Banks on Trump and Musk
In February, I published a piece entitled “Trump and Musk on Banks,” in which I discussed some of the early actions and statements made by members of the Trump Administration pertaining to the banking sector in their initial days in office. The piece touched on the Consumer Financial Protection Bureau, rules around fees and interest rates, and capital requirements. Among the broader conclusions:
For all the changes in policy, the most important factor for banks is a stable, healthy economy. And stability is not exactly Trump’s brand. Markets thrive on confidence, and while investors often cheer deregulation and tax cuts, they also loathe uncertainty. With an unconventional White House, trade tensions, and an unpredictable approach to governance, banks may find themselves in an environment where short-term gains are plentiful, but long-term risks to themselves and the consumer are heightened.
The past few weeks have been the story of “all of that, but more so.” There is only so much we can say about what Trump and Musk have in mind for the economy and, with it, the banking sector. But to flip the question around, I thought it would be worth a look at the reverse view: What are banks and bankers saying about Trump and Musk (at least those who are willing to say anything at all)?
Exuberance and Optimism - At Least Initially
Polling prior to Election Day suggested strong support among bankers for Donald Trump. According to S&P Global:
US bankers expect a second term for former President Donald Trump would be better for the US economy by a nearly 3:1 margin compared to Vice President Kamala Harris.
Soon after Trump’s Election Night victory this past November, JPMorgan Chase CEO Jamie Dimon reflected upon the change. Dimon has long been seen as a bellwether and perhaps unofficial spokesperson for the banking sector as a whole (the large banks, at least). He remarked:
A lot of bankers, they’re like dancing in the street because they’ve had successive years and years of regulations, a lot of which stymied credit.
Has this been true? Not taking the “dancing in the streets” thing literally, there has certainly been a lot of optimism among many in the banking sector that Trump will roll back various compliance pieces in the regulatory framework, thereby making bankers’ work easier (and more profitable).
Just to give one example of a policy or set of rules that some bankers are hopeful Trump will address would be to repeal some or all of the Unfair or Deceptive Acts or Practices (UDAP) rules, which some banks argue impose excessive costs on banks of compliance. These rules have evolved over nearly 90 years, but became particularly more stringent since the 2008 financial crisis and then again under the Biden Administration. In recent weeks, the Trump Administration has already compelled the Consumer Financial Protection Bureau to withdraw its more restrictive rules that were installed under President Biden about “Buy Now, Pay Later” lending. The Biden-era rules were meant to protect consumers from excessive fees and a lack of transparency, plus provide better recourse for consumer complaints. The Trump Administration, on the other hand, argues that the rules are excessive and that their removal will foster innovation and greater accessibility in consumer lending.
What Others Are Saying
Beyond Jamie Dimon’s comment above, there is a striking lack of public commentary from leaders in the banking industry about the outlook for Trump and Musk’s upcoming four years in the White House. That silence is telling for a couple of reasons.
First, there is just so much uncertainty at play. No one knows where this economy is going. On March 5th, the Federal Reserve released its so-called Beige Book, which compiles economic data and perspectives from all over the country, and the word “uncertainty” appeared 47 times, up from 17 times in the January report. Leaders are not willing to go out on a limb right now in terms of economic prognostication with this level of doubt about the direction things are actually going.
But the other reason why bank CEOs and others in the industry are staying quiet is that there is a powerful disincentive to speak out, no matter what you plan to say. Jamie Dimon has faced blowback from shareholders and customers for being perceived as too close to Trump. Although, interestingly enough, he also experienced criticism among some prior to the election for being a rumored supporter of Kamala Harris. So what is he is supposed to do or say.
Beyond shareholders and bank customers who may be critical of one’s stance on the politics of it all right now, for some bankers, there is an audience of one: Donald J. Trump (two if you count Elon Musk). And there are even stronger reasons to not speak out right now with that particular audience.
A Chill in the Air
In the 1950s and 60s, the U.S. Supreme Court began to articulate the concept of The Chilling Effect. The Chilling Effect refers to the discouragement of the legitimate exercise of legal rights—especially free speech—due to the fear of legal repercussions, government surveillance, or social/political backlash. It occurs when individuals or organizations self-censor to avoid potential consequences, even if their actions would otherwise be lawful. This effect is often discussed in contexts like press freedom, online speech, and political activism, where vague or overly broad laws, lawsuits, or intimidation tactics suppress open discourse. But it can also be seen in the lack of willingness for people to speak up against perceived wrongs for fear of consequences or retribution by those in positions of power.
In conversations I’ve had with various people in the banking ecosystem, there is a clear sense of fear around speaking critically of Trump and his team. Some within the banking industry feel that the first person to raise their hand and say something like, “You know what, the impact of these tariffs is going to be devastating to our economy,” or, “Actually, all of this deregulation is dangerous in that it is removing some important checks and balances that help protect ordinary Americans,” will soon find themselves with an investigation of their department or of their entire bank hanging over their head the next day (this is in addition to the other consequences, of basically incurring the wrath of the mob whether that mob be actual customers or keyboard warriors on social media).
So it is easier for people to just not speak up. To some, this is the responsible action from a fiduciary standpoint. A bank CEO whether the bank is large or small has a lot of different constituencies for whom he or she is responsible: customers, employees, shareholders, the very communities they operate in - to say nothing in the fact of such unprecedented disruption is arguably the most approrpriate way to be mindful of the well-being and security of all of these constituencies.
To others, the unwillingness or inability to speak out is the Chilling Effect at play. And furthermore, that by not reacting to everything that is going on and by not trying to offer a counter-position, the benefits of short-term security may cost more through long-run damage as things play out over the next few years and beyond.
What Comes Next
As we continue to navigate the uncertainty of this political and economic climate, the banking sector’s optimism in public yet reluctance to criticize those in power reflect the broader challenges of balancing profitability with accountability (not to mention the more core human questions of whether people just don’t want to be a part of the fray right now).
While some may welcome deregulation and tax cuts, others recognize the underlying risks these actions pose. Ultimately, the current environment reveals a paradox: in a time of unprecedented change, what is the cost of saying or doing nothing, especially as the banking sector (along with the overall economy) need stability to thrive.
These are the questions that many in positions of leadership face right now. I plan to write more in the weeks to come about the other overarching influences at play, including the so-called market. The stock market is down nearly 10% since Trump took office, for example. This is bound to have an impact on public sentiment and, in turn, politics in the weeks and months to come, as well.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com.