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Your guide to what the 2024 US election means for Washington and the world
The key nominations to Donald Trump’s top team are in some ways like those of many presidents before him — overwhelmingly male, overwhelmingly rich and significantly drawn from the financial services industry.
And yet Trump’s nominees differ in one important respect. They are not mainstream. In particular the list contains no prominent bankers, breaking the tradition (even upheld by Trump Mk I) that financier appointments would normally be drawn from the likes of Goldman Sachs.
This is true across the board — from vice-president-elect JD Vance, a venture capitalist, and Treasury secretary nominee Scott Bessent, a hedge fund manager, to incoming UK ambassador Warren Stephens, a self-made investment banker, and new Turkish ambassador Tom Barrack, a private equity and property investor.
Most of Trump’s financier appointees have been significant donors to his campaign and/or business partners during his career as a property mogul.
The “spoils system” of patronage in US politics — an 18th-century tradition that allowed presidents to bolster loyalty by appointing friends and family to government roles — was supposed to have been done away with by a succession of legislative reforms begun in the late 19th century. The incoming president has not only embraced the system made famous by Andrew Jackson, the seventh US president, but has done so in a way that will create huge financial as well as political conflicts of interest. How effective legal restrictions will be in checking these conflicts is unclear.
The upbeat reading of Trump’s appointments to date are that these are no-nonsense people who will cut through bureaucracy and bring energy to a growth-focused reform agenda. Elon Musk, the joint head of the so-called Department of Government Efficiency, is its incarnation-in-chief.
The breadth of Musk’s own business interests makes it hard to pin down all the conflicts as they relate to Tesla, SpaceX or X. Another area to watch stems from Musk’s close affinity with finance — he started out as a co-founder of PayPal. X Payments, his nascent payments platform, has ambitions to become the WeChat of the west and ape the huge success of the Chinese “everything app”. Strong government and regulatory support could give the platform a big boost.
More profound still would be how US official attitudes to crypto finance (another of Musk’s pet topics) seem set to invert. Under the leadership of Gary Gensler, the Securities and Exchange Commission has taken an openly hostile stance: multiple cases have been brought against crypto companies for fraud, so-called “wash trading” that inflates transaction volumes, registration violations, and other misconduct.
Yet Gensler is set to be replaced by Paul Atkins, a keen deregulator, who co-chairs the Token Alliance, a crypto lobbying group. Atkins will be buttressed by a number of other senior nominees to the Trump administration: most prominently Howard Lutnick, who is a vocal crypto advocate, with strong links to Tether as commerce secretary; and David Sacks, who is a close Musk ally and fellow Paypal alumnus, as the so-called White House AI and crypto czar.
In the investment arena, Trump has picked Stephen Feinberg, co-founder and co-chief executive of Cerberus Capital Management, as his deputy secretary of defence — opening up another potential conflict, given Cerberus’s history of investing in defence businesses. Similarly in social security administration, picking Frank Bisignano, a payments technology boss, to be in charge presents both a source of reform and a conflict to manage.
However positively you view the potential rewards of disruption, the risk of putting vested interests in charge of such areas is significant.
One twist is that despite the absence of big bankers among Trump’s nominees, big banks could be notable winners. Watering down the so-called Basel III banking regulations could save them billions of dollars in capital charges. Overhauling the system of federal deposit insurance would be likely to benefit them, to the detriment of smaller institutions, as savers move their money to bigger, safer banks. And any move to end state support for mortgages, by fully privatising Fannie Mae and Freddie Mac, could also be a relative win for bigger banks.
Along the way, such revolutionary changes could feasibly trigger turmoil or a crisis. That may be the moment Trump feels the need for some more mainstream Wall Street advice.
