Trumping the Regulators? Initial Thoughts on the Election’s Meaning

by Ben Jackson 0

The results of the presidential race would have shaped financial services over the next four years regardless of the outcome. In this blog, Mercator Analysts have pulled together their initial thoughts on what comes next.

Ben Jackson, Director, Prepaid Advisory Service: Trump’s victory surprised a lot of people on Tuesday. It looks like the regulatory landscape will change, but I think the financial services industry should be careful before declaring total victory. There are two big currents in all of this.

First, the GOP and Trump have talked about dismantling big government. I have heard at least one mention of repealing Dodd Frank, and the recent decision in the PHH Mortgage case means that Trump as president could fire Richard Cordray. So, we might see some regulations fall under that small government philosophy.

But, secondly, we have to remember that the vote that carried Trump to victory was in essence and anti-establishment vote. The public, and possibly even members of Congress could become suspicious of anything that looks like it helps the Wall Street Banks that Clinton was supposed to be the darling of.

I do think FinTech companies have opportunities to get more regulatory space to develop, and they may be able to tap into the anti-establishment current by positioning themselves, as Simple and Green Dot have tried to do, as alternatives to the establishment.

Sarah Grotta, Director, Debit Advisory Service: Despite the Republicans holding on to control of congress, I think the pace of change will be slow and tortured. The GOP is far from unified, so their ability to come together around ideas, an agenda, or even leadership will be tested. Let’s remember too, many Republicans don’t think of Trump as a Republican — he’s just not Clinton.

Representative Jeb Hensarling, the Republican chairman of the House Financial Services Committee, has introduced a bill that is being called the GOP alternative to Dodd-Frank. This bill calls for the repeal of interchange controls. I’m not sure that is an issue with enough broad concern beyond the payments industry for a fragmented House to get behind. It certainly has a better chance than it would have had under a Clinton administration with Sherrod Brown and Elizabeth Warren at her side.

I think the laws that have gotten more consumer attention will be in the cross hairs. I have been writing a report this week on healthcare accounts. There has been a dramatic upswing in consumers, through the healthcare.gov marketplace, choosing high-deductible plans and a healthcare savings account. I now need to add a corollary. I believe the repeal of the Affordable Care Act is a campaign promise that will be followed up on.

Raymond Pucci, Associate Director, Research Services: The big X factor in the future Trump administration is that we really don’t know much about his key advisors and Cabinet choices. Who’s going to be running Treasury, Justice, and the long list of regulators? Those agencies will be calling most of the shots on rolling back or keeping many of the perceived anti-business actions in the last eight years. Plus, there will still need to be some degree of cooperation with Congress, even one under Republican control.

One of the earliest items on the economic agenda will be business tax reform, especially attempts to ease the repatriation of U.S. companies’ cash held overseas. Over $2.5 trillion is kept in foreign countries by the likes of Apple, Microsoft, Google and many others. That represents almost 15% of U.S. GDP. Even a one-time break on repatriation would see that cash used for R&D, plus investment in many fintech companies, large and small.

Other early business beneficiaries could be the sharing economy types like Uber and Lyft, who are increasingly coming under the hammer of regulators. Retailers could see some relief from recently passed regulations on overtime and employee classifications. Then on the negative side, if the tough talk on trade turns into action, expect to see tariff-driven, higher prices on everyday products and services.

Joe Walent, Associate Director, Customer Interaction Service: The first job of any typical first term president is to get a second term. I’m not sure if Trump falls into that category, but I cannot imagine that the man’s ego would allow for “one and done”.
Financial deregulation in broad brush strokes will get lip-service, but when the rubber meets the road, the CFPB will be kept largely intact to protect the little guy. The small business owners and workers that were Trump supporters likely feel they’ve been at the mercy of not just the Federal government, but big FIs as well. Trump is not a policy architect, but a builder of coalitions. He will not want to jeopardize the good will of that part of the coalition that is suspicious of big institutions.

As far as actual policy, I agree with Ray when he pointed out that it will come down to the appointments. How the Treasury and the FTC are lead and directed will be our early indicators of the course and speed. Other than that, all I know is that it will be “the Best” policy.

In summation, I suppose the interesting thing is that we now get the big reveal, another holder over from Reality TV. We , as a nation, can collectively yell for President-Elect to “MOVE THAT BUS” and show us all the grand plan he has in store. It should be one of the highest rated state of the union speeches ever.