- Wall Street anticipates windfall from tax cuts, deregulation
- ‘Everyone I talk to is happy,’ says a consultant to big banks
After Donald Trump beat Hillary Clinton, Wall Street consultant Octavio Marenzi learned something about his clients’ grins.
“I’m seeing people smile now, clients of mine, where I didn’t even know they had teeth,” said Marenzi, co-founder of Opimas LLC, whose clients include some of the biggest banks. “Everyone I talk to is happy.”
On the campaign trail, Trump sometimes painted financiers as greedy criminals. After he won, it took only days for them to rejoice over how good they might have it with him in charge, according to interviews with a dozen executives. Wall Street skipped the usual stages of grief and started anticipating the money to be made if he follows through on promises to dismantle financial regulation, spur infrastructure development and give jumbo tax cuts to the richest 1 percent.
It didn’t hurt that bank stocks popped, with Goldman Sachs Group Inc. shares gaining 15 percent in the week after the election and JPMorgan Chase & Co. not far behind.
Some turnarounds clocked in at less than an hour. Development Specialists Inc. President Bill Brandt Jr., a bankruptcy consultant and friend of the Clintons, spent about 20 minutes in a state of devastation. “And then I moved on,” he said. “I’m in the restructuring industry and I’m going to get a tax cut. What a double-good thing,” he added. “It’s all good for me.”
Brandt is excited about the ways a potential loosening of the Dodd-Frank Act could gin up business for consultants like him by boosting risk -- even if he said it could also rattle the financial system. While Trump has said he will dismantle the 2010 law, incoming Senate Minority Leader Chuck Schumer said Sunday he has the 60 votes necessary to block a repeal.
Earlier this year, Trump was warning Iowans about bankers. “I’m not going to let Wall Street get away with murder,” he said at a January rally. “Wall Street has caused tremendous problems for us.” An ad he aired at the end of his campaign showed Goldman Sachs Chief Executive Officer Lloyd Blankfein’s face as the candidate said in a voice-over that a corrupt global power machine was robbing the U.S.
But by the Friday after the election, Trump’s transition team included Goldman Sachs veterans Steven Mnuchin, the campaign’s finance chairman and a front-runner for Treasury secretary, fund manager Anthony Scaramucci and Stephen Bannon, Trump’s chief strategist.
“Regulatory overreach probably peaked,” said Robert McTamaney, a former Goldman Sachs partner who helped run the firm’s equities-trading business in Asia until 2011 and now manages his own money. “It’s going to come off the boil, and you can probably cut back on the legal team and compliance.”
Wall Street isn’t all glee, and not just because short-term boosts from deregulation, tax cuts and higher interest rates can fade. Trump has promised to reverse longstanding immigration policies and trade deals that have benefited business. His comments about Muslims and other groups have offended many bankers. The Republican platform called for reinstating the Glass-Steagall Act’s wall between commercial and investment banking, set up after the 1929 stock market crash helped trigger the Great Depression.
That’s hard to square with Trump’s vow to place a moratorium on new regulations. The officials who write them have been rushing to finish sweeping limits on Wall Street pay, the last major unfinished piece of Dodd-Frank. The compensation rule is meant to rein in risk across the industry by forcing executives to wait longer to cash out bonuses.
Two traders who work for banks said they’re mostly optimistic. But they worry markets have already become so much more transparent, with many transaction prices now reported publicly, that no matter what Trump does there’s no going back to the fat old days.
A former Goldman Sachs executive’s emotions veered from gloom over Clinton’s loss to enthusiasm in the course of one phone call. He described his grief, then said he accepted Trump’s win and perked up about his rising bank stock and more government spending. What Trump does and says might hurt Muslims, immigrants and women, he said, but he and his family will be in good shape.
Clinton supporter Richard Farley, chairman of the leveraged-finance group at Kramer Levin Naftalis & Frankel LLP, doesn’t like that others can’t pivot quickly.
“There is a lot of hysteria, unfounded hysteria,” he said. “This is not the ideal occupant of the White House. Nonetheless we’re going to have a functioning government, most likely, with less regulation.” The thought cheers him.
Excitement for the treats the next president might bestow on Wall Street reminds Brandt, the bankruptcy consultant, of what he felt when he walked out of a meeting in Florida two decades ago with President Bill Clinton and then-Senator John Kerry.
“They turned and said, ‘We’re going to repeal Glass-Steagall,’” Brandt recalled. “And I said, ‘I’m all for it, because it’ll make me rich.’ And it did.”