The country’s largest banks are navigating a delicate balancing act in President Trump's Washington.
CEOs for some of the biggest US lenders, including JPMorgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC), Citigroup (C), Morgan Stanley (MS), and Wells Fargo (WFC), are all competing to win a leading role in a lucrative public offering for mortgage giants Fannie Mae and Freddie Mac, a competition that has involved Oval Office appearances with the president.
At the same time, Trump has called out some of these same Wall Street bosses over "debanking." Some are now facing increasing scrutiny from their regulators over whether they denied or refused services to conservative customers. Their legal and regulatory affairs teams are currently combing through old records for any account closures.
"There are a lot of areas where we're playing offense," said Greg Baer, CEO of the Bank Policy Institute, an industry trade group. "There's some areas where we're playing defense. It makes for a very complicated battlefield, that's for sure."
Banks began the Trump administration with high hopes for broad, sweeping reforms that would work to their advantage.
And that does appear to be happening. Bank regulators are proposing the biggest walk-back in rules since Congress tightened the reins on the industry following the 2008 financial crisis with a piece of legislation known as Dodd-Frank.
The Fed, for example, has unveiled proposals to relax key bank capital components based on leverage and its annual stress-test exercise specific to large banks. It will host a conference on Thursday designed to air concerns about the regulation of smaller community banks.
"It's 15 years later, right, since Dodd-Frank was originally envisioned," Michelle Bowman, the Federal Reserve's top banking supervisor, said during a Georgetown University event in late September.
"I think we have a good perspective on what's been working, what could be improved," Bowman added.
But the Trump administration has also made things more complicated for banks at the same time.
For one, it has provided regulatory relief to the crypto industry, which is emerging as an upstart competitor to banks within the financial world. Some crypto companies are now seeking banking licenses — a sign they intend to push deeper onto banks' turf.
Bank lobbyists are pushing back. They're seeking language to bar non-bank crypto platforms from offering interest payments on customer stablecoin balances in a forthcoming crypto market structure bill, arguing that doling out interest on stablecoins creates less-regulated "pseudo-banks."
"Everybody would want to be in the business of issuing money and offering something that's a money-like instrument without being subject to the same level of oversight," BPI's Baer said on the subject.
"That would be an incredibly profitable business," Baer added.
Major crypto platform Coinbase (COIN), which offers financial "rewards" on stablecoin holdings, has already urged customers to oppose big banks on the issue.
Another challenge for banks trying to navigate the new administration is the focus on debanking, which Trump highlighted in January when he confronted Bank of America CEO Brian Moynihan at the World Economic Forum in Davos, Switzerland. In August, he signed an executive order on the issue.
Last month, the Office of the Comptroller of the Currency said it had requested information about debanking activities from nine of the largest institutions it regulates. The review is scheduled to be completed early next year.
Some of those same institutions that received letters anticipate negotiations with the administration and potentially lawsuits to follow, according to one source familiar with the matter.
Smaller banks also received debanking letters in September, according to the Wall Street Journal.
The Small Business Administration wrote to 5,000 banks and other lenders directing them to make reasonable efforts by Dec. 5 to find customers they previously cut off for political or debanking reasons, according to the Wall Street Journal.
Banks have denied discriminating against Trump and other customers based on their political or religious affiliations. However, they have also said their decision to shut down accounts or turn away potential customers is based on financial and legal risks, which banks are held accountable for by regulators.
The president has said that both JPMorgan Chase and Capital One (COF) closed family and business accounts after he left the White House in 2021, while Bank of America refused to offer him services.
"The banks discriminated against me very badly, and I was very good to the banks," Trump said on CNBC's "Squawk Box" in August.
