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.

Treasury Secretary Steven Mnuchin, another Goldman alum, shows no signs of wanting to stand in Cohn’s way. Dina Powell, influential as deputy national security adviser, also used to work at Goldman and is close to Cohn.

Second, the key regulators and supervisors have all been replaced or are going to be replaced — including at the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Commodity Futures Trading Corporation and the Securities and Exchange Commission. We should not rush to judgment, but every indication is that the Trump nominees — mostly lawyers with a long list of financial sector clients — will favor a radical rollback of financial regulation.

Read the full post at NBC News.

Simon Johnson is the Ronald A. Kurtz (1954) Professor of Entrepreneurship at the MIT Sloan School of Management, where he is also head of the Global Economics and Management group and chair of the Sloan Fellows MBA Program Committee.

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