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The Trouble with Trump for Bankers

WASHINGTON — In almost any other election cycle, bankers would be celebrating the fact that a Republican candidate has emerged so far in front of the pack and would quickly fall in line behind him. But this has been anything but a normal election cycle, and there are a whole host of reasons that bankers will be at least as reluctant to embrace the outspoken businessman Donald Trump as the Republican establishment has been. Here's why:

1. Trump is not committed to regulatory relief, Dodd-Frank repeal — or any other bank priority.

While most of the Republican candidates in the race have avoided discussing Wall Street reform or the financial crisis, almost every one at some point endorsed a repeal of the Dodd-Frank Act and pledged regulatory relief for community banks. (Sen. Marco Rubio, R-Fla., was the first, doing so during the initial Republican debate in August.) Trump, in contrast, has said almost nothing about Dodd-Frank beyond describing it as a "terrible law."

In an interview last year with The Hill, Trump vaguely endorsed repealing the law, but he has also said "there are aspects of it you could leave." And he hasn't called for regulatory relief for smaller institutions — a position that even former Secretary of State Hillary Clinton, the likely Democratic nominee, has espoused. If bankers are looking for someone to implement their agenda, there's scant evidence to suggest Trump would do so.

"One of the worst things for the financial industry is uncertainty. And with Donald Trump, there is tons of uncertainty regarding his economic plan," said Jaret Seiberg, an analyst with Guggenheim Securities. "We just don't know what his views are."

2. When in doubt, Trump goes populist — and that would inevitably be bad for bankers.

Throughout the race, Trump has embraced populist positions, even when that meant touting unrealistic and discriminatory plans, like the border wall and deportation. He revels in picking bogeymen — lots of them. In this election cycle alone, Trump has gone after Mexicans, Muslims, journalists, Apple and Nabisco (the maker of Oreos). How long before he goes after banks?

While Trump has steered clear of anti-Wall Street rhetoric so far, in a race against Clinton, he's likely to drift in that direction. Sen. Bernie Sanders, D-Vt., has shown how vulnerable Clinton is on Wall Street issues, and in a general election Trump is almost certain to use that to his advantage.

While breaking up the big banks may be a bridge too far, Wall Street remains deeply unpopular with the public. Many remain angry about the bailouts — and Trump has proven a master at tapping into public anger. Whatever his personal views might be about banks, it's an easy card to play against Clinton.

"The rhetoric against Clinton will be very heated — it will be very anti-Wall Street," said Brian Gardner, an analyst with Keefe, Bruyette & Woods. "He's never going to get to the level of Sanders, but he runs an anti-establishment campaign. He will paint her as the ultimate insider with the titans of Wall Street and the people who brought you the financial crisis."

3. Trump pursues vendettas — you want him overseeing the SEC or CFPB?

Whether as a candidate or president, Trump is unlikely to deal well with any banker opposition to his plans (whatever they end up being). Throughout his career, Trump has shown a willingness to mock, belittle and embarrass his opponents and critics (including bankers) and there's no reason to assume he would cease doing so if he won the White House. He has even called for rewriting libel laws so the government could more easily pursue actions against journalists.

That could leave bankers in a challenging situation if Trump pursues anti-bank policies. Those who dare to speak out against him (and, for that matter, those who cover them) risk being publicly and personally attacked — if not subjected to vindictive, selective enforcement actions.

Many bankers already privately admit that they dislike Trump, viewing him as a dangerous demagogue who doesn't believe in true conservative principles, but do not wish to say so on the record for fear of drawing his ire. If bankers end up going against a Trump administration, they could find themselves in a no-win scenario.

"Trump has deep insecurities that show when he responds to criticism," Gardner said. "He doesn't take it well. He's thin-skinned."

4. Trump on the ticket could lose Republicans the Senate — and even possibly the House

President Obama was able to pass the Dodd-Frank Act only because his party controlled the House and Senate. Trump as the Republican nominee threatens to recreate the same conditions for a President Hillary Clinton.

At the very least, political analysts agree that Trump's presence on the ballot would significantly boost Democratic turnout nationwide and put vulnerable Senate Republicans in jeopardy. The Democrats need to pick up just four Senate seats to retake control of the chamber — and most of the vulnerable incumbents are Republicans. In Roll Call's pick of the top 10 "most vulnerable" senators, nine were GOP members.

Even without Trump on the ticket, keeping the Senate may prove impossible for Republicans. But with him there, the odds of retaining it — and banks' ability to make significant changes to Dodd-Frank or the Consumer Financial Protection Bureau — go down.

"Trump puts those moderate Republicans that need to get re-elected in real jeopardy," Seiberg said. "While he's energizing the base of the Republican party, he's also scaring the bejesus out of Democrats who are likely to turn out in droves."

It would take far more for Democrats to recapture the House, given the GOP's current 246-188 majority. But in this surreal election year it seems nothing is out of the question.

"If Trump just starts totally melting down, you start putting more seats in play," Gardner said. "Maybe he does take the House down with him."

Rob Blackwell is the Washington bureau chief of American Banker. The views expressed are his own.


(8) Comments



Comments (8)
Rob - I posted on another article before I saw yours. You're right about Trump. There is no evidence I can find that he would support community bank regulatory relief. On the other hand, Hillary Clinton is on record as supporting regulatory relief for traditional community banks. She declared as much most recently at a fund-raiser here in OKC.
Posted by rogerbeverage | Wednesday, March 30 2016 at 1:02PM ET
I think it's pretty clear by now that your article, although well meaning, didn't sit too well with your banker/readers. I am not a Trump supporter, but I also am not a supporter of any of the other candidates. All simply main line GOP, party line, do nothing candidates. I have been very active in the GOP for two decades, a strong fundraiser for (R) candidates and a former GOP Chairman - and, I'm fed up with the GOP. So, let Trump kick their butts into the party they once were.
Posted by Rancher | Thursday, March 10 2016 at 9:26AM ET
The preceding comment brought to you by the Trump campaign.

I've been accused of carrying water for Rubio, Cruz, Kasich, and Sanders. So, sure, why not Clinton too? It's better than dealing with anything raised in the article substantively I suppose.
Posted by rblackwe | Friday, March 04 2016 at 3:25PM ET
This article brought to you by the Hilary Clinton campaign. Do not mistake this as journalism. If I am not mistaken, Hilary is also abandoning banks and the financial service sector in her remarks. Republicans have passed reforms under the veto threats which are real and get nowhere on the Senate side. Every side is responsible for the anger and rise of candidates like Trump & Sanders. Executive leadership and uniting our country has been absent for the last 8 years.
Posted by Mary Jackson | Friday, March 04 2016 at 2:49PM ET
Moreover, who among all candidates has the wherewithal after elected to walk up and down the beltway into dozens of agencies and bureaus, call out the leadership and request a 25% reduction in personnel by the end of the week. If you think that is not the correct start to solving Washington problems, I can't help you.
Posted by TxTim | Thursday, March 03 2016 at 12:40PM ET
Might all be so... However, it seems to me that Republican voters as so fed up with their party establishment that the more the establishment relies on reason to sway voters away from Trump, the more they dig in. Nobody is in the mood to be told how to vote. For sure Trump has a lot of "unknowns." For certain he will be a VERY disruptive President if elected. Many think disruption is exactly what this country needs. The disruption could be very good, or very bad. I believe voters think the risk of no change at all may be riskier than a very bad disruption at this point.
Posted by TxTim | Thursday, March 03 2016 at 12:37PM ET
If Trump becomes the nominee for the Republican party and loses the election and causes the Democratic party to gain politically, so be it. The last 8 years have seen this country torn apart on racial, economic and cultural lines. Voters are tired of electing politicians who promise financial accountability yet never get the backbone to do what they promise. It may take the election of a socialist to entirely wreck the country and from that point maybe leaders with integrity can raise our country from the ashes of destruction.
Posted by Jluebcke | Wednesday, March 02 2016 at 10:59AM ET
Your analysis is right on target, Rob. This is insanity. Republicans are reaping what they have sowed for the past eight years with constant negativity, no constructive policies, and a failure to deal with the rabble rousers within their ranks. Banks are actually in much more danger under Trump than under even Sanders. It is not that he does not know what he is doing or that he "knows nothing about banking;" to the contrary, he is perfectly capable of doing anything his whimsical and vain character finds pleasing.
Posted by Lawrence Baxter | Wednesday, March 02 2016 at 8:36AM ET
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