works at money manager Neuberger Berman, says the era of Trump will be a “golden age” for the banking sector. “I think over the next couple of years there will be more leverage, and this will be a golden age of investing in financial stocks,” he told CNBC during an interview early Monday in New York.
He said he was “as long as he could be” in the banking sector.
.. She said she only rates two sectors overweight (that’s code for buy among Wall Street researchers), and those are financials and technology.
.. Other market participants also have warned that rapidly rising interest rates may result in loan losses in other areas of banks’ balance sheets, including in auto lending.
While Trump bashed Wall Street throughout the campaign, the financial services industry is hoping his victory, coupled with a GOP-led Congress, could open a path forward to easing regulations.
.. “To say the world has changed is an understatement,” one bank lobbyist said. “The defensive issues we were concerned about we can be less concerned about. And we can start thinking about, to some degree, an affirmative agenda. … We didn’t have a plan B, so now everyone’s got to come up with a plan B.”
.. One area where Trump could have the biggest impact is on the CFPB, the agency set up by Sen. Elizabeth Warren (D-Mass.) that has become a lightning rod for Republican criticism.
The transition may jeopardize CFPB regulations aimed at curbing payday lending and the mandatory arbitration clauses that prevent consumers from taking companies to court.
.. On the legislative side, small and regional banks, as well as credit unions, are well-positioned to see some regulatory relief, with political support from Republicans and moderate Democrats.
.. Regional banks in particular have seen a change to their calculus. A coalition of regional lenders and credit card companies has been lobbying Congress to overhaul a section of Dodd-Frank that requires banks with more than $50 billion in assets to be subject to so-called enhanced prudential standards.
.. Still, it’s unclear how Trump would square his populist rhetoric with the free market leanings of the broader Republican Party.
.. The people leading Trump’s transition efforts indicate friendliness toward Wall Street and other financial firms, including his selection of former SEC Commissioner Paul Atkins to help fill posts at independent financial agencies. Atkins has said “one could write a book about the various problems with the statutory text and implementation” of Dodd-Frank. He is the chief executive of Patomak Global Partners, a financial services consulting firm staffed with former regulators.
.. “There is an inherent contradiction between Donald Trump’s anti-Wall Street rhetoric and talk of ‘draining the swamp’ to make the government work for the people, and his possible Wall Street appointments to run big government agencies that regulate the financial sector to protect regular Americans,”
.. hoped that the populist pitch made by Trump during the election “wasn’t just rhetoric that gets forgotten when you come to DC.”
Michael Froman, who is now U.S. trade representative but at the time was an executive at Citigroup, wrote an email to Podesta on October 6, 2008, with the subject “Lists.” Froman used a Citigroup email address. He attached three documents: a list of women for top administration jobs, a list of non-white candidates, and a sample outline of 31 cabinet-level positions and who would fill them. “The lists will continue to grow,” Froman wrote to Podesta, “but these are the names to date that seem to be coming up as recommended by various sources for senior level jobs.”
The cabinet list ended up being almost entirely on the money. It correctly identified Eric Holder for the Justice Department, Janet Napolitano for Homeland Security, Robert Gates for Defense, Rahm Emanuel for chief of staff, Peter Orszag for the Office of Management and Budget, Arne Duncan for Education, Eric Shinseki for Veterans Affairs, Kathleen Sebelius for Health and Human Services, Melody Barnes for the Domestic Policy Council, and more. For the Treasury, three possibilities were on the list: Robert Rubin, Larry Summers, and Timothy Geithner.
This was October 6. The election was November 4. And yet Froman, an executive at Citigroup, which would ultimately become the recipient of the largest bailout from the federal government during the financial crisis, had mapped out virtually the entire Obama cabinet, a month before votes were counted.
.. Many already suspected that Froman, a longtime Obama consigliere, did the key economic policy hiring while part of the transition team. We didn’t know he had so much influence that he could lock in key staff that early, without fanfare, while everyone was busy trying to get Obama elected. The WikiLeaks emails show even earlier planning; by September the transition was getting pre-clearance to assist nominees with financial disclosure forms.
.. The “Bob Rubin school” is named for the former top executive at Goldman Sachs and Citigroup and first Clinton administration Treasury secretary. It is composed precisely of the kinds of Democrats that the Warren wing opposes on domestic policy, particularly on financial matters. In the Obama administration, that school won out. Froman, chief of staff to Rubin at Treasury, gave options for Treasury secretary that ranged from Rubin himself to Summers and Geithner, two of his key protégés.
.. The Rubin school dictated the Obama administration’s light-touch policy on bank misconduct
.. Peter Orszag this week suggested a trade-off: Give the Warren wing its choices on personnel, in exchange for more leeway to negotiate an infrastructure package with Republicans that gives big tax breaks to corporations with money stashed overseas.