Trump 2.0

What can we expect during a second Trump administration? Let’s take gander into the crystal ball and make some predictions!

Economy and Interest Rates

President Trump has already stated that he intends to push for lower interest rates. Throughout his first term he touted zero interest rates at the Federal Reserve level, and even toyed with the notion of negative interest rates (something I’m sure he would have enjoyed back in his casino days). Timing is definitely on the side of Trump’s second term as inflation has somewhat normalized over the past 18 to 24 months. Therefore, we can expect the new administration to put pressure on the Federal Reserve Board to lower interest rates in rapid fashion. Many believe that we can expect a 150 to 200 basis point reduction over the next two years. I actually believe it will be greater than that. Currently the WSJ Prime Rate is 8.0%.

As for the economy, we will likely see a reduction in fuel prices across the board, mainly due to fewer regulations and domestic production increases. Unemployment levels will remain low for the foreseeable future. But the big question centers up government spending. Will Trump 2.0 reduce government spending? What most people don’t understand is that mandatory spending is required by law and is difficult (if not impossible) to reduce. Today, mandatory spending is approximately 61 percent of government spending, with discretionary spending coming in at 26 percent. The remaining 13 percent is interest on the debt. Trump has vowed to cut wasteful spending (apparently with some help from Elon Musk) … but that can only be within the discretionary spending levels. Obviously if interest rates come down then interest on the national debt would be reduced.

Bottom Line Prediction: Consumers will benefit from a WSJ Prime Interest rate of less than 5 percent within the next 12 months.

Consumer Finance Protection Bureau

As most of you know, the CFPB was created in 2011 through the Dodd-Frank Act that became law under the Obama Administration. The original intent behind creating the CFPB was to establish an independent watchdog consumer protection agency that focuses on four areas:

• Creating a means by which to collect consumer complaints relative to unfair, deceptive or abusive practices by financial institutions and financial services providers
• Investigating consumer complaints and enforcing laws to ensure institutional compliance and fairness
• Providing consumers with financial education
• Making sure that disclosures provided to consumers relating to credit cards, mortgages and other loans are correct and understandable

Under the Obama Administration, the CFPB focused on these four areas and successfully created the Consumer Complaint Database. Investigations were derived exclusively from the database and financial institutions quickly jumped into gear to ensure disclosures and practices were compliant with statutes and regulations.

Under the first Trump term, the Consumer Complaint Database was maintained, but investigations slowed down. Many within the financial services community believed the administration might do away with the CFPB altogether. Under Interim Director, Mick Mulvaney, public access to the Database was shut down. And while Mulvaney imposed a significant fine against Wells Fargo for fraudulent practices, investigations were indeed “watered down.” Throughout Trump 1.0.

Under the Biden Administration, the CFPB reinvigorated itself under the leadership of Director Rohit Chopra. Not only did oversight of financial institutions increase between 2020 and 2024, but the CFPB actually began writing rules and enforcing best practices outside of statutory or regulatory guidance.

On a personal note, I currently receive at least one CFPB press release per week. During Trump 1.0 I rarely received any.

Bottom Line Prediction: The CFPB will remain in place despite efforts by Congress and the Senate to dismantle the agency. With that being stated the CFPB will operate similarly to that of Trump 1.0.

Regulatory Environment

This will be a quick one. Look for three BIG things to happen within the first 200 days of the second Trump White House:

1. Boards and oversight of the FDIC, NCUA and other regulatory agencies will rapidly turn over and Senate confirmations (as may be necessary) will take place expediously
2. The current “Climate Justice” initiative spun off from the Greenhouse Gas Reduction Fund will rapidly decay and financial institutions will be left on their own to develop best practices to reduce carbon emissions
3. Deregulation will take place on a broad scale and will trickle down to the state and local levels

Bottom line prediction: Examination procedures will not change but the regulatory environment will significantly shift from “oversight” to “best practices.”

Author: Lance Teinert, Chief Executive Officer, RevlTek