Donald Trump, the financial sector hardly knows ye.
During the campaign, a group of bankers from around the country — plane tickets in hand — were looking forward to meeting the candidate in the flesh at Trump Tower in midtown Manhattan. They were going to get a chance to hear from his own mouth what he’d like to do with their industry. But at the last minute, Trump canceled and decided to spend his time elsewhere, so they never got the chance.
They weren’t alone. Trump, the president-elect, didn’t spend much time on the campaign trail discussing banks — not nearly as much as Hillary Clinton did in her primary battle with Bernie Sanders. For Wall Street, which loathes unpredictability, Trump is an absolute wild card.
One thing is clear: Traders are nervous about Trump. In anticipation of his victory, U.S. stock futures fell as much as 5 percent and yields on 10-year Treasuries surged the most since Britain voted in June to leave the European Union. Market turmoil eased as news of his win set in.
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A Trump White House was an outcome that bankers were never able to game out. Who will he tap to helm the Treasury Department? Will he follow through on his pledge to try to replace Federal Reserve Chair Janet Yellen? What exactly will he do to the Dodd-Frank Act? Answers have been elusive.
“It’s really tough to tell with Trump,” said Justin Schardin, a financial policy expert at the Bipartisan Policy Center. “There’s no indication that financial regulation is a high-profile issue for him.”
Trump said in August he’d issue a temporary moratorium on new regulations. (Would such a move halt rules on bank capital that haven’t taken effect?) He’s said he’ll repeal Dodd-Frank. (Does he plan to swap it for new regulations to keep banks from sliding into the Wild West?) He’s also said he’ll bring back the Glass-Steagall Act’s wall between commercial and investment banking. (Isn’t that a new regulation?)
Wall-Street has spent billions of dollars complying with Dodd-Frank, and it has transformed how banks do business. The biggest lenders are intimately familiar with most of its terrain, having battled over virtually every inch of the law during the last six years. What does it mean when Trump says he wants to dump it? The industry has no idea, but getting rid of the legislation could be a pain. While Democrats debated Wall Street policy during their primaries, the topic wasn’t a central feature of the Republican contest.
Not knowing costs money. Bank business models may need to be revamped if big changes are made, and whenever a dramatic revamp is brewing, the firms spend a lot on legal advice and lobbying.
When Trump has talked about Wall Street and the hedge fund industry, he’s bashed them, which has gone over well with his supporters. He ran an ad in his campaign’s final days, for instance, that featured Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein as a representative of the corporations that Trump says have pocketed the wealth that American workers have lost. And he’s accused hedge fund managers of “getting away with murder” on paying taxes.
Yet, he tapped hedge fund managers and financiers as advisers, including making Steven Mnuchin, a former Goldman Sachs executive who now runs hedge fund Dune Capital Management, his finance chairman. His economic advisory council includes John Paulson, a billionaire hedge fund manager, and Stephen Feinberg, CEO of private-equity firm Cerberus Capital Management.