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Bankers in Davos See Trump’s Team Making Wall Street Great Again
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Loading...Wall Street’s high-flyers in Davos, basking
in their firms’ strong fourth-quarter earnings, said they’re
confident Donald Trump’s incoming administration will loosen
regulatory constraints on financiers -- even if it leaves
Obama’s signature Dodd-Frank Act largely intact.
Bank executives, speaking on condition of anonymity at
events around the Swiss ski resort, said they’re not counting on
Trump to overturn Dodd-Frank. Instead, they expect the federal
agencies that enforce the rules to ease up on them and support
bankers’ efforts to limit how much capital and liquidity their
companies need to pay bills or absorb losses in a crisis.
The bankers said they recognize that changing or
overturning the 2010 Dodd-Frank Act would require support in the
U.S. Senate that Republicans may lack. Instead they’re counting
on Trump’s team to dial back how supervisory agencies enforce
and interpret rules. Led by Federal Reserve Governor Daniel
Tarullo, U.S. regulators have adopted an extra-strict version of
the global standards on capital and liquidity set by the Basel
Committee on Banking Supervision in the aftermath of the 2008
financial crisis.
“Legislation, obviously that’s harder to do than just
changing regulations,” JPMorgan Chase & Co. Chief Executive
Officer Jamie Dimon said in a Bloomberg Television interview
with John Micklethwait on Wednesday. “Regulators can change a
lot of things easily about compliance, about costs, certain
rules about lending, how you use your liquidity, how you use
your capital. I would like to see some of those looked at and
maybe modified a bit, and I think it would be good for the
economy.”
Soaring Shares
At a panel discussion on the global banking outlook in
Davos Thursday morning, JPMorgan asset management CEO Mary
Callahan Erdoes, echoed that view.
“It’s going to be a great several years,” Erdoes said.
“It’s going to be very positive for businesses in the U.S.,
which should cascade to businesses around the world.”
Wall Street bank shares, including JPMorgan’s, have rallied
since the election on speculation that Trump’s plans to cut
taxes and regulations and boost infrastructure spending will
accelerate economic growth and drive higher interest rates.
Several bankers in Davos said they’re optimistic that
regulators under Trump could do away with the gold-plating by
the U.S. of the latest Basel benchmarks and ease the process by
which banks are stress-tested annually to ensure they have
adequate capital to absorb losses in a hypothetical crisis.
Changing Regulators
Trump can appoint a vice
chairman for regulation, effectively replacing Tarullo, who has
filled the role unofficially and antagonized bankers with his
strict approach to regulation. That, along with other
appointments, could help tip the Fed toward a more bank-friendly
approach.
While criticizing Dodd-
Frank, Republican leaders in Congress have backed even higher
capital requirements than the Fed for the largest banks.
‘Not Free’
JPMorgan’s Dimon and other executives also have pushed
against international liquidity standards that were part of the
post-crisis Basel regime and designed to ensure that firms have
enough easy-to-sell assets to meet claims coming due in a month
and over a year.
“There’s $2.5 trillion sitting at the central bank called
excess reserves,” Dimon said in Davos. “And we’re not free to
lend it because of all these new requirements.”
Asked whether laws will change or just how they’re
enforced, Bank of America Corp. CEO Brian Moynihan told Erik
Schatzker in Davos that “I think it will be the implementation
of regulation,” adding later that he expects a “regulatory
debate about what the right regulation is and how it will be
mitigated over time.”
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