Wall Street’s Win-Win with Trump

Exclusive: Most Wall Street bigwigs sided with Hillary Clinton in 2016 but now have adroitly shifted affections to Donald Trump whose populist rhetoric is giving way to another super-rich bonfire of the vanities, explains Mike Lofgren.

By Mike Lofgren

During the 2016 campaign, pundits claimed that Donald Trump’s proposed economic policies would bring the end of the world as we know it. Moody’s Analytics predicted his plans, particularly those involving trade and the budget deficit, could trigger a severe recession. Others asserted that Trump’s election would cause a severe stock market selloff.

Donald Trump speaking with supporters at a campaign rally at the Phoenix Convention Center in Phoenix, Arizona. Oct. 29, 2016 (Flickr Gage Skidmore)

The Wall Street Journal wrote that none of the Fortune 100 CEOs endorsed him for president. For a Republican candidate, this was both unprecedented and seemed an unmistakable signal of a lack of confidence by the business community.

That was then and this is now. The stock market has risen after the election, flirting with 20,000. And while the many presentiments of doom have not been disproven by events – after all, Trump has not yet even been inaugurated – the commanding heights of capital are no longer sitting on their hands.

As a glance at the membership of the President-elect’s Strategic and Policy Forum shows, they are flocking to his side, with representatives of financial buccaneering like Steven Schwarzman of the Blackstone Group and Jamie Dimon of JPMorgan Chase, old smokestack firms like GM’s Mary Barra, and towering retail giant Walmart’s Doug McMillon. There is even an ex-governor of the Federal Reserve Board, Bush appointee Kevin Warsh. It appears that Corporate America has abruptly swung to Trump’s side.

Why the change? First, beyond whatever innate skill at making money that they may possess, the typical American corporate executive smells power in the way a pig locks on to a Périgord truffle. It was only a couple of months ago that virtually none of the corporate moguls supported Trump, while they fell all over themselves to back Hillary Clinton. Now, I doubt many of them would take her phone call. Sucking up is so ingrained in American corporate culture that we should hardly be surprised at the about-face.

Second, regardless of their pious rhetoric about fiscal responsibility, business leaders dearly love the deficits created by rate cuts on income, capital gains, and dividends. The tax cuts put money directly into their coffers, and the resulting deficit provides the fiscal stimulus driving consumer spending and corporate profits. Occasionally, a few of them, like Pete Peterson (ironically a co-founder of Schwarzman’s Blackstone Group), will launch a rhetorical jihad against the federal deficit, but this effort is mainly a rationale to cut the federal pensions and benefits that they assume the Ninety-Nine Percent are lazily wallowing in rather than working.

That is not the end of Trump’s fiscal stimulus. In addition to his $6.2 trillion in planned tax cuts, he is promising a large infrastructure program as well as hefty increases in Pentagon spending (the one Keynesian measure Republicans have traditionally adored).

Good Times for the Rich

Let the good times roll? Financial Times correspondent Edward Luce points out a couple of downsides. First, Trump, the real estate mogul (which means he is instinctively for the lowest interest rates possible) is setting himself up for an extended battle with the Federal Reserve Board just as its chair, Janet Yellen, is beginning to tap the brake on the Fed’s previously very loose monetary policy. Second, according to Luce, a potential combination of Trump’s stimulative fiscal policy and Yellen’s mild tightening will likely be an appreciation of the dollar.

That, in turn, will cause the trade deficit to rise while depressing domestic manufacturing – the diametric opposite of what Trump’s populist economic platform promised, a platform which won him the electoral vote in the Rust Belt, and thus the presidency. Such an outcome would ratchet up the pressure on Trump (who has already said he wanted to do it) for an all-out trade war with China, Mexico and other large exporters. Luce concludes that the markets will react badly.

That analysis is likely correct, but it does not address the more fundamental problem with Trump’s economic plans. His trade policy may be unique in distinguishing him from standard Republican Party dogmatists, but huge tax cuts and heavy military expenditures were precisely George W. Bush’s fiscal policy, and, as we all remember, that did not end well.

A third policy feature the Bush and Trump administrations have in common is a loathing of financial regulation. Under Chris Cox, George W. Bush’s Securities and Exchange Commission chairman, the agency exerted virtually no effort to preempt the marketing of the worthless financial instruments that caused the 2008 asset meltdown. Likewise, Goldman Sachs alumnus Hank Paulson, Bush’s Treasury secretary, was asleep at the wheel right up to the crash.

The fact that America’s premier corporate raider, Carl Icahn, will advise Trump on financial regulation (and may be appointed SEC chairman), and that his pick for Treasury Secretary, Steve Mnuchin, was a Goldman executive for 16 years, does not inspire confidence that their management of the economy will be any different from that of their predecessors before the 2008 crash.

Mnuchin is only one of several Goldman alumni destined for top positions in the Trump administration. Goldman president Gary Cohn has been tapped to head the National Economic Council. Hedge fund manager and former Goldman executive Anthony Scaramucci is a vocal Trump media surrogate and is widely expected to receive a government position. (Responding to a question by CNN about the alleged demonization of bankers, Scaramucci responded, “I think the cabal against the bankers is over,” neatly inverting the fact that the derogatory term “cabal” has normally been associated with bankers, rather than their critics).

The pseudo-populist Stephen Bannon, Trump’s chief of strategy, is also a Goldman spawn. It is hardly surprising that Goldman Sachs’s stock has risen 30 percent since November. Does anyone seriously think “this time will be different” compared to the Bush debacle?

A Deluge of Tax Cuts

It may only be different in terms of how big a disaster Trump’s policies will unleash. His tax cuts are potentially three times the magnitude the 10-year cost of Bush’s cuts. Because they are heavily targeted at those who are already rich – 47 percent of the dollar amount will go to the top one percent – it will exacerbate income inequality, which is already at its highest level since the 1920s.

President George W. Bush receiving applause during his 2003 State of the Union Address.

The crumbs for low-income earners will be nullified or worse by regressive labor policies like an assault on the minimum wage and undermining of pensions. (The DeVos family, long-time Republican mega-donors, have declared that public employees in Michigan should have their public pensions revoked; Betsy DeVos, Trump’s pick for education secretary, will be pressuring public school systems to “reform” their pension plans).

Subsistence income for the poor and near-poor could be further eroded by a reduction in Medicaid benefits (reportedly already in the works courtesy of Paul Ryan and the Republican Congress). These actions will exacerbate the ongoing trend toward jobs without benefits.

Despite their windfall from Trump’s tax policies, the rich will only be able to consume so many filet mignons, Sub-Zero refrigerators, and Patek-Philippe watches before reaching satiation. The rest of their tax cut will go into kiting the equities market to stratospheric levels or building palatial monuments to their own greatness in Glen Cove, Palm Beach and Palo Alto.

Given that the tax cuts and spending increases will be of a much greater magnitude than Bush’s own prodigious fiscal mismanagement, the resulting asset and real estate bubble will be a thing to behold.

Aggravating the odds of a financial meltdown will be the unrelenting hostility of Trump’s economic team, as well as that of the Republican Congress, towards financial regulation in general and the Dodd-Frank law in particular. While Dodd-Frank is only a halting half step in the right direction, some of its provisions, such as those that required banks to hold greater reserves, are useful in preventing the overleveraging of asset bubbles and, when the assets fall, a bank liquidity crisis. If Trump’s policies are enacted this country will have a gargantuan fiscal deficit-driven asset bubble in the making, and will have removed the regulatory tools to ameliorate it.

Some flavor of the happy anticipation with which the wealthy are greeting the incoming Trump dispensation may be gathered from this passage in a Bloomberg News piece: “The New York real estate mogul is building a cabinet heavy on wealth and corporate connections, and light on government experience, a mix that hedge fund billionaire Ray Dalio said last week would unleash the ‘animal spirits’ of capitalism and drive markets even higher.”

Translated from the Bloombergese, it suggests the plutocrats are licking their chops in the expectation of a looting spree that will make the plutocracy of Ferdinand and Imelda Marcos look like strict Swiss governmental administration.

Eyes Wide Shut

Why is this foreseeable economic crisis so seldom discussed in the mainstream media compared to the potential of a trade war? There are two parts to the answer: one involving popular sentiment and the other the elite interests of corporate America.

The Wall Street bull statue by Arturo Di Modica

Trump was elected on a platform asserting that America’s economic problems were almost exclusively caused by foreign countries such as China or Mexico. As such, it was an analogue to Bush’s 2004 campaign whipping up hysteria about sinister foreign terrorists abroad. The media naturally gave the theme extensive coverage as a central tenet of Trump’s platform. But it also served to divert the easily distracted attention of his followers away from the 2008 crash, its role in their misery, and who might have been responsible.

It brings to mind the words of Winston Churchill: “The multitudes remained plunged in ignorance of the simplest economic facts, and their leaders, seeking their votes, did not dare to undeceive them.”

At the commanding heights of the economy on the other hand, the ideology and the wallets of corporate America (and the professional economists whose chairs they endow) are perfectly aligned against protectionism. That was why we heard their objections during the campaign.

But with regard to tax cut-fueled asset accumulation and anti-regulation dogma, their wallets are perfectly aligned in favor of Trump’s policies, while their traditionally tepid anti-deficit rhetoric masks their true feelings about fiscal irresponsibility – provided that this irresponsibility enriches them personally.

So, was the entire Trump candidacy a clever plan by the upper reaches of American capital to let the good times roll (for them) by concocting a populist vulgarian whose jeremiads against menacing foreign competitors would be a sure way of engaging the xenophobia and gullibility of the Republican base as a deflection from Wall Street’s agenda of asset-stripping, privatization, and pension-grabbing?

Probably not. The process of history, like that of evolutionary biology, is largely a self-organizing and self-reinforcing accretion of otherwise random phenomena along pathways of least resistance, rather than minute planning by a Grand Designer. But it really does not matter: Wall Street’s pragmatic opportunism on seeing the inevitability of a Trump nomination would cause them to act in much the same fashion regardless.

The big banks in effect had a hedged bet during the campaign: Hillary Clinton, a friend of Wall Street, was successfully denounced as such by an opponent who was an even bigger friend of the Street. It was a no-lose proposition.

The only question remaining is this: in the aftermath of a future blowout that could make the 2008 saturnalia look tame, will Trump’s voters correctly identify the source of their economic pain, or will they be effortlessly distracted by some supposedly existential terrorist menace, predatory trading partner, or newly confected domestic Culture Wars bugaboo? Trump’s close adviser, Steven Bannon, a veteran both of Wall Street and the right-wing paranoia factory, will doubtless be hard at work on that one.

Mike Lofgren is a former career congressional staff member who served on the House and Senate budget committees. His latest book is The Deep State: The Fall of the Constitution and the Rise of a Shadow Government.

22 comments for “Wall Street’s Win-Win with Trump

  1. JayHobeSound
    January 13, 2017 at 02:54

    If only that statue were a Brazen Bull for Wall St. con-artists.

  2. J'hon Doe II
    January 11, 2017 at 23:49

    Dictatorship of the proletariat

    Socrates.png Philosophy portal

    In Marxist sociopolitical thought, the dictatorship of the proletariat refers to a state in which the proletariat, or the working class, has control of political power. The term, coined by Joseph Weydemeyer, was adopted by the founders of Marxism, Karl Marx and Friedrich Engels, in the 19th century. In Marxist theory, the dictatorship of the proletariat is the intermediate system between capitalism and communism, when the government is in the process of changing the ownership of the means of production from private to collective ownership.

    Both Marx and Engels argued that the short-lived Paris Commune, which ran the French capital for over two months before being repressed, was an example of the dictatorship of the proletariat.

    According to Marxist theory, the existence of any government implies the dictatorship of one social class over another. The dictatorship of the bourgeoisie is thus used as an antonym of the dictatorship of the proletariat.[4]

    Marxism–Leninism follows the ideas of Marxism and Leninism, seeking to establish a vanguard party, to lead proletarian uprising, assume state power on behalf of the proletariat, and create a single party socialist state. The socialist state, representing a dictatorship of the proletariat is governed through the process of democratic centralism, which Vladimir Lenin described as “diversity in discussion, unity in action.” It remains the official ideology of the ruling parties of China, Cuba, Laos, and Vietnam, and was the official ideology of the Communist Party of the Soviet Union (CPSU) and the other ruling parties making up the Eastern Bloc.

    Libertarian Marxists, especially Luxemburgists, criticize Marxism–Leninism for its differences from Orthodox Marxism, and they oppose the Leninist principle of democratic centralism and the Leninist strategy of vanguardism. They also oppose the use of a one-party state which they view as undemocratic.

    Rosa Luxemburg, a Marxist theorist, emphasized the role of the dictatorship of the proletariat as the rule of the whole class, representing the majority, and not a single party, characterizing the dictatorship of the proletariat as a concept meant to expand democracy rather than reduce it, as opposed to minority rule in the dictatorship of the bourgeoisie, the only other class state power can reside in according to Marxist theory.[5]


  3. J'hon Doe II
    January 11, 2017 at 16:03

    George HW Bush led the despoiling of LaRouche, but he ought not be ignored as a “has been”.

    History adds up and repeats i.e.,
    Land Grab–1848– War on Mexico
    = “Make America Great Again”.

    (easy to forget when complete History isn’t taught and the best education must now be bought $$.)

  4. Anon
    January 10, 2017 at 17:54

    Re: “…the way a pig locks on to a Périgord truffle” LOL!

  5. Brad Owen
    January 10, 2017 at 17:07

    Looking for silver linings, I went to Executive Intelligence Review, recalling something I read there a few years ago. I typed in their search box “Top British Bankers”, and up popped “Top British bankers shift for Glass-Steagall”. Apparently there is a big rift in our covert ruling class residing in City-of-London, (thanks to Cecil Rhodes shenanigans, that will inevitably affect their lieutenants at Wall Street). Some are now very much FOR complete separation between retail banking, with their patient, steward-like, investment in the REAL economy (this means the blue-collar jobs, trades, crafts, training, etc…), and investment banking’s wild buccaneering, casino ways of quick-buck investing to “make a killing”which has negatively infected the retail banking sensibilities. Maybe they really do care about the real, PHYSICAL economy afterall, and Trump is running with THIS crowd…all in their self-interest of long-term survival of their financial system; but hey, if they made a determination that we deplorable “useless eaters” actually are making their bread for them, and buttering it too, this bodes well for another “New Deal” from a group of genuine “aristocrats” (read plutocrats) like we got from FDR (from the Aristocratic Roosevelt Family) 90 years ago. LaRouche, with his “Four Laws” can walk them through the procedure of how to implement policy for long-term survival of civilization to reverse the dark age-like General Breakdown Crisis (worse than a Great Depression) on-going for some time; 1st Law is “re-instate, verbatim, the Glass-Steagall law”.

    • Bernie
      January 10, 2017 at 22:29

      I was with you until you mentioned LaRouche. The man is insane. The LaRouche movement is a violent dangerous cult.

      • Brad Owen
        January 11, 2017 at 05:22

        That’s just the character assassination stuff manufactured by the Establishment; same crap they churn out about Putin. Where do you think China’s Silk Road win-win policies came from?…LaRouche. The man’s been the orchestrator of the New Paradigm emerging from Eurasian (counting Russia) quarters, been reading about it for years on their website. I find it hilarious that a man of such consequence is so overlooked in his own country…typical of the many stupidities we’re guilty of, lately.

  6. rosemerry
    January 10, 2017 at 15:40

    Mike Lofgren has a Chris-Hedgian way of making us gloomy telling us what we really need to know!
    As a person far from the USA, I wish to mention that although the worst aspects of Trumpian policies may have their most serious effect on the US population and environment, the external effects have begun. “an appreciation of the dollar” has been going on for some time already, and it seems to me SO UNFAIR!!! The USA does so much that is harmful and is rewarded (it seems) by the dollar strengthening. I buy items (or donate to websites!) in $US and each time I pay more euros or $A!!!!

  7. Jessica Kespohl
    January 10, 2017 at 15:18

    It’s well overdue that we the people hit the streets, jam congressional phone lines, get the antiwar movement back in action, etc. We must organize and not just comment in cyberspace! 2017 is crucial, we cannot allow this savage plunder to continue, as Obama’s ineptitude showed clearly. Elites are clueless and compassionless!

  8. Bill Bodden
    January 10, 2017 at 13:48

    First, beyond whatever innate skill at making money that they may possess, the typical American corporate executive smells power in the way a pig locks on to a Périgord truffle.

    Anyone not knowing how the system works need only memorize this quote to put them in touch with reality.

  9. Sam F
    January 10, 2017 at 13:31

    Very good work by Mike Lofgren. It seems early to predict another asset-bubble depression despite the Goldman appointees, although tax and regulation cuts creating an “asset and real estate bubble” could do that. Not sure why “appreciation of the dollar” would “cause the trade deficit to rise while depressing domestic manufacturing.”

    But doubtless many Trumpers will defect when the Repubs betray them. They need a true progressive party to defect to, to prevent the oligarchy using their very own Dem party as a backstop to catch them for another betrayal.

    The solution is for a third party to align moderate progressives (national health care, no wars of choice, income security) with parts of the traditional right (fundamentalists, flag-wavers, make America great) leaving out only the extreme right (wars, discrimination, big business imperialism), use individual funding, and rely upon broad platform appeal to marginalize the Dems as the third party.

    • Bart in Virginia
      January 10, 2017 at 17:12

      As the dollar increases in value with respect to other currencies, the cost of our exports becomes more expensive to importing countries. Decreased demand for our tractors and MRI machines results.

      • Sam F
        January 11, 2017 at 05:40

        Yes, thanks, I misread that as depreciation.

    • backwardsevolution
      January 10, 2017 at 21:05

      Sam F – and maybe leaving out the extreme left too. Watched a show a few nights ago where a girl was in incredible debt already, and she was only about 29 years old. Payday loans, student debt, owed family and friends money. Thousands and thousands of dollars. I wasn’t really paying attention until she said that she’d had more trips on her student loans than she’d ever had (Toronto, Caribbean cruise, and I lost track after that because I couldn’t quite believe what I was hearing). A closet full of expensive shoes and clothes that I would dream of having. She never did go to school or get a degree. Many people went to school for a few weeks, dropped out, and then began living on their student loans.

      I remember my parents teaching me about how bad it was to ever declare bankruptcy. It was a real stigma that used to follow you. What has changed that people now feel they can just rack up debt, have a good time, and then get out of paying it back? And actually have people cheering you on, telling you that that’s exactly what should happen.

      With the government backing student loans that the banks make, the banks no longer need to ask any serious questions because they’re no longer on the hook if the loans go bad. Instead of asking serious questions about the type of career they’re planning on pursuing or what type of grades they got in school, they now just say, “You want a loan? Okay, sign here.” Who foots the bill if they drop out or can’t find a job in order to pay the bank back? The taxpayers do. Nothing is free. Someone ends up paying.

      And, of course, just like in nature, when something is free, don’t be surprised when people show up, and they did. With more and more students now partaking in a higher education (because the government backstop made it easy for them), demand increased, but supply didn’t. Consequently, prices increased, which hurt everybody. The government needs to get out of the student loan business. This will allow prices to come back down, and allow the people who are really serious about their education to continue.

      • Sam F
        January 11, 2017 at 05:54

        Perhaps a standard of performance in school would keep out the freeloaders. I used student loans in the 1970s, never dreamed of a default, worked every summer, never had money for the least luxury, and repaid the loan as soon as I could.

        I might suspect the TV show as advertising rare examples of freeloading to reduce public support for a program that is important where properly administered. Their version of “reality” is often fiction serving a political position. But then I don’t watch TV anymore unless trapped at an airport. I don’t know why administrators would permit freeloading by non-students, nor continuation of support of very poorly performing students, beyond one or two bad semesters. So I wonder whether abuse is really widespread. I have seen two possible cases in my life.

        It sounds like those welfare-queen stories that the right loves to circulate. A program can get out of control when administered by those who would open the floodgates, but it can also be audited and bad staff removed. Even indulgent support systems may cost less than prisons for 2 million, but they can really be just as strict as you like or can afford. Just put the uncooperative in ever more tightly monitored tracks where they can rise by cooperation, where anyone would cooperate with training, etc to move back to the higher level of support.

        Cooperation determines level of support. What do you think?

        • backwardsevolution
          January 11, 2017 at 16:46

          Sam F – I have a feeling that the blogs you frequent are quite different than the ones I visit. As with all other important issues, we are not getting the truth, not on Russia, Israel, the CIA, and I would add student debt.

          The T.V. program did not highlight this girl’s vacations in order to make an issue out of them. It was just a quick side comment that she made. It was me who picked up on it because it corroborated many others stories I had read.

          Perhaps it is a form of welfare and, you’re right, better than prison.

      • Brad Owen
        January 11, 2017 at 06:02

        Your scenario shows why education should be public and tax-supported, like it used to be, instead of allowing it to be turned into a loan-sharking racket (thanks to piratical privatizing privateers). Then there would be no piles of money laying around for loaning out by racketeers who are only looking to generate debt to receive payback from the shmucks who took the bate(loans). Then the kids would either have to get spending cash from mom-n-dad, or get a job. The “incompletes” on their report cards would eliminate the non-serious from school, BUT, the kids wouldn’t be in debt, and the loan-sharking racketeers would be starved out of existence, and have to find honest work for a change.

      • jen
        January 12, 2017 at 21:07

        I think this woman you saw on a “show” a few nights ago is the exception. Most young people I know take school very seriously. Yes, there is too much credit card debt but credit card companies push it on them. And their parents need to teach them how to manage their money responsibly. In countries where college is free, they don’t have loafers, they have educated young people.

  10. Joe Tedesky
    January 10, 2017 at 13:11

    If we Americans are to prepare ourselves for more economic doom, then we need to get off of the blaming the Russians mantra, and quit worrying about what some actress has to say about our soon to be inaugurated President, for we must get busy watching these DC/Wall St scoundrels at every turn, who are sure to continue to rob us blind.

    Brandon Smith at Alt-Market.com writes in much the same fashion as Mike Lofgren here.


    I’m actually staying patient, and waiting to see what comes out of a Donald Trump Adminstration. I mean what else is there left to do. The MSM noise is just that noise. If we here in America had anything even close to a responsible and objective media, we would at least stand a chance to deal with our own personal economics in a much better fashion than we have to deal with it now. Instead we are fed suspicious statistical data, like unemployment is under 5%, and with a college educated unemployed youth living in your basement you know that that statistic is bogus.

    The one thing I keep coming back to, is to try and stay out of debt, and don’t put all your eggs in one basket. I will also say this, when the crash does occur my hope is that the stimulus will be given to the populace instead of the crooks on Wall St. who created this mess…but that will never happen, so for now just go watch the NFL playoffs and don’t worry be happy.

  11. Wm. Boyce
    January 10, 2017 at 12:33

    “Translated from the Bloombergese, it suggests the plutocrats are licking their chops in the expectation of a looting spree that will make the plutocracy of Ferdinand and Imelda Marcos look like strict Swiss governmental administration.”

    Precisely. This administration will also make Tammany Hall look ethical and conventional.

    “WASHINGTON — Freed from the constraint of a presidential veto, Republicans are moving rapidly on industry-backed legislation that could paralyze the government’s ability to protect the environment, public health and virtually everything else federal agencies regulate.

    The onslaught began last week with a trio of House bills — two of them approved and sent to the Senate — that would gut the administrative process used for decades to implement the practical details of such landmark laws as the Food and Drug Act, the Clean Air Act and the Fair Labor Standards Act.

    The centerpiece of the Republican action was the REINS Act, which cleared the House on Friday, with an amendment that extended its reach to include all regulations adopted by federal agencies within the past 10 years. Approved on a largely party-line vote, it swiftly drew companion Senate legislation.

    The act would require any rule costing industry more than $100 million — a dollar figure that amounts to any significant regulation — to be submitted to Congress. If either chamber fails to approve the rule within 70 days, the rule would die.

    The rules could affect everything from food labeling and nutrition requirements for restaurants to performance standards for residential wood stoves and energy efficiency standards in grocery store coolers to banking and public health. One major rule adopted after the financial crisis requires banks to hold larger cash reserves. A 2014 rule cleans up tailpipe emissions from cars. A 2009 rule for the first time allowed regulation of tobacco.”

    (San Francisco Chronicle 1-10-17)

    So enjoy the 19th century, it’s going to make a big comeback in the swamp.

    • rosemerry
      January 10, 2017 at 15:33

      Yes, it seemed Trump wanted to go back to the “good ole 1950s” (though at his age, he should remember the fear of nuclear war we all had) but now it seems we will regress further.

    • Bart in Virginia
      January 10, 2017 at 15:54

      Chip and PIN credit card implementation will be deferred again or killed, as it has been said to cost billions.

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