Donald Trump built his presidential campaign around two ideas: 1) a corrupt financial establishment had swindled the middle class, and 2) immigrants and foreigners are dangerous.
Some combination of these two sentiments has fueled every American populist movement dating back to President Andrew Jackson. Populists can take credit for plenty of economic progress: child labor laws, universal public education, the eight-hour workday, the abandonment of the gold standard and all modern antitrust and bank regulations. The dark side of populism can be blamed for the Trail of Tears, the Chinese Exclusion Act and the incarceration of Japanese-Americans during World War II.
After a month in office, it’s pretty clear which strain of populism Trump takes seriously. He’s ordered the construction of a border wall with Mexico and plans to hire 5,000 new border patrol agents and 10,000 Immigration and Customs Enforcement officers. He’s also attempted to ban Syrian refugees and travelers from seven Muslim-majority nations from the country.
In the meantime, Trump has embraced American financial titans as some of his closest allies. Wall Street is making its peace with people like Trump chief strategist Steve Bannon, the former Breitbart News executive chairman, and Attorney General Jeff Sessions, who’s been repeatedly accused of racism, as the crackdown on immigrants intensifies.
Trump’s affinity for Wall Street is most obvious in his choice of personnel. His top economic adviser, Gary Kohn, his treasury secretary, Steven Mnuchin, and Bannon are all Goldman Sachs alums. Trump’s nominee to run the Securities and Exchange Commission is Jay Clayton, a Wall Street lawyer who has represented Goldman Sachs as a partner at Sullivan & Cromwell, a law firm so close to Goldman it is sometimes jokingly referred to as the legal wing of the bank.
Trump’s pick for commerce secretary is private equity billionaire Wilbur Ross, whose wheeling and dealing included stewardship over American Home Mortgage Servicing and Option One, mortgage companies that paid millions to settle charges of relying on forged signatures and fabricated documents to push through foreclosures. Mnuchin’s bank, OneWest ― often referred to as a “foreclosure machine” ― also pursued improper evictions by “robo-signing” key documents, a fact Mnuchin lied about in his confirmation hearing.
Within two weeks of taking office, Trump was already delivering policy favors to Wall Street. He feted banking kingpins like JPMorgan Chase CEO Jamie Dimon at the White House before signing a flashy executive order calling for a review of the 2010 Dodd-Frank financial reform law.
The signing ceremony was essentially symbolic ― regulatory agencies don’t need an executive order to rewrite the regulations required by the law. In fact, they don’t really need to rewrite the rules ― they can simply refuse to enforce them.
Trump Transportation Secretary Elaine Chao was a master of this approach when she served as Labor Secretary for President George W. Bush. As The Huffington Post’s Dave Jamieson has reported, a Government Accountability Office investigation found that Chao’s agency simply didn’t investigate serious complaints about labor violations. The GAO determined this by registering several fake and outrageous complaints, and monitoring the department’s response. In the most outlandish case, Chao’s agency didn’t follow up on a report that children were operating meat grinders and circular saws at a meat-packing plant ― during school hours.
All Trump’s appointees have to do to gut Dodd-Frank is follow Chao’s example. But the symbolism of the signing ceremony matters. Trump was sending the strongest signal possible to Wall Street that he will not interfere with their quest for profit, however reckless or ill-gotten it may be.
Andrew Harrer/Bloomberg via Getty Images
JPMorgan Chase CEO Jamie Dimon with President Donald Trump at a Strategic and Policy Forum meeting in the White House on Feb. 3, 2017.
The same day Trump attacked Dodd-Frank, he signed another executive order with more immediate consequences. The Obama administration had crafted a “fiduciary duty” rule that required retirement account professionals to manage their funds in their clients’ best interests. Most people think their retirement advisers have to work on their behalf, but many pick and choose investments based on special perks and financial gains that accrue to the adviser or his firm.
As far as Wall Street’s bottom line was concerned, the rule was a bigger nuisance than the vast majority of Dodd-Frank. The Obama administration had calculated that Americans lose $17 billion a year to conflicted retirement advice ― and Goldman Sachs projected the rule would cost the investment industry $7 billion a year, plus $13 billion upfront.
Trump erased the rule. He invited Rep. Ann Wagner (R-Mo.) to the signing ceremony to explain the move. Wagner, who raises about $900,000 every election cycle from the financial sector (more than quadruple her haul from any other industry), declared: “This is about Main Street … this is a big day, a big moment for Americans.” It was true. It was also a big rip-off.
The 2-for-1 Deregulation Rule
This executive order was not the most harmful of Trump’s early activities, but it may be the dumbest. Any administrative agency that wants to write a new regulation under president Trump will have to identify two existing regulations that it will eliminate.
This is, of course, completely arbitrary. It is also short-sighted. Over the course of a presidency, bad things happen. And one way that presidents can make themselves appear attentive to those problems is by having regulatory agencies respond with new rules. Those rules might not be worth much, but Trump’s executive order makes it harder for the administration to even pretend to paper over future problems.
Even if deregulation is your lodestar, this executive order doesn’t really help. Killing enforcement is just as effective as deleting a rule. But like the Dodd-Frank review, the deregulation rule carries real symbolic value. Trump was telling members of the corporate establishment to feast on whatever spoils they can secure.
The Mortgage Price Hike
Shortly after former neurosurgeon Ben Carson was confirmed as the secretary of housing and urban development, the agency raised prices on mortgages for low-income people. It was a windfall for private mortgage insurance companies that compete with the Federal Housing Administration.
SEC Commissioner Michael Piwowar speaks at the U.S. Chamber of Commerce in Washington, D.C. on Jan. 27, 2014.
The SEC Trainwreck
The Securities and Exchange Commission appears to have received Trump’s deregulatory message. Former President Barack Obama left the agency understaffed ― only two of the five commissioners appointed by the president were in office when Trump assumed the presidency.
The December resignation of SEC Chair Mary Jo White ― perhaps Obama’s most embarrassing regulatory appointment for her deference to CEOs and dark money ― left Republican Commissioner Michael Piwowar in charge of the agency. And Piwowar has unleashed a reign of corporate favoritism that would make even White blush.
Piwowar has already directed the agency to scuttle a Dodd-Frank-mandated rule that would require corporations to report the pay discrepancy between their CEOs and a typical worker.
He has done the same for another Dodd-Frank regulation requiring companies to audit their supply chains to determine whether they relied on “conflict minerals” ― mining resources that enrich warlords engaged in long, violent campaigns in the Democratic Republic of Congo. The rule would also have required American companies to tell consumers whether their products were “conflict-free.”
The conflict minerals rule was partially overturned in a controversial federal court decision, but Piwowar is apparently not one for half-loaves. His first public statement as acting SEC chair effectively called for killing what remained of the rule. You do you, failed state butchers.
Piwowar is also moving to revoke the power of the SEC’s enforcement division to issue subpoenas launching investigations.