Money, Wall Street, and Trump 2.0
How much money does it take to tip the electoral scales in favor of Wall Street? It depends on what part of the financial world you ask.
A private equity executive would point to the $231 million their industry spent on races in the 2024 election cycle, most of the funds funneled toward conservative candidates. A cryptocurrency mogul might nod at the $135 million – in cold, hard cash – that flooded into the campaigns of more than 50 pro-crypto candidates across the country. Meanwhile, a real estate tycoon would underline the $166 million the sector pumped into lobbying and contributions.
Now, with President-elect Trump poised to put finance in charge of overseeing itself, Wall Street is taking a victory lap. Private equity firms are ramping up buyouts with the expectations of tax cuts, a regulatory rollback, and more lax antitrust enforcement. It’s a rebound after a period of heightened scrutiny over the industry’s extractive ways. Corporate housing lobby groups are looking forward to working with the new administration, intent on bullhorning landlords’ voices at a time when tenants face high rents and worsening conditions.
The crypto lobby expects, and likely will get, a friendly SEC in the wake of Gary Gensler’s tough-minded approach. Jubilation over weaker crypto regulatory oversight could spur Bitcoin to skyrocket to as much as $100,000 before inauguration. We can expect an expansion of crypto’s risk-laden presence in the banking system. So far, the industry has used its money to win every race it contested – including the toppling of Sherrod Brown, the Ohio senator who chairs Senate Banking. Farewell to Sen. Brown, who was a stalwart progressive for nearly 20 years in the Senate and 14 years in the House as well.
In the executive branch, Trump now has his eyes on some sort of super-rich Wall Streeter for Treasury Secretary. Bond trader Howard Lutnick? Private equity billionaire Marc Rowan? Industry-friendly former Fed governor Kevin Warsh? Hedge fund manager Scott Bessent? Not exactly a populist’s dream.
Trump’s anticipated dismantling of financial system safeguards, which keep everyone safe and money flowing, will ripple out from Washington. Trump will doubtless seek to undermine the CFPB, the watchdog that has, since inception, secured nearly $20 billion in relief for harmed and abused consumers.
With that in mind, AFR is vowing to carry on the fight against Wall Street’s malign influence:
We must stop Wall Street from writing rules of the game that concentrate wealth at the top and make life more difficult and insecure for everyone else. People — across all parties and demographics — consistently and strongly support curbing Wall Street’s corrosive control of the economy and protecting families from the predatory and extractive financial industry.
Sober voices are already warning that giving Wall Street what it wants isn’t good for society or, for that matter, the industry. “This bonanza could leave them richer now, and weaker later.” The Financial Times’ Brooke Masters reminded the executives, who are drooling over the prospect of weaker regulation, that “guardrails do benefit their industry.”
There’s a fight ahead. Sen. Elizabeth Warren, a longtime defender of everyday people from financial predators, will be the top Democrat on the Senate Banking Committee. Wall Street’s – and Fed Chair Powell’s – attempt to stop her failed.
BANKING AND FINANCIAL STABILITY: Commercial Real Estate – Banking Up the Unbanked – MAGA’s Bank Policies
CONSUMER: Navy Federal Credit Union – Comerica – Buy Now, Pay Later – Small Business Lending – Payday Lenders – Going Meta and Google – Data Privacy – The CFPB Tells Employers Who’s Boss – Student Loan Relief and Repayment – Enforcement Actions
CAPITAL MARKETS: Clayton – Trump Good for Goldman
PRIVATE MARKETS: A Private Credit ETF – BlackRock’s Bets on Private Credit Exits – Private Credit in the Lead? – Polymarket CEO’s Home Raided – PE’s NAV Shortcut – What PE Wants – Carrying Private Equity – Keeping It in the Family –Other Private Markets News
CRYPTO: Crypto Control – Anti-Money Laundering – Crypto Not Green – Mixed Up in the Crypto Fog
HOUSING: A Sour Invitation – Home Insurance for Safety, Not Profit – NY Broker Fees
CLIMATE AND FINANCE: Basel Climate Plan
POLITICS AND MONEY: Private Equity Money
Feedback? Reach us at afrnews@ourfinancialsecurity.org
BANKING AND FINANCIAL STABILITY
Commercial Real Estate.
Banks are creating and hiding risk as they “extend and pretend” their way through increasingly dour commercial real estate (CRE) loans. Repayments of CRE loans have been more difficult because of high interest rates and low property valuations. Since they’re disproportionately concentrated among smaller and midsize banks, stability risks have mounted as more loans come due. To punt the problem down the road, lenders have been postponing write-offs by modifying (extending) loans. It’s led to “credit misallocation and a build-up of financial fragility,” according to the Financial Times, which has caused a rise in double defaults – that’s when a borrower defaults a second time after already receiving relief.
Banking Up the Unbanked.
The national unbanked rate – the percentage of U.S. households that don’t have a bank or credit union account – hit a record low 4.3 percent (5.6 million households) in 2023, according to the FDIC. However, the lower overall unbanked rates concealed far higher rates among marginalized households, including lower-income households; less-educated households; Black, Latine, and Indigenous households; households with people with a disability; and households with variable income.
MAGA’s Bank Policies.
Rep. French Hill (R-Arkansas) unveiled a slate of regressive banking policies – “Make Community Banking Great Again” – that would kneecap regulators’ ability to keep the financial system safe. The proposed policies include making climate stress testing optional and pushing regulators to follow the regulatory tailoring guidelines from the deregulatory legislation passed during the prior Trump administration that contributed to the banking crisis of 2023 when Silicon Valley Bank and other regional banks failed.
CONSUMER
Navy Federal Credit Union
The CFPB levied a $95 million enforcement against the credit union, which serves military and veteran families, for illegally charging tens of millions of dollars in surprise overdraft fees from 2017 to 2022. Now, $80 million will be refunded to consumers and $15 million will go to the CFPB’s victim relief fund, the largest sum collected from a credit union for illegal activity. AFR writes that the enforcement highlights the need for a final CFPB regulation on overdraft fees.
Comerica.
In 2021, the CFPB launched a probe into Comerica, the bank that administers prepaid cards to the 4.5 million people that receive federal benefits through the Treasury’s Direct Express program. The agency claims that some of Comerica’s customer service practices may be unfair, deceptive, or abusive, and has also alleged that the bank’s fraud detection and prevention controls are lacking. Comerica thinks that the cost of making sure its customers are safe is too “costly” and has filed a lawsuit against the CFPB in Texas.
Buy Now, Pay Later.
The Buy Now, Pay Later (BNPL) industry, which includes fintechs like Klarna and Afterpay that allow a consumer to split big purchases into smaller installments, are often able to evade being treated like creditors by state- and federal-level regulation despite their products’ striking similarity to loans, according to a new policy brief from Indiana Community Action Poverty Institute (INCAP). BNPL exploded during the pandemic and has since exposed consumers to risk by promoting and incentivizing overspending, failing to protect consumers from fraud, and creating complex interactions with other financial mechanisms like credit scores and overdraft fees. INCAP recommends policy reform, such as requiring the firms to obtain lending licenses, closing legal loopholes, and applying existing statutory protections like the Truth in Lending Act.
Small Business Lending.
A CFPB study of matched-pair testers (where white and Black applicants sought small business loans) found that lenders offered less encouragement to Black entrepreneurs applying for a loan and were more likely to steer Black applicants to credit cards and home equity loans rather than small business loans, compared to their white counterparts. The results of the pilot study underscore the importance of collecting comprehensive lending data.
Payday Lenders.
Payday lenders offer small, short term loans that have sky-high interest rates and trap borrowers in a cycle of debt, as most borrowers merely take out another loan to repay the outstanding payday debt. In 2017, the CFPB issued a rule that required payday lenders to determine a borrower’s ability to repay the loan, tamped down on how often borrowers could take out loans, and kept lenders from accessing customers’ bank accounts multiple times if they were previously denied access. The Fifth Circuit, usually industry-friendly, denied a request from payday lenders for the full court to hear an appeal of a previous ruling that the agency’s process was sound.
Going Meta and Google.
Meta (i.e. Facebook and Instagram) is in the CFPB’s crosshairs for the company’s alleged improper use of third-party financial data in its advertising arm.
Also: The CFPB wants to apply the same scrutiny to Google that it applies to large banks and credit unions, since Google’s digital wallet and its former instant payments product are comparable products. Said Demand Progress’ Emily Peterson-Cassin: “If Google looks like a bank and acts like a bank, then it should be regulated like a bank. For far too long, Big Tech companies like Google have recklessly barged into our financial lives without accountability — all while consolidating their market dominance and kneecapping smaller competitors.”
Data Privacy.
While states are allowed to pass tougher privacy laws than the federal standards, the CFPB suggests that state financial data privacy protections are still weaker than similar safeguards in other parts of the economy. The agency’s new report on the issue recognizes that financial institutions are creating revenue streams based on exploiting and selling user data, and it recommended that state lawmakers take action to close gaps in enforcement.
The CFPB Tells Employers Who’s Boss.
The CFPB’s recently issued guidance on the use of AI in employment decisions highlights that employers are responsible for complying with the Fair Credit Reporting Act (FCRA) when using third-party consumer credit reports containing private employee information. The guidance is a response to rising concerns about potential bias and discrimination in AI applications. The guidance encourages employers to obtain written consent, provide transparency about what data is used, and allow employees to dispute inaccuracies.
Student Loan Relief and Repayment.
The CFPB’s Student Loan Borrower Survey found that student loan debt relief has “been a lifeline for many borrowers, allowing them to make positive changes in their lives.” Most borrowers who received relief, primarily those with below-median incomes said it let them pursue important life choices. At the same time, almost half of borrowers are having trouble with repayment options that are frequently inaccessible and ineffective.
Enforcement Actions.
Dave. The FTC filed a complaint against the online cash advance app Dave for its use of deceptive marketing and its practice of charging undisclosed fees and so-called “tips” without consumers’ consent. The service describes its target audience as “financially vulnerable" or “financially coping,” claiming that these borrowers can tap into an instant high-dollar payday loan before Dave springs a surprise fee.
Global Tel Link. The CFPB ordered the company, which provides financial and other services to correctional facilities, to pay $3 million for “illegally taking millions of dollars from more than a half million accounts and blocking money transfers to consumers who are incarcerated, which the consumers relied on for goods such as food, medicine, and clothing.”
CAPITAL MARKETS
Clayton.
Trump plans to appoint Jay Clayton, the same person who did the job during his previous term, to the SEC. Clayton has no experience as a criminal prosecutor and is notably industry-friendly.
Trump Good for Goldman
The WSJ says Trump is good for Goldman: “Donald Trump’s election has unleashed big hopes in the market for dealmaking, regulatory easing and private credit. Together, all of that would put some extra shine on Goldman Sachs.” Goldman profits from M&A. It profits from regulatory easing. It profits from hands-off attitudes toward private credit. It profits from weak capital rules.
PRIVATE MARKETS
A Private Credit ETF?
AFR Education Fund and nine other signatories urged the SEC to reject an application by the private equity firm Apollo for an exchange-traded fund (ETF) that would allow retail investors to invest directly in the private credit market. Several larger institutional investors have already taken losses in the private credit market and the letter warns how even the presence of an institutional investment manager still fails to mitigate concerns around valuation, conflicts of interest, and suitability.
BlackRock’s Bets on Private Credit Exits.
BlackRock is setting up a $1.3 billion private credit fund to give its existing investors an easy exit strategy with help from Jefferies Financial. The private equity firm plans to bundle 300 first-lien loans into a continuation fund to attract new buyers in a secondary market. This move follows other firms, like Ares Management Corp., Coller Capital, Pantheon Ventures and Tikehau Capital in fueling the growth of private credit’s secondary market.
Private Credit in the Lead?
Private credit is outperforming private equity. Direct lending returns surpassed private equity funds in seven of the last 10 quarters. However, private debt funds benefitted from rising interest rates.
Polymarket CEO’s Home Raided.
Polymarket CEO Shayne Coplan's home was raided amid a DOJ investigation. Agents seized devices over allegations of the platform allowing U.S. users to access the platform via VPNs. Polymarket, which gained attention during the 2024 U.S. presidential election for predicting Trump's victory, dismissed the raid as "political retribution.” No charges have been filed.
PE’s NAV Shortcut.
Private equity firms are borrowing against their portfolios through net asset value (NAV) loans to avoid losses, waiting for a better deal-making environment. While controversial and risky, major banks like Goldman Sachs and JPMorgan are backing these kinds of loans, signaling a growing trend, with a growing $1.2 trillion market with high NAV interest rates, providing a high-risk yet effective way to boost returns.
What PE Wants.
Companies that are exceedingly focused on short-term earnings at the expense of long-term growth draw Wall Street’s attention, according to an article in the Review of Accounting Studies. That tunnel vision is called “earnings myopia,” and private equity firms love the short-sightedness; an analysis of 3,200 acquisitions from 1999 and 2018 found that especially myopic companies were more likely to be acquired.
Carrying Private Equity.
Carry is carrying the rise in PE salaries. Also called carried interest, it’s the industry’s coveted tax law loophole that treats the share of profits a firm’s employee receives from the sale of an investment as capital gains instead of income. Some of the largest PE mega-firms paid their employees substantially more carry this year than in previous years; KKR doled out $843 million from January to September, over twice the amount from the same period last year.
Keeping It in the Family.
Family offices, the investment firms that manage the assets of one or a small handful of very-wealthy families, are dipping deeper into making direct investments in private companies instead of via private equity funds. In other words, some families see value in skipping over private equity.
Other Private Markets News.
Pet Care. Two private equity firms, Shore Capital Partners and Silver Lake, plan to merge their two pet-care businesses in a possible $8.6 billion transaction that would create one of the biggest operators of animal hospitals in the country.
Shop, Shop, Shop. Blackstone inked a $4 billion agreement to buy Retail Opportunity Investments, a real estate investment trust focusing on grocery-anchored shopping centers.
CRYPTO
Crypto Control.
Expecting full Republican control of the White House and both chambers of Congress, pro-crypto lawmakers say they’d prefer to wait for the following year to make progress on any crypto legislation, when a new host of industry-friendly lawmakers and regulatory heads take over
Anti-Money Laundering.
A group of international NGOs, including the Hudson Institute's Kleptocracy Initiative, the Free Russia Foundation, Razom for Ukraine, and Financial Accountability and Corporate Transparency (FACT) Coalition, urged the House Agriculture and House Financial Services Committees not to move forward with pending cryptocurrency legislation without paying more heed to corruption and national security controls. The coalition cited Russian actors’ use of crypto to evade sanctions, the billions of dollars laundered through Iran’s unhosted wallets, and the huge proportion of North Korea’s foreign revenue that comes from crypto.
Crypto Not Green.
Food & Water Watch and 79 other organizations, including AFR, sent a letter to Senate Majority Leader Schumer urging him to prevent Senate consideration of pro-crypto legislation being considered by the Senate Agriculture Committee, noting that it would legitimize an industry that has already had grave environmental impacts and would fail to address increased the climate impacts of crypto mining spurred by lax new crypto regulations. Food & Water Watch Executive Director Wenonah Hauter stated:
The crypto industry spent more than $100 million to secure a hands-off regulatory approach that emboldens corporate tycoons to get rich by destroying the climate. Senator Schumer should not coddle an industry bent solely on profits that is trying to buy a lax regulatory regime in order to burn through fossil fuels that poison our planet.
Mixed Up in the Crypto Fog
Roman Sterlingov, founder of the cryptocurrency mixing service Bitcoin Fog, was sentenced to over 12.5 years in prison for laundering over $400 million in illicit funds from dark net markets. Bitcoin Fog helped hide criminal funds for a decade and was charged with money laundering and running an unregistered money transmitting service. Sterlingov was also ordered to forfeit $395 million and a Bitcoin wallet worth over $103 million.
HOUSING
A Sour Invitation.
Last month’s FTC action against Invitation Homes, a single-family corporate landlord rife with deceptive and abusive tactics, “confirms what their tenants have been telling us: our country’s largest landlord of single family homes has a consistent track record of ripping off its tenants,” AFR’s Caroline Nagy writes. Nagy highlights the role of both Wall Street, by scooping up homes and flipping them, and the federal government, by financing Invitation, in the crisis.
Home Insurance for Safety, Not Profit.
The Climate and Community Institute’s Moira Birss and Delft University of Technology’s Zac J. Taylor emphasize the need to center safeguarding homeowners, rather than the profits of insurers, as climate-intensified disasters expose the shortcomings in the housing insurance market. The profit-driven model, they write, diverts risk, instead of reducing it:
Our analysis showed that the US home insurance system is fatally flawed, relying too heavily on private markets to manage household disaster risk…insurance providers are disappearing for single-family homeowners while multifamily housing providers face vanishing coverage options. These and other market failures are creating widening protection gaps that leave the most vulnerable families exposed to disaster losses while worsening the housing affordability crisis.
Birss and Taylor propose that states create housing resilience agencies to coordinate disaster risk reduction activities and offer public disaster insurance.
NY Broker Fees.
Charging broker fees, which tenants pay when they sign a new apartment lease, is a rare practice in most U.S. cities but is the cost of being a renter in New York City; it’s part of the reason that rents there are so high. This week, the New York City Council voted to ban the fees.
CLIMATE and FINANCE
Basel Climate Plan.
The Fed refuses to support a plan by the international Basel Committee on Banking Supervision to get lenders to disclose their climate financial risks, some months after the central bank watered down the U.S. proposal to implement the Basel III Endgame in the industry’s favor.
POLITICS and MONEY
Private Equity Money.
WSJ reported that the private equity industry spent more than $231 million on the 2024 election through October 17, with over half – 52 percent – funneled toward Republicans. One law firm suggested that private equity prefers a divided government, in which sweeping policy changes (like tax code reform to clamp down on carried interest tax, for example) are unlikely.