Jamie Dimon, Brian Moynihan, Jane Fraser and the heads of other big banks will soon have something else to fear from Donald Trump than just his tariff wars, On The Money has learned.
Sources close to the Trump administration say The Donald and his economic team plan to upend commercial banking by demanding that the CEOs and more importantly their deep-pocketed banks – places like JP Morgan, Bank of America, and Citigroup — ramp up lending to small businesses as a way to jolt economic growth.
“Trump wants these bankers to go back to running banks, not hedge funds, and that means lending to small businesses,” one Trump insider told On The Money. “If they want to be hedge funds, they should sell off their commercial banks and become Goldman Sachs.”
Small business is generally defined as having 500 or fewer employees. It is considered a linchpin of the US economy, responsible for nearly half of all economic activity, according to the US Small Business Administration.
It was also the backbone of traditional banking, but the fact that that is no longer the case is something the White House wants to change.
As my Trump source pointed out: “When was the last time you heard Dimon talk about real banking like lending to small businesses on Main Street as opposed to his operations around the globe?”
Reps for Dimon, Moynihan and Fraser had no comment. A White House spokesman had no comment.
The lending to these companies is a $1.7 trillion industry, which sounds good until you consider it is dwarfed by other areas of banking.
Beginning in the late 1990s – when a wave of deregulation allowed financial institutions to house securities operations and commercial banking under one roof – trading, securitization, M&A and global lending became more lucrative than doling out loans to restaurateurs or small factories.
In recent years, non-bank lenders have stepped in and attempted to fill the void, but they don’t have the balance sheets to scale-up lending to small-sized companies like JP Morgan, Bank of America and Citigroup, all with $1 trillion or more in assets.
Of course, the banks will tell you it’s not all their fault that small-business lending is shrinking in importance to them. Demand for these loans has been low since COVID, which shuttered mom-and-pop operations that never reopened. Biden-era inflation didn’t help matters. Regulation became particularly dicey after the demise of Silicon Valley Bank and other community lenders.
The Trumpers are set to remind Dimon & Co., that Biden is gone. The regulatory environment is shifting to de-regulation, so they should open the spigot to small businesses. And they have an obligation to do so: All the big banks are Too Big To Fail institutions, meaning if they screw up badly enough, the federal government will bail them out
Such an ask would be ignored in the past given the cozy relationship bank chiefs maintained with DC-based regulators and past administrations. But I have pointed out in the past, bank CEOs are deathly afraid of the Orange Man in the White House, who is known to be vindictive when he doesn’t get his way.
And for the next three-plus-years, Trump is their regulator, which is why they’re probably inclined to play nice with him over this no matter how much it costs them.
Credit: Source link
