WASHINGTON — A powerful conservative organization with advisors close to former
In 2016, Trump won the presidency as a relative unknown in banking policy circles, said Ed Mills, managing director and Washington policy analyst at Raymond James.
"And the banks woke up the day after the election without knowing virtually anyone in the Trump orbit, and they didn't have a plan about what they wanted to ask for from the Trump administration," he said. "Neither Trump nor the banks are going to make the same mistake this time."
This time, a blueprint for federal change laid out by the conservative group the Heritage Foundation titled Project 2025, written by some of Trump's closest policy advisors, illuminates some of the most influential views behind a potential new Trump presidency when it comes to economic and banking policy.
While the results of the 2024 presidential election are far from assured, either for Trump or President Joe Biden, Project 2025 represents one of the most comprehensive blueprints for Republican and conservative policy going forward. It's also increasingly a topic of consternation among Democratic politicians, for example, including Rep. Maxine Water, D-Calif., ranking member of the House Financial Services Committee.
"Project 2025 promotes radical ideas to materially undermine the Federal Reserve if not effectively abolish it," Waters said in a hearing Wednesday with Fed Chairman Jerome Powell. "MAGA wants to put you out of a job, Chairman Powell."
What's in Project 2025
Project 2025, a nearly 1,000 page document released by the Heritage Foundation, describes a conservative overhaul of the federal government.
As far as bank regulation and financial policy — which, to be sure, represents a small part of the overall document — goes, the plan would rewrite some of the basic tenets of the Federal Reserve, and would streamline bank oversight.
Project 2025 would "restructure the outdated and cumbersome financial regulatory system" by supporting legislation to merge prudential bank regulators including the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Fed's bank regulation arm.
"Banking law remains stuck in the 1930s regarding which functions financial companies should perform," according to the policy document, in a section attributed in part to Stephen Moore, Trump's former nominee for the Fed Board, who's now a senior fellow at the Heritage Foundation. "It was never a good idea either to restrict banks to taking deposits and making loans or to prevent investment banks from taking deposits."
Policymakers should also create new charters for financial companies "that eliminate activity restrictions and reduce regulations in return for straightforward higher equity risk-retention standards," according to the document. Congress should also repeal the parts of Dodd-Frank that created and empowered the Financial Stability Oversight Council, and return Fannie Mae and Freddie Mac from government conservatorship, the policy blueprint says.
Some of the plan's most systemic changes would happen at the Fed. Project 2025 would severely curtail the power of the Fed by restricting the central bank's mandate to exclude full employment. Any bank policy at the Fed would focus on "maintaining bank capital adequacy," and elected officials should "clamp down on the Fed's incorporation" of environmental, social and governance policies, "including by amending its financial stability mandate."
The policy statement also proposes limiting the Fed's function as a lender of last resort, and directing the Fed to wind down its balance sheet and stop paying interest on reserve balances "so that banks instead lend the money."
Paul Winfree, formerly a deputy assistant to Trump for domestic policy who is now president and CEO of the Economic Policy Innovation Center, is credited with the Fed section of the Project 2025 report.
What's realistic for a Trump 2.0 presidency
The Project 2025 plan has at times been embraced by Trump, and other times rejected. While the authors associated with the report, including the banking and economic sections, are closely associated with Trump's previous term, the extent to which the plan would be implemented under a second Trump term is still uncertain.
"Party platforms and policy statements from campaigns have become less important in recent years," said Ian Katz, managing director of Capital Alpha Partners. "Presidents follow some of it and don't follow some of it. I think particularly with Trump, he's not a traditional party politician. He's not going to be concerned about policy objectives that haven't come from his own mouth, and he has made it clear many times that he speaks for himself."
That said, Katz said that Trump's comments suggest that, in large part, he agrees with many of the ideas spelled out in the document.
In areas of tech that intersect with banking in particular, Isaac Boltansky, managing director and director of policy research at BTIG, said that Trump's more explicitly endorsed platform would be more friendly to industry than the current regulatory regime.
Crypto, which features in Trump's Republican party platform, is a
"Republicans will end Democrats' unlawful and un-American crypto crackdown and oppose the creation of a central-bank digital currency," the GOP document, released Monday, says. "We will defend the right to mine bitcoin, and ensure every American has the right to self-custody of their digital assets, and transact free from government surveillance and control."
Under a Trump presidency, a regulatory landscape would become more supportive of crypto, at the market regulators like the Securities and Exchange Commission for certain, and also at the prudential banking regulators.
"There is always some lead time to get people in place and actually shift policy," Boltansky said. "Perhaps more importantly, everything that can be done to soften the regulatory landscape would be directionally positive."
What is certain, Mills said, is that Trump would have a lot of opportunity in financial policy to appoint his own regulators, including those who either authored parts of the report or contributed to the ideas behind it.
The last turnover at the FDIC, with current Chairman Martin Gruenberg and other Democratic banking regulators pushing out former Chairman Jelena McWilliams, suggests that a similar playbook could be deployed at that agency.
The OCC is currently operating with an acting head, meaning that position is easily replaced, and Project 2025 lays out several paths for Trump to rid himself of unsympathetic regulators.
"I do think we would have the largest transition of federal financial regulators in the history of this country," Mills said. "We would see an immediate withdrawal from the regulatory supercycle that has existed under President Biden."
But, compared to other agencies that might be more politicized for Republicans, prudential banking regulators might be insulated from other parts of Protect 2025, like the plan to replace civil government employees with political appointees because of the technical expertise required to be, for example, a banking examiner.
"When I think about the attack on civil servants that Project 2025 contemplates, I don't think it would be as impactful in the bank regulatory space as it would be in other agencies," Mills said.
