Finance dreams of a deregulatory utopia
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Illustration: Aïda Amer/Axios
The financial services industry is very excited about the prospect that the Trump administration will go on a massive deregulation spree.
Why it matters: Financial services is one of the most heavily regulated industries in the world, where compliance costs can soar into the billions of dollars and where getting innovations approved can take years.
The big picture: By the end of the Biden administration, banks were openly at war with their regulators, filing multiple lawsuits saying they were going too far.
- "It's time to fight back. I've had it with this s---," JPMorgan CEO Jamie Dimon said at a banking conference just before the election.
Driving the news: Michele Alt, cofounder of advisory firm Klaros, has sent a pointed letter to bank regulators, urging them to make it vastly easier to start up new banks.
- Existing regulations, she writes, have created "a nearly impenetrable barrier to entry into the banking market."
- Specifically, Alt notes, regulators under both Trump 1.0 and Biden have effectively prevented financial technology companies from either forming or acquiring banks.
Zoom out: Investors and nonbank entities with financial aspirations have also been feeling stifled by regulators, and are looking forward to taking advantage of a lighter hand in Washington.
- Trump Media and Technology Group is a prime example, announcing its move into financial services the week after the inauguration.
- Elon Musk's platform X is making similar moves.
- Short seller Andrew Left, who was targeted by Biden's Securities and Exchange Commission, has jumped on the change of administration to file a formal petition with the agency, asking it to promulgate clear new rules that would effectively allow everything he's been charged with doing.
Zoom in: Robinhood CEO Vlad Tenev is also getting in on the game, publishing an op-ed in the Washington Post this week touting the ability of crypto technology to "tokenize" real-world assets, including shares of private companies, making them accessible to individual investors.
- The idea is that even if regulators won't allow such investors to buy the assets directly, Trump's deregulatory crypto regime will effectively allow such investment via the back door.
- Put a crypto cloak on a private-company stock and it just becomes a crypto token, and crypto tokens can be traded freely.
The bottom line: From Wall Street's point of view, the only real danger associated with Trump's deregulatory agenda is that it won't go far enough fast enough.
- But so far, the president has given very little reason to believe he's going slowly on anything.
