What you should know:
- Federal Reserve Gov. Michael Barr is confident that even with new trade agreements, the
tariff impacts will be around for a long time. - Data from the Federal Reserve Bank of New York found consumers are
less confident that they can make minimum debt payments in the near term. - Wall Street bonuses, like bank stocks, are subject to the
crushing impact of tariffs.
President Donald Trump has been at the forefront of bankers' minds in recent weeks, as the tariff pause continues and the fight to advance House Republicans' tax and spending bill waxes and wanes.
The House Ways and Means Committee saw initial success on May 14 when it advanced the massive tax package featuring an intact
That progress hit a roadblock on May 16, when the House Budget Committee voted 21-16 in favor of
Those who broke from party lines against the package are calling for increased cuts to Medicaid and other programs, while remaining conscious of demands for larger state and local tax, or SALT, deductions from Democrats.
"We are writing checks we cannot cash, and our children are going to pay the price," Roy told the committee. "So, I am a 'no' on this bill unless serious reforms are made."
The bill resumed progress on May 18 after the committee
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Bankers breathed a sigh of relief when Trump's
Further deals are on the horizon, as Trump said on May 16 that Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick will begin reaching out to foreign leaders to notify them "they'll be paying to do business in the United States."
The Federal Reserve has remained steadfast in its wait-and-see approach to shifting its benchmark interest rate, but board governors haven't shied away from offering predictions into what the short- and long-term impacts of the tariffs could be.
"Potential disruptions to supply chains and distribution networks are particularly acute for small businesses, which are less diversified, less able to access credit and hence more vulnerable to adverse shocks,"
Others like Fed Vice Chair Philip Jefferson have remained more reserved in their judgment.
"Various measures of consumer and business sentiment have declined sharply this year, and I will be watching very carefully for signs of weakening economic activity in hard data," Jefferson said.
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Dive into the latest coverage on the market ups and downs, how banks are impacted by various proposed legislation and how more tariff threats could come soon.
Fed's Barr has downcast economic outlook from tariffs
Much of the Federal Reserve isn't rushing to raise or lower interest rates in the face of how Trump's tariff plays will
Fed Gov. Michael Barr said while speaking at the Reykjavik Economic Conference in Iceland that he "expect[s] tariffs to lead to higher inflation in the United States and lower growth both in the United States and abroad starting later this year," specifically through supply chain disruption that will create "persistent upward pressure on inflation."
While Barr's outlook was less than optimistic, he remained confident that the Fed's benchmark interest rate joined with low unemployment will help the U.S. economy weather new market uncertainty.
"Thus, the FOMC may be in a difficult position if we were to see both rising inflation and rising unemployment," Barr said.
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Tax proposal includes credit union exemption, ag lending
The first step toward Trump's plan to enshrine the Tax Cuts and Jobs Act happened on May 14, as the House Ways and Means Committee
Agricultural lenders and those with fewer than 75 shareholders notched wins with respective sections on exempting taxation interest on loans secured by farmland and residential mortgages under $750,000 in small towns and cementing the Section 199(a) pass-through deduction to 23%.
Unfortunately for bankers, the contentious
"Today, House Republicans continued strong progress toward enacting President Trump's economic agenda and preventing historic tax hikes on families and businesses," Bessent said in a statement supporting the bill. "The President's plan for prosperity is in full swing as a unified Republican Party works to drive economic growth while lowering costs from coast to coast."
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A mounting debt storm is on the horizon for consumers
Data released last month by the
"I think it's all about tariffs," Jay Hawkins, a senior economist at PNC Financial Services Group, told American Banker. "Ultimately, if they do stay in place, no matter what form they're in or what level, that's going to increase costs, it's going to increase inflation and that's going to be passed along to the consumer."
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SEC reaches $50 million settlement in Ripple suit
The 2020 Securities and Exchange
The agreement filed this month will prompt Ripple to pay out $50 million to the SEC, much less than the $2 billion the SEC originally asked for, and get the other $75 million in escrow back. The agreement will also remove the securities law requirement placed on Ripple by the SEC.
Claims from the SEC centered on accusations against Ripple and the two executives of profiting off the sale of unregistered securities to the tune of hundreds of millions of dollars, then using the more than $1 billion in profits from offloading XRP to account for operating expenses. In return, the defendants argued the coin does not classify as a security and therefore is not subject to the scrutiny of the SEC.
"This is it — the moment we've been waiting for. … The SEC will drop its appeal — a resounding victory for Ripple, for crypto, every way you look at it," Garlinghouse wrote in a March 19
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The taxing impact of tariffs on Wall Street bonuses
Trump's tariffs are putting the squeeze on almost all aspects of the U.S. economy, and it seems like Wall Street's expectations for the Trump administration aren't immune from similarly downtrending forecasts.
A new report from compensation consulting firm Johnson Associates predicts that incentive compensation for some investment bankers could fall by as much as 20% in 2025, due mainly to a pullback from corporate clients facing increased market volatility and global trade uncertainty.
The report goes on to highlight both the slowdown of merger and acquisition activity and a general pause on initial public offerings as key factors weighing down on advisory fees and equity underwriting revenues.
"Tariffs and geopolitical concern are [the] biggest wildcard," the report said.
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