Wall Street Cashing In on Fat Expectations

After eight years of unrelenting scrutiny and billions of dollars in legal settlements, the banking industry suddenly is facing a more hospitable political climate in Washington next year.

Prior to November 8, Wall Street had been girding for a potential Democratic victory that would have empowered progressive firebrands like Massachusetts Democrat Elizabeth Warren, who has pushed to break up large banks and jail banking executives in the wake of the financial crisis, AFP reported.

Instead, the Republican sweep of Congress and president-elect Donald Trump’s election in one fell swoop bolstered the chances for pro-growth measures, tax cuts and loosening of a whole swath of regulations, including the 2010 Dodd-Frank banking law passed in response to the crisis.

“You’re going to have a very substantial reversal in regulations of all types,” Blackstone Group chief executive Stephen Schwarzman told a Goldman Sachs banking conference Tuesday.

Schwarzman, a major Republican donor tapped by Trump to chair a advisory council of prominent business leaders, gushed that the election would usher in the biggest regulatory revolution in his 45 years in finance.

Trump’s cabinet appointments have furthered the sense that his presidency will be good for big finance.

And he tapped Goldman Sachs President Gary Cohn to lead the National Economic Council, according to reports Friday, his third major personnel pick from the prestigious New York investment bank following selections of Steven Mnuchin as treasury secretary and Steve Bannon as chief strategist.

Critics have accused the president-elect of hypocrisy after he railed against Wall Street on the campaign and then brought many financial market insiders onto his team. “We’re intensely worried,” said Bart Naylor, financial policy advisor at Public Citizen, a consumers advocacy organization.

Wall Street itself is literally cashing in on the fat expectations.

The S&P banks index has surged more than 25% since November 8, lifting the entire sector, including Goldman Sachs, the midsized Capital One and regional banks like KeyCorp in Cleveland.

Yet Erik Oja, a banking analyst at CFRA, rejected the suggestion that big banks will win major rollbacks under the Trump administration. Smaller banks may win concessions, but big banks are still under fire.