For the big banks, a double-edged sword under Trump
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America's biggest banks are having a rough week in President Trump's Washington.
Why it matters: The industry has had policy victories under Trump. But this week's historic fine against Bank of America and a regulatory report that raises new concerns about politically motivated "debanking" show the limits of Wall Street's influence with the administration.
Driving the news: Three actions in less than 24 hours have put some of the nation's largest banks on the defensive.
Tuesday: Treasury imposed more than $1.2 billion in penalties against Bank of America for anti-money laundering and sanctions violations, a historic fine that weighed on the bank's third-quarter results.
- The action was among the largest enforcement penalties in Treasury history, including a record $750 million fine from the Office of the Comptroller of the Currency.
Wednesday: A federal banking regulator put nine major banks in an uncomfortable spotlight over instances of debanking.
- The report could not establish how widespread the practice is, but it handed the banks an embarrassing public rebuke over an issue that Trump has made a personal crusade.
Also Wednesday: The Consumer Financial Protection Bureau said it would investigate whether banks identified in the report violated federal consumer protection laws.
The backdrop: The pressure in Washington comes smack in the middle of Wall Street earnings season. Big bank shares have taken a hit as rising interest rates threaten to chill borrowing and dealmaking.
- "It just happens when rates go up 85 basis points in a quarter, that tends not to be good for those businesses. Clients tend to slow their activity," Alastair Borthwick, Bank of America's chief financial officer, told investors Wednesday.
Between the lines: Big banks have faced competing forces since the start of Trump's second term — on the one hand, an administration eager to loosen financial regulations. On the other, a president willing to publicly attack the industry.
- Regulators are moving ahead with plans to ease capital requirements and streamline bank mergers. The Fed late last month finalized changes to make its annual stress tests more predictable.
- But Trump has repeatedly targeted banks over alleged political debanking and credit card fees, a fight that began just days into his second term when he publicly confronted Bank of America and JPMorgan Chase.
What they're saying: The banking industry's response shows the delicate balancing act. Banks are emphasizing areas of agreement rather than pushing back against the administration's criticism.
- In response to the OCC report, the Bank Policy Institute said it supports efforts to prevent political discrimination while maintaining "sound risk management," and pledged to work with the administration and Congress on further changes.
The intrigue: Trump's close ties to the crypto industry have unexpectedly worked in big banks' favor.
- Democrats' objections to Trump's financial interests in crypto helped derail the Clarity Act last month.
- It was legislation the crypto industry desperately wanted but banks fought over fears that proposed stablecoin rewards could siphon deposits away from traditional lenders.
The bottom line: This week shows the awkward position big banks occupy in Trump's Washington — benefiting from his deregulatory agenda while remaining targets of his administration's scrutiny.
