Candidate Donald Trump talked tough about “draining the swamp.” Presumably, that includes cracking down on the big banks whose greedy risk-taking sparked the worst recession in modern memory.
Now that he’s President-Elect Donald Trump, populist champion of blue-collar America, surely the big bank honchos must be running scared, right?
The KBW-Nasdaq index, which tracks bank stocks, shot up 10 percent from Election Day to midday Friday. Wednesday morning, Bank of America stock rose by 5 percent. J.P. Morgan Chase, Morgan Stanley and even scandal-soaked Wells Fargo moved up more than 3 percent.
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What do savvy bank investors know that Trump’s blue-collar voters don’t? Simply put, it’s that, with the notable exception of free trade, Trump largely subscribes to the same pro-big business, supply-side economics philosophy as the last Republican to hold the White House, George W. Bush. They fervently believe that fewer regulations mean higher profits for business, and the good stuff trickles down to the common man.
History never shows that to be true. Income inequality soared under Ronald Reagan, and eight years of Bush-era supply-siding ended with the Great Recession, not economic nirvana.
That lesson seems lost on Republicans in Congress. They eagerly await President Trump, hoping he’ll join them in rolling back the 2010 Dodd-Frank Act, President Barack Obama’s effort to rein in the big banks.
Republicans also seek to de-fang the Consumer Financial Protection Bureau, the agency that brought Wells Fargo to heel over the bank’s unauthorized accounts swindle, a shocking reminder of how deeply big bank misconduct can wound average citizens.
Will Trump join his GOP colleagues in neutering the bureau, even though his blue-collar voters surely have no problem with the agency’s take-down of Wells Fargo? Will Trump give his voters’ needs primacy over those of the Wall Street titans and K Street lobbyists preparing to flood the halls of a newly un-gridlocked Congress?
If he’s truly out to drain the swamp, he needs to say no to K Street. There are signs he’s not favoring a full Dodd-Frank repeal. But Trump, as we all know by now, is not predictable, and he’s not a details guy. Others below him will fight it out over the particulars of bank regulation policy. But Wall Street is clearly betting on getting fewer regulations and more risk-taking leeway for banks.
Hardly sounds like swamp-draining. Trump, and GOP leaders, ought to tread with caution. GOP voters this year said they wanted change, not just another Republican. Change from Obama’s policies, yes, but also a change from business as usual in Washington, where Big Guys’ needs come first and Little Guys’ needs go to the back of the line – no matter which party runs things.
Of course, Trump could be different. He has suggested a renewal of the Glass-Stegall Act, the Depression-era law that curbed big banks’ participation in riskier investment banking activities.
Trump voters should pay close attention. His dealings with the banks will reveal whether he’s really for the common man, or if he’s just yet another promise-breaking politician – this time camouflaged in a private businessman’s suit.