(Bloomberg Markets) - You wouldn’t have known JPMorgan Chase & Co. (JPM) had just reported its best quarter by the way Jamie Dimon talked about his competition in July 2023. “They’re dancing in the streets,” the chief executive officer said, referring to hedge funds and private equity firms that were piling into the lending business as banks like his faced higher capital requirements.
When Donald Trump won a return to the White House, it was the financiers’ turn to boogie. “A lot of bankers, they’re, like, dancing in the street,” Dimon told CEOs at a global summit on Nov. 14. "They've had successive years and years of regulations, a lot of which stymied credit."
Wall Street was pulling a long face before the election. Executives tended to lament the rules of the road—annoyance at old regulations, frustration about the prospect of fresh ones and uncertainty over how they’d finally shape up. “Whenever we turn around, there’s a new capital requirement, or a new regulation, or a new something that just makes it harder—and after a while it gets to you,” says Sandy Warner, who ran JPMorgan decades ago. “The gratuitous piling on will stop. One of Trump’s platforms was reduced regulation, after all.”
But the era that’s made bankers defensive has also, according to their own earnings numbers, brought them more money than ever. In 2007, when George W. Bush was president and the global economy was zooming toward the financial crisis, JPMorgan pulled in record profit. It went on to set fresh records again and again—six times during the years Barack Obama was in the White House, then twice during Trump’s first term. The bank did even better when Joe Biden was president, outdoing itself in 2021 and again in 2023. If all goes as expected, 2024 will be its best year yet.
Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) set profit records of their own during the Biden years. And shares of all three banks hit their highest price ever in the weeks before this November’s election. Altogether, the six biggest U.S. banks—a group that also includes Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC)—have made more than $1 trillion over the past 10 years.
Through it all, some executives positioned themselves as underdogs up against government bureaucrats who didn’t understand or appreciate their work. Dimon’s comment last year about rivals was triggered by a trio of regulators proposing to increase the capital buffers banks must maintain to avoid meltdowns like the ones in the 2007-08 crisis.
The idea was part of a much-delayed finalization of global banking rules known as Basel III Endgame. After Trump won his return to Washington, Citigroup Inc. CEO Jane Fraser said she anticipates that those tighter capital regulations will be significantly eased, if they’re enacted at all.
“I would expect a lighter version of the proposal,” Fraser told CNBC the week the election was called.And it’s game on for mergers and acquisitions.
The Biden administration’s scrutiny of mergers kept a lot of companies on the sidelines, depriving banks of lucrative fees for corporate matchmaking. A more favorable government approach to tie-ups combined with easing interest rates has bankers girding for a pickup in their investment-banking businesses.
Even so, Trump will face tension between satisfying his billionaire backers and delivering for the working-class cohort that sent him back to the White House. And his promises on the campaign trail to wield jumbo-size tariffs, deport millions of undocumented immigrants and extend his last round of tax cuts could put pressure on prices and the federal deficit, some economists warn. Inflation fears could eventually spur higher interest rates.
But even as Trump considers unorthodox appointments, threatens to undermine the Federal Reserve’s independence and embraces a crypto industry that parts of Wall Street despise, bankers are optimistic that he’ll deliver on his biggest corporate promises.
“I’m not a dancing-in-the-streets guy. I keep my hands in my pockets,” Warner, the former JPMorgan executive, says. “I’m certainly smiling.”
By Max Abelson and Hannah Levitt
