Update 826 — First of Trump’s Econ. Policy Noms;
End of Basel III/Endgame?; Other Developments
President-elect Trump continued announcing Cabinet nominees this week as his administration begins to take shape. The early appointments signal the incoming Trump administration’s intention to elevate the priorities of wealthy interests who appear loyal to Trump and willing to undermine institutional norms to further his agenda. The nation dodged a bullet when Matt Gaetz, Trump’s pick for Attorney General, withdrew his nomination. The Mar-a-Lago palace intrigue around his nominee for Treasury Secretary continues.
This week, federal banking regulators appeared before Congress for their semi-annual oversight hearing in which they told lawmakers that the contentious Basel III Endgame proposal would not move forward in the near future. Also this week, several Congressional committees discussed the record of the Tax Cuts and Jobs Act (TCJA) ahead of next year’s tax debate and the Senate Judiciary Committee focused on the Durbin-Marshall effort to rein in the Visa-Mastercard duopoly. We cover these along with initial notes on Trump’s Cabinet nominees below.
Good weekends all…
Best,
Dana
Headline
Trump Continues with Cabinet Nominations
This week, President-elect Trump nominated a slew of loyalists to his Cabinet and senior White House positions, several of whom will have major influence over economic policy during the next administration. These include:
Office of Management and Budget Director – Russell Vought
Trump is reportedly expected to name Russell Vought to lead the Office of Management and Budget (OMB). During Trump’s first term, Vought served as deputy OMB director, acting OMB director, and OMB director. The OMB helps craft the President’s budget proposals to Congress and is involved in approving federal spending decisions.
Vought authored a portion of the Heritage Foundation’s Project 2025 focused on the “Executive Office of the President of the United States” and has been a proponent of reclassifying thousands of federal employees as political appointees which could allow mass dismissals.
Secretary of Commerce – Howard Lutnick
On Tuesday, President-elect Trump announced his pick of Howard Lutnick for Secretary of Commerce. Lutnick serves as CEO of investment firm Cantor Fitzgerald where he has served in leadership since 1991 and played a key role in Trump’s campaign, serving as co-chair of his transition team.
In this role, Lutnick would lead the President’s economic and trade agenda, a pillar of his 2024 campaign. It is expected that he will continue to maintain the trajectory towards protectionism of the last 8 years but further escalate tariff rates under the direction of Trump’s promises of 10-20 percent blanket tariffs and 60 percent tariffs on imports from China. Lutnick has suggested an emphasis on using the threats of tariffs to get trade partners to the negotiating table.
Economists warn of the repercussions of such sweeping tariff policies – which will largely be enforced by the Department of Commerce – such as higher prices for consumers and retaliatory tariffs which could spark various trade wars with adversaries and allies alike.
Secretary of Education – Linda McMahon
On Tuesday, President-elect Trump announced his nomination of Linda McMahon for the position of Secretary of Education. McMahon has served as the CEO of World Wrestling Entertainment (WWE) since the 1980s, running the organization alongside her husband Vince McMahon. McMahon previously served as the administrator of the Small Business Administration. McMahon and her husband are major Trump donors, and McMahon serves as the board chair of the right-wing, pro-Trump America First Policy Institute.
McMahon has very little experience in education. She briefly served on the Connecticut State Board of Education in 2009 before resigning to run for Senate and has served as a member of the board of trustees for Sacred Heart University in Connecticut since 2004. More worryingly, she was named as a defendant in a case involving the sexual abuse of children by WWE ringside announcer Melvin Phillips Jr. Not surprisingly, she supports right-wing policy objectives in education, such as implementing school voucher programs and eliminating diversity, equity, and inclusion programs (DEI) from college campuses. Whether any of this will matter is an open question, as Trump has repeatedly promised to dissolve the Department of Education entirely.
Still to Come
Trump has yet to appoint a Secretary of the Treasury — foremost among nominations for many other critical economic policy posts — and is reportedly considering several contenders including Scott Bessent, founder of the investment firm Key Square Group; former Federal Reserve Governor Kevin Warsh; and Apollo Global Management CEO Marc Rowan. The public jockeying among the contenders reflects in part the tension between Trump’s campaign promises to ratchet tariffs rates up substantially and the Treasury Secretary’s traditional role of providing comfort to the U.S. Treasury markets.
In May 2026, Trump will have the opportunity to appoint a Federal Reserve Chair as current Fed Chair Jerome Powell’s term expires. Trump is considering the expected vacancy as he plans appointments to top economic positions in his administration.
Trump is on track to name all of his intended Cabinet appointments before Thanksgiving.
Hearings
Prudential Regulators Testify Before HFSC
On Wednesday, the House Financial Services Committee convened for its semi-annual hearing focused on oversight of federal prudential regulators. Federal Reserve Vice Chairman for Supervision Michael Barr, Federal Deposit Insurance Corporation (FDIC) Chair Martin J. Gruenberg, Office of the Comptroller of the Currency (OCC) Acting Comptroller Michael Hsu, and National Credit Union Administration (NCUA) Chair Todd Harper appeared before the committee in one of its final hearings before the conclusion of the 118th Congress.
Basel III Endgame Proposal
Committee members also discussed the Basel III Endgame proposal jointly put forward by the Fed, FDIC, and OCC last summer. The proposal would require stricter capital requirements on banking firms with $100 billion or more in total assets and firms that engage in significant trading activities to bolster the resilience of banks and the broader financial system. The banking industry and Committee Republicans have strongly pushed back on the proposal since its introduction and this week, regulators confirmed that the proposed rule will not be completed in the coming months and is unlikely to be completed in the near future. Gruenberg noted that he doubted that any of the FDIC’s pending rulemakings would be finalized before the next presidential administration.
Members Highlight Danger of Trump Administration
Ranking Member Maxine Waters (D-CA) used the opportunity to highlight that the incoming Trump administration will likely seek to gut guardrails that keep the financial industry in check, rubber stamp bank mergers, and give banks a free pass to charge new junk fees. Waters also praised regulators for their strong work to bolster economic resilience, while Chair Patrick McHenry (R-NC) attempted to distort regulators’ strong record and make the case for the agencies’ independence and authority to be reduced by Congress, the President, or the courts.
Gruenberg Leadership of FDIC
Republicans continued to call on FDIC Chair Gruenberg to immediately resign following revelations of a workplace culture that included sexual harassment, racial discrimination, and other workplace misconduct that had persisted within the agency for decades. In May, Gruenberg said that he would step down once his successor is confirmed by the Senate. Ahead of the hearing, Gruenberg said that he would retire from the FDIC effective January 19, the day before Trump’s inauguration.
Despite this, Chair McHenry said, “Resigning in January is too little, too late.” Last Friday, Representative Bill Huizenga (R-MI) and Committee Republicans introduced H.Res.1574, calling for Gruenberg to be immediately terminated. Ranking Member Waters called out Committee Republicans’ hypocrisy given that none of them have publicly stated that it would be inappropriate for Matt Gaetz to similarly lead a federal agency given that he is accused of sexual misconduct and illicit drug use.
Fed Vice Chair for Supervision Barr also made clear in the hearing that he intends to serve in the position until the end of his fixed term in July 2026. His comments came after reports last month suggested that lobbyists for large banks discussed a potential strategy in which Trump would demote Barr with Trump advisers.
Financial Stability Risk as Regulatory Landscape Shifts
As the federal banking regulatory landscape of the coming years continues to take shape, regulators will continue to monitor concerns highlighted by officials in this week’s hearing. These include the rise in delinquency rates among certain commercial real estate loans — such as those backed by offices, particularly in major cities – and elevated delinquency rates for certain consumer loans.
Economic Policy Subcommittee, JEC Discuss Tax Reform
This week, the Joint Economic Committee (JEC) and Senate Banking Subcommittee on Economic Policy met for tax-policy-focused hearings discussing the track record of the Tax Cuts and Jobs Act (TCJA) and possible paths forward for next year’s tax reform debate. These discussions occurred just weeks after Republicans secured a trifecta in the 2024 elections, allowing them to address provisions of the TCJA that expire at the end of 2025 through the reconciliation process (circumventing the 60-vote threshold to break a filibuster in the Senate).
JEC Republicans, joined by former CBO director Douglas Holtz-Eakin and former Ways and Means Chairman Kevin Brady, focused on the growth potential of tax cuts and largely hailed the TCJA as a success. Specifically, they argued that the TCJA spurred business investment, drove wage growth, and improved our economic competitiveness. However, some Republicans like House Budget Chairman Jodey Arrington (R-TX), Representative Lloyd Smucker (R-PA), and Douglas Holtz-Eakin acknowledged the importance of fiscal responsibility given the almost $5 trillion cost of just extending expiring provisions of the TCJA. This could signal that at least some Republicans are willing to temper Trump’s full tax proposal, which could cost upwards of $10 trillion over 10 years including extensions and campaign proposals, but is much more likely a call to significantly cut spending to fund tax cuts for corporations and the ultra-wealthy.
JEC Democrats took a hardline stance against the Republican argument outlined above. They were joined by witness Samantha Jacoby (CBPP) in citing the skew of the TCJA to the ultra-wealthy and corporations and the failure of Trump and Bush tax cuts to trickle down to workers and families in the years since passage. Representative Gwen Moore (D-WI) highlighted this point, agreeing with Republicans that growth is important, but noting that growth only for the sake of growth is not beneficial for the American people – it has to trickle down to the bulk of individuals instead of sitting in the pockets of corporations and wealthy individuals who are accumulating and hoarding wealth like never before.
These sentiments were largely echoed in the SBC Subcommittee on Economic Policy’s hearing, notably without opposition as Republicans did not attend or call witnesses for the second hearing in a row on this topic. Subcommittee Chairwoman Elizabeth Warren (D-MA) was joined by Senators Van Hollen (D-MD), Smith (D-MN), and Helmy (D-NJ) in questioning the track record of the TCJA and strongly opposing new tax cuts for the wealthy and corporations paid for by working Americans. They, and the witnesses, highlighted trade-offs largely consisting of investments in the American people like an expanded Child Tax Credit, affordable housing, child care, and paid family and medical leave.
Tax policy will surely continue to be a topic of great import over the next few weeks and months. Republicans, even with a trifecta, will have to manage narrow margins and questions/concerns from deficit hawks on their side of the aisle, especially given legitimate evidence that the TCJA did not even come close to paying for itself through economic growth.
Senate Judiciary on the Visa-Mastercard Duopoly
On Tuesday, the Senate Judiciary Committee convened for a hearing titled “Breaking the Visa-Mastercard Duopoly.”
Chair Dick Durbin (D-IL) noted that each time an American consumer makes a purchase using their credit card, a “swipe fee” paid by the merchant is taken out of the transaction amount and divided between the credit card network and the bank that issued the card. Durbin focused specifically on the interchange fee, the largest part of the credit card swipe fee, which is set by the credit card network and paid to the issuing bank.
Interchange fees can range from one to three percent of a total transaction and merchants generally pass this cost on to consumers. University of Notre Dame Law Professor Roger Alford noted that last year, the average American spent $1,100 on credit card swipe fees.
Visa and Mastercard control 83 percent of the credit card network market in the United States. Committee members on both sides of the aisle agreed that the issue should be addressed. Chair Durbin highlighted S.1838, the Credit Card Competition Act of 2023, the bipartisan legislation he introduced last year with Senator Roger Marshall (R-KS). An identical companion bill, H.R.3881, has been introduced in the House by Representative Lance Gooden (R-TX). The legislation would direct the Federal Reserve to ensure that large card-issuing banks offer a choice of at least two networks over which an electronic credit transaction may be processed, increasing competition in the extremely consolidated credit card processor network market.
Look Ahead
Wednesday, November 27
- GDP Q3 second estimate
- October PCE report