Bank regulators under the
Brian Brooks, who served as
"The first thing is, you can expect a radically different kind of bank regulator to take office here in the next six months — radically different," Brooks said in a speech at a real estate conference this week. "How do I know this? Because I've written some of the lists of them. They're going to be radical, you're going to love them."
A video of Brooks' speech was
Brooks, who became the CEO of the real estate finance firm Meridian Capital Group in April, said
"The problem with that, of course, is that the nature of credit is to promote risk-taking," Brooks said. "Risk-taking is a good thing, and the role that banks play in our society is to intermediate risk."
Brooks said this type of risk-taking will be essential to a key pillar of Trump's economic agenda: spurring growth to outrun systemic issues such as inflation and ballooning deficits.
"[Regulators are] going to be more focused on growing the economy out of this situation than they are in making sure that there's not a single loan default anywhere in the banking system," he said.
He criticized the way current regulators have responded to post-pandemic stress in the commercial real estate sector, noting that sweeping loss provision requirements have given banks less flexibility in dealing with current borrowers and prevented them from issuing new loans.
"You have two problems. You have the general negativity about commercial real estate that this crowd's regulators have imposed, and then you have the very specific capital charges that prevent banks from making the next loan," Brooks said. "Balance sheets are unavailable and they've gotten the mood music that they should stay away from the sector. And those two things combined make it very tough for those of us in this room to do the kind of business that we did four years ago. That's a real problem."
Brooks said instead of blanket loan loss requirements, he would have focused on assets that were in more immediate danger of default.
During his speech, Brooks also said it was "highly likely" that the new Trump administration would privatize Fannie Mae and Freddie Mac, which have been under government conservatorship for 16 years. He described ending that conservatorship as "the last piece of unfinished business" from the 2008 financial crisis.
"Trump is the first real estate president," he said. "He actually cares about these things and gets how important they are in the economy."
One benefit of an end to GSE conservatorship, Brooks said, is the likely removal of their caps on multifamily loans, which he said have distorted the allocation of credit in the apartment finance space.
"When they're privatized, you won't have a cap, you'll have market actors seeking a rate of return," he said. "And as commercial real estate comes back, you'll see greater investment in CRE and as single family becomes more important, you'll see a shift to single family, but they'll respond to market demand and price signals, which is what you would want in any kind of credit allocation."
On the topic of government-imposed caps, Brooks also criticized the OCC for its reluctance to approve mergers and acquisitions that result in a bank larger than $50 billion of assets. He did not say whether this would be changed under Trump, but said it had a similar market distorting impact.
"Nobody would want to invest in a community bank if you knew that the community bank can never get bigger than $50 billion, right? Why would you make that investment?" Brooks said. "You know there's a growth cap, so you put your money someplace else without a growth cap."
Brooks also discussed the Trump transition team's
While lower interest rates would support Trump's goal of broadly economic expansion, Brooks said the administration will be loath to rekindle high inflation.
"Low interest rates spur growth, but high inflation destroys societies," Brooks said.
