Bankers were overjoyed by Donald Trump’s election victory, according to Jamie Dimon, CEO of JPMorgan Chase & Co. and King of Wall Street. Many were angered by President Joe Biden’s inauguration as mergers and banking fees faced increased scrutiny and new capital markets rules were rapidly implemented. With Trump’s inauguration just around the corner, America’s financiers will find out just how much of a cause they have to celebrate.
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The industry will undoubtedly experience a sudden change in the way it is supervised. U.S. regulators will set new priorities in enforcing securities laws and take a more lenient approach in banking and other areas. Cryptocurrency is about to become truly mainstream. And loosening regulations could allow consolidation of the U.S. banking system, which is home to a vast number of small and medium-sized lenders. The only danger from Wall Street’s perspective is that the Trump team’s MAGA instincts and anarchic approach will thwart the deregulation boom.
One appointment is symbolic of the changes to come. Gary Gensler, the outgoing Securities and Exchange Commission commissioner, has annoyed Wall Street by demanding salary disclosures and interfering with private market funds. Her successor, Paul Atkins, served as SEC commissioner under President George W. Bush and has criticized the SEC’s approach to prosecuting suspected fraud, favoring quantity over quality. Instead, Atkins favors an “open jacket” approach, where the SEC presents evidence to defendants up front. He believes this could speed up the process by forcing defendants to decide whether to settle their cases or go to court.
This is typical of a Republican administration. But Atkins had a twist. He is co-chair of the Token Alliance, a cryptocurrency advocacy group, and digital asset enthusiasts will be joining him. French Hill, the incoming chair of the House Financial Services Committee, said he would push legislation in the first 100 days of the new Congress to identify which digital assets are products and which are securities. The Biden administration also required banks to report cryptocurrencies held on behalf of customers on their balance sheets, unlike other assets. This rule is likely to be repealed.
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In other regions, change will come even sooner. Trump is expected to reinstate executive orders from his first term and rescind executive orders issued by Biden. Bankers expect the bonfire to include orders to increase oversight of mergers and slow down partnerships among many U.S. banks. There were fewer than 150 mergers and acquisitions in the past two years, compared to at least 250 a year from 2015-19. Although high interest rates are a factor, the time it takes to complete a merger is increasing, reflecting increased scrutiny.
Mr. Trump’s appointees will also oversee the implementation of international banking standards known as “Basel III Endgame.” A proposal by the Biden administration and the Federal Reserve in 2023 would eliminate equity requirements for forms of mortgage lending, which would mean an average of 16%. Lenders argued that the proposal went far beyond what international standards require and did not require a capital raise in its entirety, citing the recapitalization of a bank with more than $100 billion in assets. It now seems more likely that it will be done by a major bank.
It’s not just Wall Street that has hopes for the new administration. Other areas of U.S. finance, particularly the private equity industry, are similarly bright. Shortly before the end of Mr. Trump’s first term, the Department of Labor announced that defined contribution plan administrators could include some private equity assets in their portfolios without violating their fiduciary duties. However, the recommendations were later rescinded. Mark Rowan, CEO and co-founder of private equity giant Apollo Global Management, which has $733 billion in assets under management, said accessing these savings is the “single biggest opportunity” for his company.
dog eats dog
Consolidating the alphabet soup of American financial regulators is also a long-standing Republican desire. Members of Trump’s transition team reportedly asked executive candidates whether some U.S. financial institutions could be cut. Elon Musk, the billionaire technology executive who heads Trump’s Department of Government Efficiency, said he wants to “eliminate” the Consumer Financial Protection Bureau, an agency created by legislation passed after the financial crisis. Consent is required for the merger or abolition of institutions. But narrow margins in the House may make it difficult to do so.
This is especially true given the potential opposition from some in the Trump ally. In 2023, Vice President-elect J.D. Vance, along with confidence-shattering Democratic Sen. Elizabeth Warren, criticized financial regulators for allowing JPMorgan Chase to buy the assets of failed First Republic Bank that year. , claimed that the acquisition amount would increase. Corporate concentration. Even if Mr. Vance doesn’t pick up the government baton, other MAGA types almost certainly will. The administration’s response to Capital One’s proposed takeover of Discover by two credit-card banks will give an indication of how laissez-faire it will actually become, suggests Christopher Wolfe of credit rating agency Fitch. .
The coming wave of deregulation has many benefits. Mr. Biden’s efforts to raise capital levels would have unnecessarily strained the operations of big banks. Increased scrutiny of mergers has slowed the consolidation of a fragmented industry. Even some regulations on digital assets are unnecessarily aggressive. Deregulators hoping for a big bang may be disappointed given domestic constraints and ad hoc policy decisions. But Wall Streeters who have kept their ambitions in check will have much to admire about the Trump administration.