Behind the Numbers: The Banking & Payments Show
Episode: How a Trump Administration Might Impact the Banking Industry
Release Date: December 10, 2024
Host: Rob Rubin, Head of Business Development at eMarketer
Guests:
- Tiffany Montez, Principal Analyst
- Victoria Guida, Politico Economics Correspondent
Introduction
In this episode of Behind the Numbers: The Banking & Payments Show, host Rob Rubin delves into the potential ramifications of a second Trump administration on the banking industry. Joined by longtime guest Tiffany Montez and first-time guest Victoria Guida from Politico, the trio explores regulatory changes, the pro-crypto stance, merger and acquisition (M&A) activities, ESG (Environmental, Social, and Governance) considerations, and the broader economic implications of tariffs on the mortgage and construction sectors.
Regulatory Changes and Bank Capital Requirements
Rob Rubin kicks off the discussion by outlining six key areas where a Trump administration could influence the banking sector. The first focus is on bank capital and liquidity requirements. Rubin notes the anticipation of less stringent regulatory enforcement and a possible push towards deregulation, highlighting Trump's pro-fintech tendencies.
"He’s already said that for every new regulation he creates, he's going to get rid of 10," – Rob Rubin [02:30]
Victoria Guida echoes this sentiment, emphasizing a shift from the aggressive regulatory environment observed after events like the collapse of Silicon Valley Bank.
"There's going to be less aggressive enforcement... a new administration will definitely change that tone." – Victoria Guida [04:02]
However, Guida cautions about the longevity of these changes due to existing appointments within regulatory bodies, such as Michael Barr at the Federal Reserve, whose term extends to July 2026. This could lead to a deadlock among agencies, potentially slowing the pace of deregulation.
Pro-Crypto Stance
The second major topic revolves around the Trump administration's pro-crypto position. Rubin mentions the administration's support for non-traditional banking charters, which aligns with broader fintech advancements. However, Guida brings up the complexity of this stance, noting bipartisan efforts and legal challenges that may influence its effectiveness.
"I’m not sure whether that will come back or not." – Victoria Guida [05:47]
Tiffany Montez adds another layer by questioning the future of open banking and related regulations, pondering whether progress in areas like open banking might stall under the new administration.
"Will this actually stall progress on this or will it actually be peeled back in any way, shape or form?" – Tiffany Montez [06:27]
Merger and Acquisition (M&A) Activity
A significant portion of the conversation centers on M&A activity within the banking sector. Rubin expresses his long-held belief in impending consolidation among banks, predicting that a Trump administration would accelerate this trend.
"I keep saying that there's going to be a massive consolidation." – Rob Rubin [09:12]
Guida concurs, suggesting that regulatory bodies would be more accommodating towards mergers, thereby facilitating increased consolidation.
"I definitely think it will accelerate versus the pace that it's at now." – Victoria Guida [09:58]
Montez highlights that streamlined regulatory processes could lead to faster approval times for mergers, further boosting consolidation efforts.
"They actually... could actually occur faster and maybe as a result that may mean that there's more as a result of the process being faster." – Tiffany Montez [12:14]
ESG Backlash
The discussion then shifts to the ESG backlash, with Rubin pointing out potential policy reversals that could favor fossil fuel funding and traditional lending practices. He mentions Don Jr.'s involvement with an anti-ESG venture fund as an indicator of this trend.
"There will be an ESG backlash and perhaps that would relate to an increase in fossil fuel funding and loans lending rather." – Rob Rubin [04:02]
Guida adds that while ESG has been a bipartisan issue to some extent, a Trump administration might tilt the scales towards less emphasis on these factors, potentially altering investment priorities within the banking sector.
Open Banking and Regulatory Uncertainties
Montez revisits the topic of open banking, expressing concerns about whether regulatory enthusiasm for such initiatives will persist under the Trump administration. She questions the potential stalling of progress and advises financial institutions to navigate these uncertainties carefully.
"What should financial institutions do in the interim?" – Montez [06:27]
Guida discusses the mixed industry reception to open banking, noting that while banks may be skeptical, fintech companies view it as an opportunity to gain regulatory footholds.
"The banks overall are skeptical of the rule, whereas the fintechs sort of see this as an opportunity." – Victoria Guida [07:45]
Impact of Tariffs on Mortgages and Construction
Transitioning to the "Story by Numbers" segment, Rubin introduces the 7.29% average 30-year fixed mortgage rate as a critical figure influenced by broader economic policies, including tariffs.
"My number is 7.29% and that's the average 30 year fixed mortgage rate in the US when I checked." – Rob Rubin [08:53]
The conversation explores how proposed tariff increases could inadvertently affect the mortgage and construction industries by raising the costs of consumer goods and construction materials. Guida explains that higher tariffs could lead to increased prices for essential goods like lumber and appliances, thereby impacting housing availability and affordability.
"The cost of building new housing... tariffs will impact things on, you know, lumber." – Victoria Guida [15:36]
Montez broadens the discussion to include potential secondary effects, such as changes in immigration policy leading to reduced labor in construction, further straining the housing market.
"If we also start thinking about immigration and mass deportation, what does that do to the actual housing market..." – Tiffany Montez [17:54]
Rob Rubin ties these factors to mortgage rates, suggesting that economic slowdowns due to tariffs could influence the Federal Reserve's interest rate decisions, although he acknowledges the complexity and lack of direct causality.
"I don't know that we can point directly to a causal relationship between tariffs and interest rates on mortgages." – Rob Rubin [19:24]
Conclusion
The episode concludes with Rubin acknowledging the multifaceted and uncertain nature of how a second Trump administration might reshape the banking industry. He emphasizes the interconnectedness of regulatory changes, economic policies, and market dynamics, leaving listeners with a comprehensive understanding of the potential shifts on the horizon.
"There is a lot of uncertainty here and nobody has the answer which is why there are so many articles being written about the subject." – Rob Rubin [21:03]
Rubin extends his gratitude to guests Tiffany Montez and Victoria Guida, and to the audience for tuning in, while also previewing the next episode scheduled for January 14th.
Notable Quotes
- Rob Rubin [02:30]: "He’s already said that for every new regulation he creates, he's going to get rid of 10."
- Victoria Guida [04:02]: "There's going to be less aggressive enforcement... a new administration will definitely change that tone."
- Rob Rubin [09:12]: "I keep saying that there's going to be a massive consolidation."
- Victoria Guida [09:58]: "I definitely think it will accelerate versus the pace that it's at now."
- Montez [06:27]: "Will this actually stall progress on this or will it actually be peeled back in any way, shape or form?"
- Rob Rubin [19:24]: "I don't know that we can point directly to a causal relationship between tariffs and interest rates on mortgages."
This episode provides a nuanced exploration of the potential impacts a second Trump administration could have on the banking and payments landscape, offering valuable insights for marketers, retailers, and advertisers navigating the evolving digital media terrain.