Washington lobbyists, financial and policy analysts and Wall Street insiders are all trying to figure out what the Trump administration will mean for the banking industry.
But Rusty Cloutier never doubted that Donald Trump would be good for the small bank he runs in Lafayette, Louisiana. Cloutier sees in the new administration a chance not just for regulatory relief, but for a reordering of priorities away from the wealthy interests of the big cities and toward the rural and blue-collar communities where he operates.
“My customers are very hardworking people,” said Cloutier, the president of MidSouth Bank. “They work in the oilfields and they hear they are racist, and they just got tired of it being slammed in their face.”
He added, “Tell your editors that they need to run a headline that says ‘Main Street Won.’”
And yet, in the weeks since Trump’s surprise election, Wall Street has been winning, too. The stocks of Bank of America and JPMorgan Chase have been soaring to their highest levels in years — a rally of such force that it has caught many bank executives and analysts by surprise. The surge, for example, has more than restored all the value in Wells Fargo’s share price that was eroded after the scandal over the rampant creation of unauthorised bank accounts erupted in September.
For now, banks both large and small are benefiting from expectations that the president-elect will roll back regulations on just about every aspect of the industry, including the fees banks can charge, whom they can lend to and how much capital they have to hold. Banks would also benefit from the higher interest rates that are expected if a Trump administration’s fiscal stimulus program revives inflation.
Higher rates would increase the value of some of the banks’ holdings and would widen banks’ margins on loans. But like nearly all of Trump’s policy positions, his plan for banking regulation has not been explained in any great detail. Trump’s feelings on banks, perhaps more so than other industries, are difficult to sort out.
On one hand, he has called for dismantling the 2010 Dodd-Frank financial overhaul that is credited with reining in risk taking but blamed for crimping profits. On the other, he has railed against Wall Street elites for keeping down small-town America.
How, then, will Trump justify policies that bolster bank profits, while also delivering on his promises of economic populism? Community bankers see themselves in the sweet spot. They say Trump can limit regulations — particularly on banks with less than $10 billion in assets — while still being tough on the Wall Street banks that were the driver of the financial crisis and so much anger among the general public.
Freeing up community banks from the qualified mortgage rule and rigorous anti-money laundering guidelines, for example, would allow them to spend less time and resources complying with regulation and more on making loans and lifting the fortunes of the rural America Trump championed in his campaign.
Several community bankers said they also wanted the Trump administration to rein in the Consumer Financial Protection Bureau by installing a five-person bipartisan oversight board, rather than a single director. Among community bankers, support for Trump has been pervasive and consistent.
Roughly 84 per cent of community bankers supported Trump, according to a poll that the industry’s trade group conducted after the political conventions this summer. “I didn’t have any Trump signs in my yard,” said Tim Zimmerman, president of Standard Bank, which operates in communities outside Pittsburgh.
“But I want the bank to do well and to be able to help people in the community. And I can’t do that if things go the way they are going.”
In reality, the nation’s roughly 5,800 community banks represent a relatively small part of America’s banking activity. About half of the nation’s deposits are held by just a handful of megabanks, where there was deep support for Hillary Clinton.
Many on Wall Street helped bankroll Clinton’s campaign in the hope that she would protect the forces that drive their global profits, like free trade. Many executives at large banks feared that Trump was a loose cannon who could destabilise the economy.
The chief executive of Goldman Sachs, Lloyd C. Blankfein, went so far as to publicly voice support for Clinton. He was used in a pro-Trump ad — along with Janet L. Yellen, the chairwoman of the Federal Reserve, and the investor George Soros — that painted the Democrats as puppets of the global financial elite.
But as the stock market soared, the big banks began talking about the upside of a Trump presidency. Two days after the election, Blankfein said at the DealBook conference sponsored by The New York Times that he believed Trump’s policies would be “market supportive”.
Unprepared for a Trump victory, executives inside the big banks began drawing up lists of regulations or rules that the new administration and the Republican-controlled Congress might change for their benefit. They are not arguing for the repeal of Dodd-Frank, which large banks have spent hundreds of millions of dollars complying with.
Nor do they want a less powerful consumer protection agency, which some credit with helping big banks by cracking down on players on the industry’s margins, like payday lenders. At the top of their wish list: rolling back the so-called Durbin Amendment, which limits the fees banks can charge on debit cards, and tweaking the Volcker Rule so that large banks can engage in more types of trading activity to help their clients.
Cloutier, the Louisiana banker, said even if Trump appointed someone like Steven Mnuchin, the former Goldman executive, to a top economic post, the president-elect would not forget his promises to working-class America — and by extension small banks.
“He’s not going to be taking care of the sugar daddies who look down on the hardworking people of America,” Cloutier said. “But if he don’t deliver on that, he won’t be around four years from now.”
— New York Times News Service
