As President-elect Donald Trump continues to roll out his cabinet picks, a number of high-profile figures from Wall Street and the world of big banking world have found themselves with a seat at the president's table.
Chief among them are Treasury Secretary-designate Steve Mnuchin (a former partner at Goldman Sachs), Commerce Secretary-designate Wilbur Ross (private equity) and JPMorgan Chase CEO Jamie Dimon, who was rumored as a candidate for Treasury secretary, but ultimately wound up with a position as co-chair of a White House panel on job creation, as well as chairman of the Business Roundtable, where he will serve as a key intermediary between Trump's administration and the wider business community. And, most recently, Trump named Goldman Sachs president Gary Cohn as director of the National Economic Council.
With so many prominent figures from the for-profit banking world in Trump's inner circle, should credit unions be worried? It depends on whom you ask.
"The president-elect isn't the first president to draw from that area of the financial services world for key spots in his administration," noted Ryan Donovan, chief advocacy officer at the Credit Union National Association. "I'm not sure anything new or very different is taking place here."
Similarly, Geoff Bacino, a former NCUA board member and now a partner at Bacino & Associates in Washington, pointed out that the investment bankers sitting alongside the new president likely have much bigger things to worry about than credit unions.
"I've got a funny feeling that outside of trying to do business with some credit unions, Goldman Sachs doesn't worry themselves about credit unions one bit," quipped Bacino.
But not everyone in the movement shares Bacino and Donovan's carefree attitude, including Scott Wilson, CEO at SeaComm FCU in Massena, New York.
"My concern is that these are Wall Streeters who are not in touch with Main Street America," he said of Mnuchin, Ross and Dimon. "Credit unions who deal with small commercial loans of $250,000 or $300,000 or even $50,000 — we have a huge impact on Main Street America…And when Donald Trump surrounds himself with Wall Streeters, they have a very different view [than credit unions]: to make money. Our view is to help people."
Wilson isn't alone in his fears. In a recent poll at CUJournal.com, readers were asked how having such prominent Wall Street figures in Trump's inner circle would impact credit unions. Some 66 percent of respondents said they believe CUs should be concerned about these bankers' stances on the tax exemption and MBL and FOM reforms.
Despite his concerns — which Wilson said are more long-term rather than immediate worries — he observed that Donald Trump relates to Wall Street and vice versa. And that, sources say, could actually be good news for credit unions, since the vast majority of regulatory reforms will benefit CUs as well as for-profit banks.
"The guys he's talking to and some of the other folks in the cabinet are, for the most part, businessmen," observed Bacino. "If there's anybody who understands reg relief, it's somebody who understands the business side of it. In reality, it could be a blessing that the incoming administration is putting more business-oriented folks in some of these positions."
Not only is there the possibility that some of Trump's appointees might have a clear understanding of the need for reg reform, he added, but they also understand how compliance costs can drive organizations out of business.
The president-elect, said CUNA's Donovan, "has talked about the idea that for every new regulation, you ought to take two off the books. That sounds good, though we'd suggest that you shouldn't have to put a new reg on the books in order to take two off."
Where the Real Action Is
Donovan also pointed out that while the president and his cabinet set the tone for how government operates, "Congress does play a huge role in amending the laws and establishing a legislative agenda." And with credit unions very popular on both sides of the aisle, there aren't many reasons for CUs to worry, he suggested.
Beyond that, he added, banks and CUs are overseen by independent regulators, and "because of the independent nature of that regulatory scheme, there is space between the administration and regulatory agencies," Donovan explained. "The president has the ability to nominate leaders of the organization, but there is a formal, by-law separation between the two."
But if the real action happens in Congress, that is all the more reason CUs need to deepen their ties with lawmakers.
"The taxation issue comes up every single year — it's in this bill or that bill and then it gets taken out, but there's always a concern and then it winds up going away," said Paul Leavell, senior strategy analyst at Charlotte Metro FCU. "There's an ongoing need for advocacy in an environment like that…Anytime there's a change in power, there's a need to be vigilant, because you don't know what's coming next. And more so with Trump, because he's unpredictable. I think he likes being that way — he likes being the unknown quantity in Washington."
Moreover, some Capitol Hill observers suggest that tax reform is firmly on the Trump agenda. While that doesn't mean Trump or any of the lawmakers who ultimately work on tax reform are gunning for the CU tax exemption, it does mean credit unions will once again need to be ready to defend the exemption.
The Anti-CU Agenda
Even if the likes of Mnuchin, Ross and Dimon aren't much concerned with credit unions or have strong feelings about CUs, they have professional ties those who do, such as the American Bankers Association and the Independent Community Bankers of America — two groups that have an openly anti-CU agenda.
"From that regard, you have to worry a little more about an undersecretary or a position that is less than cabinet-level — but that's something we always have to worry about," observed Bacino. "Sometimes we focus so much on the selection of [cabinet members] and we forget that there is a deeply embedded bureaucracy that stays in place no matter who takes office…Those are the folks who, if they've got an anti-credit union bent, would take this opportunity to promote their cause."
CUNA's Donovan reminded that an agenda that goes counter to the interests of credit unions is a concern during any presidential transition, "particularly when folks are coming into public service without a history of public service."
But even if Trump's nominees represent a blank slate of sorts, "we've seen no indication that there's a widespread anti-credit union agenda in the incoming administration," he said, adding that CUNA has been in frequent contact with the president-elect's transition team and will continue to advocate for the movement once the new administration takes office.
"It's a reflexive and natural anxiety, but we've seen no evidence that there's any 'there' there," added Donovan.
Dennis Dollar, a former NCUA chairman who now runs an Alabama-based credit union consulting firm, pointed out that the voices railing against credit unions almost never come from Wall Street, but from the community bankers who are losing market share to CUs.
"I cannot imagine Wall Street bankers…serving in a presidential cabinet-level position with international banking and trade issues on their plate to politically choose to take on 108 million credit union members to pick up a couple billion per year in credit union taxes against a $20 trillion federal debt," Dollar told CU Journal. "If it was a community banker carrying a bias against credit unions because of back-home competitive scars, I might think differently. But the level of Wall Street mega-banker being tapped for these high-level cabinet slots are not the type of bankers sitting around their dinner tables worrying about credit union competition or the few dollars removing the credit union tax exemption would bring to the nation's budget shortfall."
Mr. Unpredictable
Trump's unpredictable nature was a hallmark of his campaign that has carried into the transition, and there appears to be no sign that he has much intention of changing that once he takes office.
"Trump has had six positions on very issue, so you have no idea what's going to wind up happening," observed Leavell. "The general sense as I read it is that there is a pro-growth, pro-business, less regulatory environment, and if that's the case then it's a win for credit unions. If they start picking winners and losers like they did with the Carrier deal that just happened…if he does that, he might pick individual industries. Who knows? The Obama administration was very friendly to the clean-energy industry; I'd hate to see an industry that started being super-friendly to the banking world and not to credit union land, but that's not where my mind is now."
Those fears aside, most believe that Trump's pro-growth focus will be a boon to credit unions, even if he's unpredictable.
"If there's one thing we know about Donald Trump — if there's anything we can draw from the pop culture history that he has, what he has demonstrated throughout the campaign and since the campaign — it's that he's going to set and drive his own agenda," said CUNA's Donovan. "And what we have taken some comfort in is the fact that he understands that regulations are getting in the way of businesses like credit unions serving American consumers and small businesses, and he wants to reduce that regulatory burden. So that's very positive."
