Breakingviews: Wall Street places reluctant bet on Trump

The idea of Jamie Dimon running for president has become something of a meme in the financial world. The JPMorgan CEO says he doesn’t want the job – or at least, not if it requires an election. Yet financial pundits like hedge fund manager Bill Ackman still occasionally attempt to coax Dimon out of his shell, misty-eyed over the idea of one of their own in the White House. President Joe Biden’s recent poor debate performance has revived the fever dream.

The question isn’t whether Dimon might run – he almost certainly will not – but why anyone would want him to. And the answer is that for Wall Street, the coming White House race, which currently pits Biden against former President Donald Trump, offers a singularly unappetizing menu. November’s election will present voters with a choice between two possible administrations, neither of which looks much like the moderate, business-friendly centrism under which the financial sector tends to thrive. It’s an unenviable choice.

So far, Wall Street money is leaning to the right. The finance, insurance and real estate sectors have donated $247 million to Republican candidates in the current two-year political cycle, versus $227 million to Democrats, according to data crunched by OpenSecrets. Focus on donations supporting presidential hopefuls, and Trump is the financiers’ clear favorite, collecting $115 million to Biden’s $46 million. Of course, money does not guarantee electoral success: Wall Street roundly backed presidential losers Mitt Romney in 2012 and Hillary Clinton in 2016.

The industry’s tentative bet on Trump may say less about the former New York real estate developer, and more about the fact that Biden’s Democrats have made themselves difficult to like. Since the former vice president moved into the Oval Office in early 2021, the regulatory burden faced by finance has swelled. Agencies like the Securities and Exchange Commission and Consumer Financial Protection Bureau, led by Biden-nominated firebrands Gary Gensler and Rohit Chopra, have rolled out aggressive enforcement campaigns against financial firms. Heightened antitrust scrutiny has contributed to a sharp slowdown in merger activity.

Few moves have generated more acrimony, meanwhile, than the Federal Reserve’s package of bank rules known as the Basel Endgame, cooked up by Vice Chair Michael Barr, who was also nominated by Biden. Those regulatory tweaks, which could raise the capital the biggest American banks have to hold by one-fifth, provoked so much ire that lenders and their trade associations have threatened to take the Fed to court. The 486 federal lobbyists working for large lenders at the end of 2023 was the highest since the 2008 financial crisis, Reuters reported in February. Though the Fed has started to capitulate, the mistrust lingers.

By contrast, Trump’s vague plans offer red meat for profit-minded Wall Street capitalists. The former president says he will cut the corporate income tax rate to 20% from 21, scrap tax that service-industry workers pay on their tips, and retain the threshold for death tax, which has been temporarily raised. That’s easy to prefer over Biden’s proposal of a 28% corporate tax rate, higher taxes on dividends and capital gains, and a plan to quadruple the 1% levy on corporate share buybacks that kicked in this year.

A Republican in the White House would not be a clear-cut win, though. First, there’s the uncertainty around what a second Trump administration would do. Financial executives tend to care about fiscal deficits, which under Trump would be unlikely to fall, and inflation, which would probably rise. The Republican Party platform, released on Tuesday, makes no mention of the federal deficit or national debt, unlike its 2016 counterpart, which pledged to balance the U.S. budget. In his first term, Trump approved $4.8 trillion of non-Covid-related borrowing; Biden’s equivalent total so far is $2.2 trillion, according to the Committee for a Responsible Federal Budget.

For institutions like Citigroup and Bank of America, which make considerable sums from financing international trade, Trump’s idea of slapping 10% tariffs on all foreign goods would also be a dampener. A related plan to levy at least 60% on all Chinese imports would obliterate commercial relations with the country’s biggest overseas trade partner and drive up prices for American consumers. The Peterson Institute for International Economics estimates that overall, Trump’s proposed tariffs would shave 2.7% off the median household’s after-tax income.

Some financial chieftains also have another concern: their workforces. The two parties are far apart on social issues, and the center ground continues to shrink. Dimon has described himself as someone with a Republican brain and a Democrat heart, but that option isn’t on the ballot. JPMorgan’s employee-funded political action committees have interests that range from LGBTQ rights to racial and gender equality. It’s hard to square that with Republican officials who have banned abortion in 14 states and passed 41 anti-LGBTQ laws at the state level this year alone, according to the American Civil Liberties Union.

That leaves Wall Street executives with little to do but lament privately that there is no real middle way. Nonetheless, the financial sector is not powerless to shape its own destiny. Its intensive lobbying over Basel Endgame shows the extent to which big banks can fight back when their interests are threatened. The nearly equal funding for Republicans and Democrats partly reflects employees’ diverse opinions, but also a strategic desire to hedge political bets. After all, the important thing isn’t getting their man or woman into the White House, but ensuring that whoever wins the election returns the bank CEO’s calls.

In JPMorgan’s case, that’s not a concern, since the bank’s leader is already more powerful than most politicians, and better connected to American households. The biggest U.S. lender’s Chase has more than 82 million customers, more than the number that voted for Biden in 2020. Four out of five customers with Chase as their main bank would recommend it, whereas only two in five Americans approve of the current president, according to FiveThirtyEight. Ackman might want Dimon to run things from the Oval Office; if the financial community wants to maximize its influence, it’s better off keeping him where he is.