Under Trump, Wall Street’s Future Is Bright. Yours and Mine? Not So Much – Simon Johnson

MIT Sloan Professor Simon Johnson

From NBC News

After much speculation, President Trump has announced his pick to lead the Federal Reserve System: Jerome “Jay” Powell. How should we think about this appointment in the context of the overall Trump administration thinking on financial regulation?

Trump slammed Wall Street throughout his campaign, asserting big banks had “gotten away with murder.” The Republican National Convention platform even mentioned a new Glass-Steagall (the Great Depression-era restriction on banks’ activities). Still, many questioned whether the Trump administration, including Powell, was committed to implementing policies tough on global megabanks.

The answer is no.

There are actually two Trump administrations. One, which attempts to deal with issues that require legislation, like health care, is having trouble making progress. But the second, which can change the rules of regulation, is moving full-steam ahead. We can already see the ground being cleared for a major round of financial deregulation.

There are three important signs of intent when it comes to finance. First, the top people on economic policy in the White House and at Treasury have all worked on Wall Street — and mostly at one big bank, Goldman Sachs. Gary Cohn, the former Goldman Sachs president, is chairman of Trump’s National Economic Council, and he has brought in a team that apparently is running the show in terms of policy. Cohn has made his intentions clear: He wants to rollback regulation.

Read More »

The People vs. Donald Trump – Simon Johnson

MIT Sloan Professor Simon Johnson

From Project Syndicate

In American politics, the next election is all that matters. Despite the Republicans’ big win in November 2016, US President Donald Trump’s ability to pass legislation still depends on what congressional Republicans expect to see happen in the November 2018 midterm election. Owing to a major shift in public sentiment in the past few months, many Democrats are now convinced that they will win seats, and potentially reclaim control of the House of Representatives.

One can already see grassroots activism gaining momentum in congressional districts that would not have seemed competitive just five months ago. For example, in California’s 45th district (in the traditionally conservative Orange County), University of California, Irvine, law professor Dave Min is taking on the incumbent Republican, Mimi Walters. This past November, Walters was reelected with 58.6% of the vote, but her district favored Hillary Clinton over Donald Trump by two percentage points.

This kind of House seat can easily flip to the Democrats in 2018, if a candidate like Min can persuade voters that Walters is out of touch – and too close to Trump. So Min has highlighted Walters’ support for Trump’s attempt to “repeal and replace” the Affordable Care Act (“Obamacare”), as well as her backing for his broader budget-cutting agenda. Moreover, her positions on many social issues seem quite distant from those of her constituency.

Read More »

A new social contract for work – Tom Kochan and Lee Dyer

MIT Sloan Professor Thomas Kochan

MIT Sloan Professor Thomas Kochan

From Boston Review

This Labor Day we could join those speaking out against Donald Trump’s many hypocrisies, chief among them the preposterous notion that he represents the American worker. We could point out that he is further dividing an already divided country, turning to Wall Street tycoons as his key economic advisors, advocating for the elimination of health insurance coverage for the poor in favor of tax cuts for the rich, rolling back overtime regulations, abandoning requirements that investment agents focus on the interests of the retirees that hire them, and appointing a Education Secretary who attacks public education, teachers, and their unions.

We could go on, but a better approach is to lay the foundation for what will need to be done in the post-Trump era, whenever that arrives, to repair the damage, regain the trust of workers, and unify employers, unions, government leaders, and all who share the responsibility for shaping the future of work. We can do so by laying out a positive vision and strategy built around a simple narrative: a new social contract for work capable of meeting the expectations and obligations that workers, employers, and society in general hold for work and employment.

A new and fresh approach is long overdue. It is now all too apparent that America is paying a severe penalty for failing to address several decades of growing income inequality and stagnant wages and deep social and political divisions between the winners and losers from globalization.

And things could get worse. If we don’t turn the digital revolution into an opportunity to increase the number of good new jobs it could offer, the gap between the haves and have-nots will grow. If we let this happen, the legacy we will leave for our children and grandchildren is a lower standing of living and the prospect of more violence.

The good news is thanks to innovations happening around the country we can see how a new and more inclusive social contract might be built.

Read More »

Opinion: your future financial adviser could be a robot – Vasant Dhar & Roger M. Stein

MIT Sloan Researcher Roger Stein

MIT Sloan Researcher Roger Stein

From MarketWatch

President Donald Trump has vowed to bring manufacturing jobs back to the U.S. through new policies and regulatory reform. But this effort faces a strong headwind: In all walks of life, human employment is being challenged.

Many manufacturing jobs have been replaced by robots. Meanwhile, drivers are on their way to being displaced by driverless cars, tax professionals by software, and much more.

Recently Trump turned his attention to the financial services industry, signing two directives aimed at repealing portions

NYU Professor Vasant Dhar

of the Dodd-Frank and Consumer Protection acts, citing onerous restrictions that hamper legitimate investing and financial activity.

But regulatory change isn’t likely to repel the march of the robots that is transforming the financial services business. FinTech — the finance industry equivalent of robots in manufacturing — is too far along for that. If future investors and consumers of financial services begin to trust FinTech platforms as they have done in retail and travel, then fewer humans will be working in finance.

Read More »

Can corporate America afford to walk away from President Trump? – Neal Hartman

MIT Sloan Senior Lecturer Neal Hartman

MIT Sloan Senior Lecturer Neal Hartman

From The Conversation

After campaigning as the candidate best able to work with business, President Donald Trump has shown he is anything but.

stream of resignations from high-level business counsels hit a crescendo recently when Trump was forced to disband two executive councils. The widespread and public defections were in protest over his unwillingness to unequivocally condemn racism and intolerance over the violence in Charlottesville, Virginia.

As an expert in organizational communication and leadership, I saw the dismissal of the councils as a dramatic and important moment in the relationship between top business leaders and the president. But does it spell the demise of the often difficult partnership between President Trump and corporate America?

A permanent breach?

CEOs like Merck’s Ken Frazier rightly voted their conscience when they began to abandon Trump’s American Manufacturing Council and the Strategic and Policy Forum. Frazier, the first to resign, said he felt “a responsibility to take a stand against intolerance and extremism.”

The Wall Street Journal, however, was quick to point out that many companies have stopped short of saying they would refuse to work with the White House in the future.

Indeed, despite the heated rhetoric, one thing is clear: Corporate America wants and needs to work with the administration, while the president benefits from a healthy relationship with America’s CEOs.

So if they both need each other, the question becomes how this increasingly tenuous relationship will play out.

Read More »