Jamie Dimon, Brian Moynihan, Jane Fraser and other heads of major banks have something to fear from Donald Trump sooner than his tariff war.
Sources close to the Trump administration say Donald and his economic team are planning to promote commercial banks by requiring locations like CEOs and, more importantly, JP Morgan, the US Bank and Citigroup to lend to small businesses as a way to shake up economic growth.
“Trump wants these bankers to return to running banks rather than hedge funds, which means lending to small businesses,” one Trump insider said of the money. “If they want to become a hedge fund, they should sell the commercial bank and become Goldman Sachs.”
Generally, small and medium-sized businesses are defined as having fewer than 500 employees. According to the US Small Business Administration, this is considered a lynching pinch in the US economy, and is responsible for almost half of all economic activity.
It was also the backbone of traditional banking, but the fact that it is no longer the case is something the White House wants to change.
As my Trump source pointed out, “When did you hear Dimon talk about real banks that lend to small businesses on Main Street, in contrast to his business all over the world?”
Representatives for Dimon, Moynihan and Fraser did not have any comments. A White House spokesman did not have any comments.
It sounds good to think that lending to these companies is a $1.7 trillion industry, and is being warped in other areas of the bank.
From the late 1990s, when a wave of deregulation allowed financial institutions to house securities operations and commercial banks under one roof, transactions, securitization, M&A, and global lending were more advantageous than lending restaurants and small factories.
In recent years, non-bank lenders have stepped in and tried to fill the gap, but there are no loan sheets for lending to small businesses such as JP Morgan, Bank of America, and Citigroup.
Of course, banks will tell you that it's not their fault that small business lending is significantly reduced to them. Demand for these loans has been lower since Covid, which closed operations for Mama and Pop, which were not reopened. Inflation during the Biden era did not help the problem. After the end of the Silicon Valley Bank and other community lenders, regulations were particularly at risk.
Trump says that Biden is gone. It is set to remind you. As the regulatory environment is shifting to abolish regulations, spigots need to be opened to small businesses. And they are obliged to do so: all big banks are too big to fail institutions. So if they ruined it badly enough, the federal government would bail them out
Questions like this would be ignored in the past given the DC-based regulators and the chiefs of the cozy banks maintained by past administrations. But as I have pointed out in the past, the bank's CEOs are fatally afraid of the orange man in the White House.
And for the next three or more years, Trump is their regulator, so they probably tend to play well with him no matter how much it costs.
