Wall Street Optimistic but Cautious as Trump’s Deregulatory Agenda Looms

Wall Street financiers gathered in downtown Manhattan on Wednesday, expressing cautious optimism about President-elect Donald Trump’s anticipated deregulatory agenda. While expectations are high for a more lenient regulatory environment, uncertainty surrounding Trump’s choices for key financial regulators and his specific policies tempered the mood among attendees.

Bankers remained bullish on the prospect of increased deal-making, with many expecting that Trump would appoint pro-business regulators to lead top agencies and potentially dismantle restrictive regulations. Yet, a week after Trump’s election, industry experts began to focus on the implications of his financial policies.

“Banks can’t have everything,” said UBS analyst Erika Najarian at the conference on Tuesday. She acknowledged the favorable market conditions but advised a measured approach: “We have to sort of temper enthusiasm when it comes to loan growth for next year” if interest rates remain elevated.

However, not all banks are expected to benefit equally. Institutions already under regulatory scrutiny are unlikely to see relaxed oversight from the new administration. Concerns over issues such as money laundering and criminal financing will continue to draw heavy scrutiny, particularly as global tensions increase between the United States and its geopolitical rivals.

Attendees also speculated on potential candidates for Trump’s regulatory team, debating which financial institutions might gain most under the new administration. “The administration is going to be this interesting mix of kind of laissez-faire, plus pro-business, plus populism,” observed Jon Lieber, U.S. head of research at Eurasia Group. “How those three things interact are going to be happening in weird ways.”

For example, Trump is widely expected to eliminate a proposed increase in capital requirements—a measure strongly opposed by major banks. Many financiers felt the industry could push for further relief from Democratic-led priorities, aligning with Trump’s promises to stimulate economic growth.

Jelena McWilliams, former chairman of the Federal Deposit Insurance Corporation (FDIC) under Trump, commented on the evolving regulatory landscape, saying, “Sometimes you will win and sometimes you will lose, but the CEOs frankly have to have the backbone to fight the regulators when they think they are right.”

However, Trump’s populist tendencies may also lead him to adopt consumer-friendly measures, such as continuing the Biden-era campaign against banks’ “junk fees,” which have been widely criticized by the public. Attendees noted that although Trump’s proposal to cap credit card interest rates may not come to fruition, it reflects the populist promises he has made to appeal to everyday Americans.

Trump’s interest in cryptocurrency could also increase competition for traditional banks, said Aaron Klein, a senior fellow at the Brookings Institution’s economic studies program. While financial institutions may initially benefit from reduced regulation, Klein noted that they face potential long-term erosion of market share if more financial transactions migrate to less regulated sectors like fintech and crypto.

Bitcoin hit a record high of $89,982 on Tuesday amid expectations that Trump will embrace cryptocurrency, generating buzz in the sector. “The incoming administration has an opportunity to deliver on campaign promises,” said Dante Disparte, chief strategy officer and head of global policy at Circle, the main operator of the stablecoin USDC.

As Trump’s team takes shape, Wall Street awaits clearer indications on the direction of financial regulation and how far Trump’s deregulatory approach will extend.

By fLEXI tEAM