WASHINGTON — Banks are losing a pillar of stability within the Trump administration with the departure of Gary Cohn as director of the White House’s National Economic Council.
While many others within the president's inner circle have quit or been forced out in recent weeks, few directly impacted financial services policy. Cohn is different.
The former Goldman Sachs banker helped usher in a tax cut bill, recruited industry friendly regulators and pushed back against protectionist trade policies financial institutions oppose. He also championed a regulatory relief bill for banks that the Senate is in the process of passing.
More than that, however, was that banks saw him as a top ally within the Trump administration, one who could deliver results while the president lurched from crisis to crisis.
“There has been a mantra ‘In Gary We Trust' on Wall Street and part of that is that because they felt he represented a pro-market view inside the White House," said Ed Mills, a policy analyst at Raymond James. "To the extent he is departing, there would be concern that his view is no longer able to win internally."
The impact of Cohn’s departure may also depend on how quickly and who is picked as Cohn's replacement.
“This could be a problem for nominations, especially if someone else is named in a reasonably quick matter and clears out the NEC,” said Brandon Barford, a partner at Beacon Policy Advisors. “Then this will have a huge impact on nominations.”
Camden Fine, president of the Independent Community Bankers of America, agreed Cohn's departure "could have an impact on financial regulatory agency appointments."
If current NEC staffers such as Andrew Olmem, who works on financial policy, and Shahira Knight, deputy director of economic policy, depart, it could signal even bigger changes in store, and make bankers even more anxious.
Trump adviser and economist Larry Kudlow has long been seen as a potential candidate to join the administration.
Ian Katz, a policy analyst at Capital Alpha Partners, said in a note to clients that if Kudlow or another free-market champion were picked, “investors could get over the loss of Cohn quickly.”
“But if we go several days without news of a replacement, investors could get edgy,” Katz said.
Speaking to CNBC after the New York Times broke the story of Cohn's departure, Kudlow said, “Lots of people come to the White House and like these jobs and life will go on. I don’t want to push the panic button.”
Barford added that Treasury Secretary Steven Mnuchin may gain more influence with Trump.
"He is one of the longest-serving people with Trump and as other people leave, those that have been around longest have his ear still and will get more airtime," Barford said.
Others also said Cohn has already built policy momentum within the White House.
“His impact will continue to be felt not only as the Trump tax cuts take hold, but also as Congress considers Dodd-Frank reforms that reflect his input,” said Daniel F. C. Crowley, a partner K & L Gates. “He will have helped establish the precedent that financial regulation can be continuously reevaluated on a bipartisan basis.”
While Cohn had been voicing support for the regulatory relief bill led by Senate Banking Committee Chairman Mike Crapo, R-Idaho, his departure likely won’t jeopardize the legislation. Despite pressure from progressives, moderate Democrats continue to support the bill, which will enable it to pass the Senate. (Whether it can become law likely depends on whether the House pushes for changes which the Democrats could not support.)
But Cohn’s departure does signal a shift in trade policies. Cohn is said to have opposed Trump's proposal last week for tariffs on aluminum and steel. According to a Bloomberg story on Tuesday, Cohn rebuffed a direct request from the president to support the move. Hours later, Cohn quit.
“The timing of [Cohn's] departure suggests that the trade protectionists have won a decisive victory inside the White House,” said Isaac Boltansky, an analyst at Compass Point.
Jaret Seiberg, an analyst with Cowen Washington Research Group, called Cohn "the most important and powerful pragmatic, pro-business member of the president's inner circle. His departure gives conservatives and protectionists much more influence over White House policy."
Cliff Rossi, a finance professor at the University of Maryland's Robert H. Smith School of Business, said, "Gary Cohn was very well respected for pushing through the tax cuts, but obviously Cohn's view on tariffs differs."
The tariffs are also unpopular among bankers, who fear they will provoke an international trade war.
“There was some unhappiness between them for some time and the tariffs were enough of a reason for him to move on," said Rossi, a former economist at the mortgage insurer Radian and former chief risk officer at Citigroup.
Cohn had been planning a meeting with Trump and businesses that would be harmed by the tariffs, but that has now been called off, according to published reports.
In the meantime, bankers are left to see what happens next.
“Cohn is only one person, but his departure will have an outsized impact in Washington and Wall Street," Boltansky said.
Victoria Finkle and Kate Berry contributed to this article.