Will Trump 2.0 Be Revolutionary or Evolutionary for the Banking Industry?

Banks anticipate a softer regulatory touch and the chance to undo some Biden-era moves. But an innovation-friendly Trump II will also lighten up on competitors.

By Steve Cocheo, Senior Executive Editor at The Financial Brand

Published on January 20th, 2025 in Banking Trends

The first batch of changes in Washington have been underway even before President Trump’s inauguration. The nominee for Treasury Secretary, Scott Bessent, had already been through his confirmation hearing before the new president had even been sworn in. And a steady trouping of tech chieftains arriving to kiss the presidential ring has made this a transition period to remember.

The transition is now over and the second Trump presidency has officially begun, along with slim Republican majorities in both the House and Senate.

Beyond a new head of state, new chairs head the House and Senate committees handling banking and new heads will be picked and confirmed for two of the three prudential banking regulators as well as for the Consumer Financial Protection Bureau — as well as other departments and agencies important to financial services.

The reinvigorated federal interest in artificial intelligence and digital assets has resulted in appointment of the first White House AI and crypto "czar" — an unofficial term going back decades that, crucially, differs from traditional regulatory and cabinet appointments in that it doesn’t require Senate confirmation. The present and future role of Elon Musk and company in the direction of federal government structure, policy and staffing raises the term "influencer" to a new level.

[Read executive order establishing the Department of Government Efficiency.] [Read executive order on "Strengthening American Leadership in Digital Financial Technology," which establishes the President‘s Working Group on Digital Asset Markets. Its membership does not include any federal banking regulators. It bars establishment of a U.S. central bank digital currency.] [Update: Bessent was confirmed by the Senate on Jan. 27.]

What’s in store for banking? The history of federal banking legislation, regulation and supervision would seem to favor incremental or gradual, change, barring a crisis. At least, that would be a reasonable assumption based on an understanding of the way things in financial services in the nation’s capital typically work.

To a degree, observers say, some things may play out that way. But other matters may follow a new script.

"Much of the commentary I’ve seen is in the framework of established rules and norms. But as we’ve seen, established rules and norms do not particularly constrain Donald Trump," says Michele Alt, partner at Klaros Group and a 22-year veteran of the Comptroller of the Currency’s legal wing.

Some big ideas have been coming out of the Trump camp since he won, including one close to home: shrinking the bank regulatory apparatus, at least by killing the Consumer Financial Protection Bureau. The notion of rationalizing and downsizing federal bank regulation comes around like a periodic comet. But Alt says that while she was initially among those dismissing the idea as another replay of a perennial idea — "I’ve seen this movie before" — she’s not so sure anymore.

The usual thinking: A task force will study the matter, come up with a detailed report with new org charts, yada, yada, yada, and then we’ll put it in the archives with all the other such reports. Future footnote fodder.

"So we all think, ‘Wow, but you can’t make this change or that change,’ or, ‘You have to go through this or that process’," says Alt. "Well, what if they just do it?"

A legislative approach requires bills, hearings, negotiations, and usually a multi-faceted banking bill to get anything done. Even the creation of the CFPB was part of a massive post-crisis law, the Dodd-Frank Act.

But how about if the Trump team takes a shortcut? "When agencies’ heads are singing from the same hymnal it’s very powerful," says Alt. "They can effectuate a lot of change if they want to. It’s not that they are unconstrained — there could be lawsuits and more. But they could go pretty far."

Speaking completely theoretically, she says, by issuing a joint memorandum of understanding FDIC, for example, could delegate its examination function to the exam staff of the Comptroller of the Currency, essentially delegating or outsourcing the function.

"If those were their marching orders, and they just did it, how far could they get?" asks Alt.

That’s just one of the shifts that could be coming. Meanwhile, congressional consideration of banking issues will have its own cadence, including a look back at Biden-era regulation.

The first priority for regulatory agencies will be getting new leaders — either in top spots or, in the case of the Federal Reserve, a replacement for Michael Barr, who is resigning his designation as Vice-Chairman for Supervision (but not his board seat), effective Feb. 25 or earlier if a replacement is named. An expedient choice, because she is already on the board, which won’t have a vacancy until 2026, is Michelle Bowman, a Republican, who is a former banker and state regulator. She is currently the Fed board designee to represent community banks.

Outlook on Capitol Hill for Banking Matters

Experts don’t see much immediate action — in terms of actual legislation — out of Congress in banking affairs. There will be nominations in the Senate and use of the time-sensitive Congressional Review Act in both houses. The Republicans’ margins are considered thin, so there will be a need to cultivate bipartisanship, where possible, to move forward.

"I’m not predicting any major financial legislation anytime soon, because we have narrow majorities, and so there will still be a lot of horse trading necessary to get anything through," says Alt. "The Democrats are not going to be at all inclined to assist the Republicans in, say, dismantling the CFPB."

Phil Goldfeder, CEO of the American Fintech Council, a group including fintechs, banks and firms serving fintechs, thinks the Trump team will have learned some lessons from the first term — what worked and what didn’t — and both parties will have learned from the results of the election.

"It opened a lot of people’s eyes, particularly among Democrats, that there’s a need and desire among Americans for pragmatic legislation and regulation. This leads me to think you may see additional bipartisan action in the new Congress," says Goldfeder. Besides his current post, Goldfeder worked for Cross River Bank in public and government affairs roles and for Sen. Chuck Schumer, currently Senate Minority Leader.

Looking for immediate action? "You’ll see more immediate movement from the administration as the president signs executive orders," says an industry source, since they can go into effect quickly and without running through public negotiations nor regulatory rulemaking procedures.

Read more: Headcount, AI, M&A: Highlights and Insights from the Big Banks’ Q4 Earnings

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The Hill’s Big Rubber Eraser: The Congressional Review Act

One of the priorities for congressional Republicans will be picking and choosing among Biden-era regulations that can be unwound using the Congressional Review Act. Republicans have already been working on lists of target rules. Trump and congressional supporters used the Act to repeal Obama-era regs during the early days of his first term, and former President Biden and supporters nixed some first-term Trump measures when he came in. Using the Act is subject to specific rules on timing that some consider to be somewhat arcane.

In the banking sphere, among the likely targets for the Act will be some of the latter-day measures put through by Rohit Chopra’s CFPB. After the election, amid a blizzard of suits, settlements, studies and fresh proposals, the bureau finalized four new regs on top of other final rules, promulgated before the election, that are unpopular with the industry. [Updates: Jan.31 President Trump fired Chopra. On Feb. 3, Treasury Secretary Scott Bessent was named acting CFPB director.]

The CFPB was mentioned multiple times in a Jan. 10 letter from the American Bankers Association and 52 state banker associations to then President-Elect Trump that asked him upon assuming office to order a stop-work to all financial regulators.

The groups requested that work on open regulatory actions be paused and that effective dates for final rules be extended until new agency leaders could weigh each action and determine its future. The groups asked that this include agency guidance. Officially guidance isn’t considered binding on regulated institutions, but the organizations say that regulators often treat these advisory documents as if they were regulations.

New House Financial Services Committee Chair French Hill of Arkansas warned CFPB, as well as other Biden regulators, about last-minute regulations and held out using the review law in response.

The review act process takes time to process, and requires majorities in both the House and Senate in order to be put before the president for signature.

A stated Trump goal for the second term is to slash regulations — 10 for every new one, versus the two for one goal of the first Trump term. Anyone familiar with banking regulation should understand that that’s a vague equation at best — virtually a non sequitur — given how banking regulation is structured [Update: Among President Trump’s earliest executive orders was a regulatory freeze. Certain banking agencies are considered independent entities. There’s been little said publicly on their anticipated compliance with the order.]

Read more:

What’s on Banking Committee Leaders’ Lists

Meanwhile, the new banking committee chairs have issued lists of priorities.

Chairman Hill, a banker by background, issued "Principles to Making Banking Great Again" shortly after the election, before he was selected to head the committee. Among his lengthy list of goals is replacing the position of CFPB director with a bipartisan commission, such as the FDIC’s board. He opposes de-banking of customers through "weaponization of the government" in efforts like Operation Choke Point. He favors tailoring of regulation and supervision by institution size, risk profile, business model and more. [Hill slated hearings on some of these matters in a Jan. 24 announcement.]

Hill has had a strong interest in digital assets and chaired the House Subcommittee on Digital Assets, Financial Technology and Inclusion in the last Congress.

For her part, Ranking Member Maxine Waters of California issued a mid-January fact sheet criticizing attempts to kill the CFPB: "While [Elon] Musk falsely claims that the agency is part of a problem of ‘too many duplicative regulatory agencies,’ the truth is that there is no other federal agency fighting hard for our nation’s consumers like the CFPB."

Senate Banking Committee Chairman Tim Scott of South Carolina issued a list of committee priorities in mid-January. Among them will be work to "rein in and right-size the impacts of the Biden-Harris administration’s unduly burdensome and arbitrary financial regulations."

Scott also plans to examine regulatory proposals that he sees as reducing the ability of financial institutions to provide innovative new services. In addition, he plans to build a regulatory approach to the trading and custody of digital assets and to foster developments like stablecoins. [On Jan. 24 Scott set a hearing on "de-banking" by virtue of industry and political affiliation for Feb. 5.]

Ranking Senate Banking member Elizabeth Warren is considered the CFPB’s creator. She set out some of her views in a Wall Street Journal op-ed titled, "I’ll Work with Trump if He Wants to Unrig the Economy." She called for continuation of the Biden war on "junk fees." She wrote that during the campaign season "Mr. Trump one-upped Democrats by proposing to cap credit-card rates at 10%. I’ll work with Republicans to make that happen." She added that if Trump is serious about protecting consumers, he should support the CFPB’s work to lower financial services costs.

Trump and Warren both play to a populist base. However, an industry observer says not to make too much of that: Their personalities are extremely different, and Warren has a combative history with Trump regulators.

During the confirmation hearing for Scott Bessent as nominee for Treasury Secretary, Warren pressed him continually to commit to elimination of the federal debt ceiling. Bessent told Warren the matter was "nuanced," but said that if President Trump sought that goal he would work towards it.

Read more: Federal ‘Payments Charter’ Threatens Turf Battle Between D.C. and the States

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Regulatory Movement Depends on Who’s in Charge

Observers say that much of what happens on the regulatory front early on will hinge on who is nominated for such key financial regulatory positions as the Comptroller of the Currency, chairman of FDIC, the Fed supervisory vice chair, and the director of the CFPB. Between vetting, nomination, hearings and voting, an industry expert suggests that it will likely be spring before posts below the cabinet level will be filled with confirmed nominees. They say that acting regulatory posts will enable agencies to snag some "low-hanging fruit."

There is a school of thought among observers that the one reason for the rush, especially at CFPB, to put rules and proposals in place before the change in administrations, was in the belief that once a rule’s in place, it’s hard to undo.

"No, it’s not hard to undo," says Michele Alt. "I expect that some of the most annoying rules to the industry and to the tech industry will either be rescinded, radically revised, or just not enforced. So a lot of rules will be effectively repealed."

Much of the final sprint in such situations is much more about "burnishing legacies, clarifying the outgoing administration’s policy positions, and taking some last shots. But a lot of it will just not matter soon," says Alt.

Moving forward, life will be different for regulators due to a combination of Supreme Court rulings in 2024 that expressed the Court’s "antipathy to administrative agencies," according to Alt. She thinks this will encourage more lawsuits against regulators and adds that this will even extend to the process for approving applications before financial agencies. Formerly, there was an understanding that an applicant didn’t rock the boat — now it may be understood that a lawsuit is being held in reserve.

On the other hand, Trump regulators are expected to be friendlier to innovation ideas as well as to mergers and acquisitions, both of which often got the cold shoulder from Biden regulators.

Resistance to innovation was seen especially at the Biden FDIC, notes Phil Goldfeder, and his group anticipates a sea change there. Indeed, in a Jan. 10 speech titled "Charting a New Course: Preliminary Thoughts on FDIC Policy Issues," Travis Hill, vice chairman at the insurer and a potential nominee as chairman, expects "a more open-minded approach to innovation and technology adoption." This will include reintroduction of FDIC’s innovation lab, which lapsed under the Biden administration. [Update: On Jan. 20, Hill was formally designated as acting FDIC chairman by President Trump. On Jan. 21 Acting Chairman Hill issued a statement promising a "wholesale review of regulations, guidance, and manuals", "a more open-minded approach to innovation and technology adoption," and revision of the FDIC’s 2024 statement of policy on bank mergers, among other measures.)

A measure of where FDIC could go concerns industrial loan companies, also called industrial banks. These state-chartered institutions can be owned by corporate entities that ordinarily cannot own a financial institution without falling under bank holding company regulation. FDIC has not granted deposit insurance on a new industrial bank since Jelena McWilliams, a Trump appointee, resigned her post as chair. While a Trump FDIC is expected to begin approving insurance on these entities again, it’s expected to be a source of friction between fintechs and traditional banks.

"What I’ve been telling my clients is that the first round will involve applicants who previously filed and were either told to withdraw their applications, or those who were otherwise discouraged from even filing," says Michele Alt. "After that, we’ll see notable filings from folks who’ve been sitting on the sidelines, waiting for the environment to change."

Read more: 6 Takeaways from Big Banks’ Final 2024 Analyst Sessions

About the Author

Profile PhotoSteve Cocheo is the Senior Executive Editor at The Financial Brand, with over 40 years in financial journalism, including the ABA Banking Journal and Banking Exchange.

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