Probably more than any other successful candidate in recent memory, president-elect Donald Trump will enter the White House owing little if anything to Wall Street and the big banks.
He certainly was not the candidate of the financial community. That was Hillary Clinton, who collected more than $78 million in finance sector-related donations for her campaign and hundreds of thousands in speaking fees from the Street before she ran.
Yes, Trump had some support from big names on the Street. They included John Paulson, the investor who cleaned up when he bet against the housing market; hedge fund investor Anthony Scaramucci, the founder of SkyBridge Capital; and Steve Mnuchin, the former Goldman Sachs partner and Trump campaign finance chief who, according to Bloomberg Politics, is the transition team’s choice for Treasury Secretary.
Trump also got major financial backing from Robert Mercer, the billionaire co-CEO of Renaissance Technologies and the moneybags behind conservative think tanks, political action committees, lobbying groups and the far-right news organization Breitbart. But Renaissance is a fabulously successful “quant” hedge fund relying on computers and sophisticated mathematics and is not part of the Wall Street establishment.
Talking about Wall Street on the campaign trail, Trump often sounded as though he had more in common with Democratic insurgent Bernie Sanders than Republicans like House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell.
In August, on the CBS news show Face the Nation, Trump told moderator John Dickenson that hedge fund managers “are getting away with murder.”
"They're paying nothing, and it's ridiculous. I want to save the middle class," Trump said. “The hedge-fund guys didn't build this country. These are guys that shift paper around and they get lucky. They're making a tremendous amount of money — they have to pay taxes."
In an interview with Sean Hannity on Fox News, Trump said: “I have guys that are friends of mine, they make a fortune. They're hedge fund guys. They move around paper. Look, at least I build things … And half the time, it's luck more than talent, OK? They pay peanuts.”
Like Clinton, Trump said he wanted the profits of hedge-fund managers taxed as ordinary income instead of as carried interest, which is taxed at the lower capital-gains rate.
Now that the election has been won, Trump seems to be taking a different tack and moving toward positions that will benefit the financial community, in some cases to the possible detriment of the middle-class and working-class voters who helped put him in office.
On the stump, Trump talked frequently about getting rid of Dodd-Frank, the post-financial-crisis legislation of 2010 aimed at reining in the big banks, and he reiterated his intention to dismantle it as recently as Nov. 11. Trump told the paper: “We have to get rid of [Dodd-Frank] or make it smaller ... Banks are unable to lend. It’s made our country noncompetitive. It’s slowed down growth.”
Reuters and The Wall Street Journal say that instead of a wholesale repeal, Trump may focus on softening the law, and that could include rolling back at least two provisions Wall Street finds especially troubling. One allows the Financial Stability Oversight Council to designate nonbanks as essentially too big to fail and thus subject to stiffer regulation; the other gives regulators the authority to take over a financial firm in trouble and liquidate it, the Journal says.
Also in jeopardy is the Consumer Financial Protection Bureau, a creation of Dodd-Frank that has been a target of Republican lawmakers on Capitol Hill since it began operating in the summer of 2011. While Trump and Senator Elizabeth Warren of Massachusetts, who first proposed the CFPB in 2007 when she was a Harvard Law School professor, went head to head during the campaign, the president-elect didn’t talk directly about trying to dismantle the agency, which has cracked down on payday lenders and credit card abuses.
In its biggest victory to date, the CFPB was one of two agencies involved in the investigation spearheaded by the Los Angeles City Attorney’s Office that brought the Wells Fargo scandal to light and forced the bank to pay $185 million in fines for opening credit-card and bank accounts without their clients’ permission.
But there has been no indication that Trump will resist the efforts of Republicans on Capitol Hill -- led by House Financial Services Committee Chairman Jeb Hensarling, who is reportedly also on the short list for Treasury Secretary -- to gain more control over the CFPB. Some changes to the agency already looked inevitable because in October a federal appeals court ruled that the agency is “unconstitutionally structured.”
Perhaps even more exciting to Wall Street than reining in the CFPB is the prospect of a weaker Securities & Exchange Commission. SEC Chair Mary Jo White announced yesterday that she will be stepping down, and Paul Atkins, a former SEC commissioner whom The New York Times calls an advocate of “deregulatory policies,” will lead Trump’s search for a successor.
The incoming administration’s efforts to loosen restrictions on big banks could also include slowing down or backing away from implementation of so-called Basel IV, global standards for how capital requirements for large financial institutions are determined. Bloomberg says that softening the strict rules the U.S. has pushed for since the financial crisis could save the banks billions.
The platform the Republican Party wrote at the convention in July called for the reinstatement of the Glass-Steagall law, which restricted the behavior of big banks and was dismantled during the Clinton administration. But that curious plank was never supported by Trump, The Wall Street Journal says.
What he did say when he was running for office was that he didn’t want to take money from Wall Street or special interests if there was any hint of a quid pro quo.
“It has to be no strings attached,” Trump said, and he largely stuck to that.
For Wall Street and the big banks, it could be the best of all outcomes. Without having to cough up significant campaign donations, they could wind up with plenty of influence and reforms they wanted anyway.