What does Trump’s economic transition signal for banks?
Donald Trump may have ducked out of his Midtown Manhattan tower for a steak dinner with his family during his first week as president-elect of the United States but, in the week ahead, he will name names.Among the transition appointments that wil...
Donald Trump may have ducked out of his Midtown Manhattan tower for a steak dinner with his family during his first week as president-elect of the United States but, in the week ahead, he will name names.
Among the transition appointments that will be announced are key positions with government economic agencies, according to Sean Spicer, the Republican National Committee’s chief strategist and communications director.
Investors will be watching as Trump details his starting lineup to oversee the country’s banking industry.
Whether his selections will “drain the swamp,” as Trump supporters chanted at his campaign rallies, or will feature plumbers well-versed in the Washington-Wall Street industrial-financial pipeline remains to be seen.
Rep. Jeb Hensarling, R-Texas, met with Trump Thursday and is reportedly on the short list of those being considered for the position of Treasury secretary. He currently leads the powerful House Financial Services Committee, the same group that helped give rise to the Dodd-Frank financial regulation legislation under former Democratic chairman Barney Frank.
Hensarling hates it, and Trump has identified Dodd-Frank as one of the Obama-era laws that he wants to throw out. Hensarling studied economics at Texas A&M, where, according to Fortune, he was taught by a Texas lawmaker who lent his name to another industry-changing law: Phil Gramm.
Gramm’s major contribution to U.S. finance is 1999’s Gramm-Leach-Bliley Act. That law eliminated rules barring regular banks from offering other financial services like insurance and investments. Dropping these restrictions led to further banking consolidation and much bigger financial institutions. It has been blamed for contributing to the Great Recession, but even banking hawk Sen. Elizabeth Warren, D-Mass., admitted in 2012 to the New York Times that the financial crisis could not have been avoided had the law never been enacted.
Regional and national bank stocks have soared since Election Day. Some of the optimism can be attributed to clear signals from the Federal Reserve that it will raise interest rates soon. That helps the loan business at banks make more money. In the week ahead, investors will be looking for signs from the president-elect whether his election will usher in big changes for the banking business.