Flying blind: Bankers lean on policy glimpses to evaluate Harris, Trump

Bloomberg News

This is the first in a series of articles on the impact of the presidential election on financial services. Be sure to check AmericanBanker.com tomorrow for the next article, "Welcome to the crypto election."

When the United States welcomes a new president next year, it'll be someone who has done little to outline a bank policy platform. 

For bank regulation, the election has been defined by an unusual degree of uncertainty. Former President Donald Trump is often difficult to pin down on specific policy points as he sways between different camps on issues. Vice President Kamala Harris is a latecomer to the campaign and has had little time to flesh out her vision in many niche policy areas. 

"What's unique and challenging about this election is that both candidates are unclear as to what they'll do," said Aaron Klein, a senior fellow in Economic Studies at the Brookings Institution. 

That's a shift, experts say, from previous election cycles where there were at least hints about what candidates wanted to focus on when it came to bank or financial policy, particularly after the 2008 financial crisis. 

Candidates are even using Wall Street and corporate power as less of a punching bag than they normally do. In the last election, President Joe Biden name-checked so-called junk fees in his talking points. That sort of rhetoric in the past had been an opening to speculate about various policy points and likely personnel appointments. 

In the September debate between Harris and Trump, Goldman Sachs was the only bank or financial institution to get name-checked, although it was in a positive light as the two candidates argued over the effectiveness of their economic plans. 

That leaves policy watchers with few hints to suss out where either candidate will fall on many key issues to bankers. 

"This election is lighter on policy details than any in recent memory, so all of us are forced to do a bit more extrapolating than we are used to," said Isaac Boltansky, managing director and director of policy research at BTIG. 

So, what do we know?

While neither campaign has laid out a bank policy platform, we do know some things about the kind of people either Trump or Harris would appoint, or the positions they've taken in the past.

Graeme Sloan/Bloomberg

Harris has appointed Brian Nelson, recently the undersecretary for terrorism and financial intelligence, to serve as a senior campaign adviser. Nelson is a longtime Harris aide, previously serving under her in California during the financial crisis when she pulled out of mortgage settlement deals with the country's largest banks. At the time, Harris said the deals were "inadequate for California homeowners." 

Nelson was confirmed to his post at the Department of Treasury during the Biden administration along party lines, with Harris casting the tie-breaking vote. 

He hasn't been overtly political during his time at Treasury, giving a few policy speeches but overall not taking a public stand on topics that might be controversial to Republicans, such as climate risk. 

Harris' other former advisers from her time in California could also be lead contenders for Washington posts if she becomes president. Among them, Rep. Katie Porter, D-Calif., whose failed bid for U.S. senator leaves her without a job in Washington, D.C., in January. Porter was appointed by Harris to be the independent watchdog for California's part in the national mortgage settlement. 

Hannah Beier/Bloomberg

Trump, meanwhile, recently appointed Linda McMahon, a former Senate candidate from Connecticut, wrestling magnate and administrator of the Small Business Administration, to help lead his transition team. 

More notably for Wall Street and bankers, however, Trump has also appointed Howard Lutnick, chief executive of the financial services firm Cantor Fitzgerald, to lead the transition team, offering a glimpse into what Trump's appointments might look like on banking and financial policy. 

Lutnick also runs brokerage BGC Group and is chairman of commercial real estate services firm Newmark Group and FMX, a futures exchange being built with funds from many of the largest Wall Street banks. 

He has also been one of Trump's most vocal advocates on Wall Street, telling donors that the presidential candidate would favor less regulation for banks and financial firms, according to five people familiar with those discussions. 

Trump has also been vocal about his support for a favorable regulatory regime for cryptocurrency. He's promised to make America the "crypto capital of the planet" and has launched his own new venture to trade cryptocurrency. 

What do we think we know?

Despite these signs, however, it's still difficult to know exactly what a candidate's plans are for bank policy without some kind of a campaign platform on the topic. 

It can be even more difficult when the candidates don't maintain positions that they previously held.

In Trump's first campaign, Klein said, he pledged to reinstate a "21st century" version of the 1933 Glass-Steagall law that required that investment and commercial banking be separated, a plank that was never pursued. Instead, Klein said that Trump appointed bank regulators that "would have largely been indistinguishable from a Romney, McCain, Bush-era set of appointments." 

This time around, Trump made moves toward campaigning as a populist, announcing Sen. J.D. Vance, R-Ohio, as his running mate. Vance has expressed views on banking, as a member of the Senate Banking Committee, that break with typical Washington Republicans. 

Hannah Beier/Bloomberg

But what initially looked like a signal about the direction of the campaign, especially on issues Vance has shown an interest in like bank policy, now appears to be a mostly meaningless gesture as the campaign goes on. 

"What Trump has shown is a rotating battle of inner sanctum advisers competing with family members and whoever is in favor," Klein said. "So Vance is as likely to find himself in and out of favor as any other cabinet official." 

Trump has also suggested that the president should have more control over Federal Reserve rate decisions, a place where he and Harris strongly disagree. 

While Harris has also changed her mind in other policy areas, notably fracking and immigration, the major question is how much she would break with Biden's plans and ideas on banking and financial policy. Harris has already pulled back on some of Biden's most aggressive tax proposals that would impact banks, reducing, for example, her proposal for a capital-gains tax to 28% for wealthy Americans compared with the Biden budget's proposed 39.6%. 

"The Biden administration has been extremely deferential to the Federal Reserve in all aspects of economic policy, particularly in financial regulation," said Ed Groshans, senior vice president for financial services at Height Capital Markets. "The Biden administration did not prioritize and will not have confirmed a comptroller, so bank regulation wasn't really very important to Biden and was largely farmed out to the Fed.

"The question is, will Harris continue to defer to the Fed, or will she take a position?" 

Still, as far as reading the tea leaves in this year's election, Klein had one piece of advice. 

"Put the tea leaves down."