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Your guide to what the 2024 US election means for Washington and the world
The top nominees for Donald Trump’s top team are in some ways like those of many presidents before him — mostly male, extremely wealthy and clearly drawn from the financial services industry.
And yet, Trump’s candidates differ in one important respect. They are not ordinary. Notably, the list contains no prominent bankers, breaking with the tradition (even supported by Trump Mk I) that financier appointments would normally be drawn from the likes of Goldman Sachs.
That’s true across the board—from Vice President-elect JD Vance, a venture capitalist, and Treasury Secretary nominee Scott Bessent, a hedge fund manager, to incoming U.K. ambassador Warren Stephens, an investment banker self-made and new Turkish ambassador. Tom Barrack, a private equity and property investor.
Most of the financiers named by Trump have been significant donors to his campaign and/or business partners during his career as a real estate mogul.
The “spoils system” of patronage in US politics — an 18th-century tradition that allowed presidents to cement loyalty by appointing friends and family to government roles — was supposed to have been scrapped by a series of legislative reforms begun in late 19th. century. The incoming president has not only embraced the system made famous by Andrew Jackson, the seventh president of the United States, but has done so in a way that will create major financial and political conflicts of interest. How effective legal restrictions will be in controlling these conflicts is unclear.
The optimistic reading of Trump’s appointments to date is that these are no-nonsense people who will cut through the red tape and bring energy to a growth-focused reform agenda. Elon Musk, joint head of the so-called Department of Government Efficiency, is its prime embodiment.
The breadth of Musk’s own business interests makes it difficult to uncover all conflicts as they relate to Tesla, SpaceX, or X. Another area to watch stems from Musk’s close affinity with finance — he started as a co-founder of PayPal. X Payments, its fledgling payments platform, has ambitions to become the WeChat of the West and catch up to the huge success of the Chinese “everything app”. Strong government and regulatory support could give the platform a big boost.
Even more profound would be how official US attitudes towards crypto-finance (another of Musk’s pet topics) seem set to reverse. Under the leadership of Gary Gensler, the Securities and Exchange Commission has taken an openly hostile stance: numerous cases have been filed against crypto companies for fraud, so-called “wash trading” that inflates transaction volumes, registration violations and conduct other inappropriate.
However, Gensler is set to be replaced by Paul Atkins, a sharp deregulator who co-chairs the Token Alliance, a crypto lobby group. Atkins will be supported by a number of other top candidates in the Trump administration: most prominently Howard Lutnick, who is a vocal crypto advocate with strong ties to Tether as commerce secretary; and David Sacks, who is a close Musk ally and fellow Paypal alumnus, as the White House’s so-called AI and crypto guy.
In the investment arena, Trump has tapped Stephen Feinberg, co-founder and co-CEO of Cerberus Capital Management, as his deputy defense secretary — opening up another potential conflict, given Cerberus’ history of investing in businesses of protection. Similarly at the Social Security Administration, the selection of Frank Bisignano, a payments technology chief, to be in charge presents a source of reform and a conflict to manage.
However positive you may view the potential rewards of disruption, the risk of putting one’s own interests at the forefront of such areas is significant.
One twist is that despite the lack of big bankers among Trump’s nominees, big banks could be the obvious winners. Relaxing the so-called Basel III banking regulations could save them billions of dollars in capital charges. Overhauling the federal deposit insurance system is likely to benefit them, at the expense of smaller institutions, as savers move their money to bigger, safer banks. And any move to end government support for mortgages by fully privatizing Fannie Mae and Freddie Mac could also be a relative victory for the biggest banks.
Along the way, such revolutionary changes can cause turmoil or crisis. This may be the moment when Trump feels the need for some more conventional advice on Wall Street.
patrick.jenkins@ft.com
