‘Dancing in the street’: Some Wall Street banks are triumphant heading into Trump era

The nation’s biggest banks have just in the past few weeks notched some major wins in Washington, as President-elect Donald Trump prepares to take office promising even less regulation.

Hard-fought rules to require the biggest banks to boost financial buffers that protect against losses could be substantially watered down. A separate plan to force banks to lower fees when consumers use debit cards will take more time to complete, delaying a potential hit to banks’ bottom line.

And some of the biggest antagonists against Wall Street serving in the Biden administration, such as the Consumer Financial Protection Bureau’s Rohit Chopra and the Securities and Exchange Commission’s Gary Gensler, will be out of government on Day 1 of the Trump administration.

“A lot of bankers, they’re like dancing in the street,” said Jamie Dimon, the chief executive of JPMorgan Chase, the biggest U.S. bank by assets, at a conference last week in Peru. “Years and years of regulations” have curtailed access to loans and other forms of credit, he said.

His remarks came days after Jane Fraser, the head of Citigroup, the third-largest lender, told CNBC that Wall Street will see a less stringent approach to regulation under Trump, supporting economic growth.

On Wednesday, a group of federal banking regulators told House lawmakers that no major new rules will advance before the new administration.

Shares of banks surged after Trump’s big win, on the likelihood of deregulation and potential tax cuts, said Isaac Boltansky, an analyst at BTIG. Prospects for greater mergers that would allow more regional bank tie-ups also helped, he said.

Regional bank shares are up more than 10 percent since the election, compared with a much smaller 3 percent gain for the broader S&P 500 index of large companies.

Consumer advocates say delays to tougher rules in the weeks after Trump’s win don’t bode well for consumer protection or financial stability. They also say Trump is likely to return to a practice of filling top positions with Wall Street executives.

“If you mean to stick up for the little guy, and not stick it to the little guy, you don’t pick nominees from industry for agencies that should be protecting the public interest,” said Patrick Woodall, managing director for policy at Americans for Financial Reform.

Some bankers and their lobbyists are withholding celebrating until they learn who, exactly, will fill out the alphabet soup of regulators charged with overseeing the banking industry. With the exception of the Federal Reserve, Trump will have more control over the regulation of Wall Street than his immediate predecessors, thanks to recent Supreme Court rulings and other precedents.

Previously, Biden and even Trump, in his first term, had to wait for the terms of the political appointees running some of the agencies to expire before installing their own picks.

Another risk for Wall Street is that the new administration is more populist and less friendly to banks than during Trump’s first term, when officials and lawmakers sought to water down post-financial-crisis rules. On the campaign trail, Trump vowed to cap credit-card interest rates at 10 percent, an idea that faces an uphill battle legislatively, yet is still causing bank officials some anxiety.

In the days immediately after the election, bankers were also concerned Biden-appointed officials might seek to jam through a proposed reduction in debit-card swipe fees, which would lower revenue that banks such as JPMorgan and Bank of America receive from each swipe of a debit card.

Banks got a bit of good news on that front last week when a top Federal Reserve official, Christopher Waller, suggested the plan was delayed because it required more legal and economic analysis. Additional data would help the Fed determine how much card issuers can charge to cover potential fraud, he added, speaking to a group of bank officials and their lawyers at a payments conference in New York.

“We’re hopeful the Fed has decided to rethink this harmful proposal, which would benefit large retailers like Walmart and Amazon at the expense of consumers and financial institutions of all sizes across the country,” said Tom Rosenkoetter, executive director of the American Bankers Association’s Card Policy Council.

After years of playing defense against Biden officials, big banks are expected to go on the offense and help craft future rules in a way that favors Wall Street. That could be on display when officials return to the plan to increase big bank financial buffers, or capital, led by the Fed.

The pending rules are the last of a series of measures global regulators agreed to after the 2008 financial crisis. They aim to boost the resilience of the banking system and guard against taxpayer-backed bailouts. The latest plan also seeks to protect against a variety of other risks, including the potential to lose money from cyberattacks.

Biden-appointed officials initially floated a plan in July 2023 that would have raised big bank capital requirements by nearly 20 percent. After widespread pushback from the industry and lawmakers of both parties, the Fed planned to recast the plan in a way that would increase capital by about 9 percent for the biggest banks - roughly half of what they had originally proposed.

The deal was generally negotiated and agreed to by the big banking regulators. But in a surprise move that inadvertently helped banks, one Democrat, Chopra, blocked the plan from advancing in September.

Chopra opposed re-proposing the requirements and instead wanted them finalized ahead of the election. Chopra wasn’t intending to reward the banking industry, but Trump’s election win made the move a gift for big banks and angered other regulators who now believe the project is significantly delayed, according to bank lawyers and other people familiar with the deliberations.

CFPB officials defended Chopra, saying any September re-proposal would have had little to no bearing on how Trump-appointed regulators would handle the issue next year, according to people familiar with their thinking.

However, other regulators expected to be in position to finalize the restrictions next year had the agencies moved ahead with a re-proposal in September, regardless of who won the election.

Now, Trump officials who will have a say on how any future capital plan are crafted are expected to push for a revamped approach that could entail a much smaller capital increase for big banks, potentially saving the firms billions.

Trump’s team “will be more focused on promoting economic growth and lending, and less concerned with what they view as already strong financial buffers at large banks,” said David Portilla, a partner at the law firm Davis Polk.