Will He Make Community Banking Great Again?
Donald Trump: Our 45th president.
That headline seemed implausible just two years ago.
But after a seemingly endless campaign of unprecedented vitriol and vulgarity, Trump triumphed, sending shock waves through seasoned and first-time voters, pollsters, members of the media, college campuses, and the world community.
At 2:47 a.m. on Nov. 9, the bombastic billionaire-entrepreneur claimed victory in a raucous hotel ballroom in midtown Manhattan, invoking a tone that was uncharacteristically conciliatory, complimentary and even, some would say, modest.
ABC News called the Trump win “one of the biggest upsets in U.S. history.” U.S. Speaker of the House Paul Ryan called it the “most incredible political feat I have seen in my lifetime.” Others called it “crazy.” “Breathtaking.” “Stunning.”
The job-starved Rust Belt and a quiet crop of rural communities spoke loud and clear in an election that TIME Magazine dubbed “the revenge of the white man.”
U.S. Rep. Scott Perry (R-York), who handily won re-election himself to a district that includes a swath of Dauphin, Cumberland, York and Adams counties, said, “The results prove that the voice of the American electorate is stronger than the prognostication of so-called experts, polls, and political pundits. There was quite a bit of humility inside the Beltway on Wednesday morning.”
As the hours ticked by late into election night, Trump ultimately carried Pennsylvania, capturing 2,890,633 votes (48.84%) while his Democratic opponent Hillary Clinton received 2,817,409 votes (47.60%). It was the first time the Keystone State and its 20 electoral votes had gone “red” since 1988, with the election of President George H.W. Bush.
Now that the confetti has been swept away, will this no-filter businessman make American banking great again? And can his love for America trump the hate?
U.S. Rep. Lou Barletta (R-Hazleton), one of Trump’s earliest and most ardent supporters, and now a member of the President’s inner circle as a transition team member, called Trump’s election “a sign of hope for community bankers.”
“Unlike the Washington bureaucrats and insiders who crafted Dodd-Frank without any real world experiences, Donald Trump is a businessman who has spent his entire life dealing with the financial services industry,” he stated.
Rep. Barletta encapsulated the leaden clouds darkening today’s community banking landscape. “Unelected bureaucrats have increasingly started to lump all financial institutions into the same regulations, not realizing that community institutions have different customers and different goals than credit unions or larger banks. Each serves different sections of the market, and should not be subject to one-size-fits-all regulations.
Separate communities have separate needs, and our laws and regulations should reflect that,” he added.
With the Trump-Pence team pivoting from campaign mode to governing gear, cabinet slots are currently being filled in rapid succession, propelling Rep. Barletta and many of his colleagues to see a myriad of reasons for hope.
Even a shell-shocked Clinton, who was unable to break the highest glass ceiling in America, has called for acceptance, unity and open minds. The former Secretary of State wore purple in her concession speech, a fashion metaphor telegraphing that Red and Blue must unite.
In a divided America, the calls to “Let the healing begin” continue to resonate.
With Trump in the White House and Republicans in control of Congress, the President-elect has said that his first priorities will be health care, immigration and jobs. His stances on many other issues have been scarce on details, making it difficult to read the tea leaves.
The Path to Victory
The Monday morning quarterbacking over what happened on Tuesday, November 8th will no doubt continue for years, but analysts struck a common chord.
David W. Patti, former president of the Pennsylvania Business Council and now Chief Revenue Officer for the Lower Paxton Township-based marketing firm Sacunas, Inc., and a frequent political analyst on PCN, viewed the Trump victory not just as an “OMG” moment, but a “Holy …(string of curse words)” one.
“In hindsight, it was obvious, but everyone else was drinking the Kool-Aid and thinking it can’t happen,” Patti said.
If you look at the context of the Clinton defeat, however, Patti noted, from Occupy Wall Street, the Black Lives Matter movement, and changes in median family income as health care, housing, education and food costs skyrocketed, the rage against the one-percenters was percolating at an often-hidden simmer.
“The sense of alienation and disenfranchisement” was pervasive –a feeling among the working class that “no one listens to them.”
Patti pointed to one of the most popular T-shirts of campaign season that foreshadowed the election night surprise: a graphic with three check-off boxes: Republican, Democrat, or Pissed off. “Pissed off” clearly won the day.
The time-honored stereotypes of Democrats and Republicans were turned on their heads in this election cycle, Patti explained. Democrats no longer seem to be reliably the working class and organized labor, who are interested in social equity and the environment, versus the Republicans, considered to be the party of the upper class and economic opportunity.
That repressed anger bubbled to the surface at the voting booth.
Before power was top-down, but today, the bottom is pushing back up, he said.
In Patti’s assessment, Hillary Clinton successfully grabbed a fraction of Sanders’ voters from the lowest socioeconomic strata, but ignored the middle class, which an unorthodox Trump tapped into on both the left and right.
Trump’s appeal attracted voters who believed, “I can’t get ahead playing by the rules.”
Patti recalled an insightful tweet: “The elites and the media took Donald Trump literally but not seriously. Voters took Donald Trump seriously but not literally.”
The average American knew instinctively that sloganeering like “build the wall” was not literal, but a symbol of taking care of our own first, he said.
Alan Novak, who has been a director, for the past nine years, of a PACB member bank, First Priority Bank, and who served as a former Pennsylvania GOP party chairman and is currently the Principal of Novak Strategic Advisors, said, “This is certainly historic. I have never seen anything like it. Rural and small-town America won.”
Examining vote totals county-by-county across Pennsylvania, Novak pointed out, Clinton came out of southeastern Pennsylvania with a 600,000 vote lead, which was, remarkably, more than Barack Obama had garnered. But the rest of Pennsylvania overcame that difference, putting the state soundly in the Trump column.
“I’ve never seen pluralities like that in counties across Pennsylvania,” citing places with 60 to 80 percent—“not just turnouts, but pluralities,” Novak remarked.
Nick DiFrancesco, President and CEO of PACB, said, “Amazing is the only word to describe the outcome of Tuesday’s election. We hear the word ‘mandate’ used after many elections, but nobody can deny that working class America spoke out strongly in opposition to the manner in which Washington policies have been hurting communities across the country. The new administration has a clear mandate to fix the rabidly partisan environment in our nation’s capital.”
He pointed to Senator Elizabeth Warren (D-Massachusetts) and other advocates who “sit in Washington advocating consumer protection policies like the Dodd-Frank law, but it is the public that has to live with the aftermath, including fewer jobs and reduced opportunity for home ownership. While smart economic policies should be a rallying cry from both political parties, Tuesday’s election gave firm control to leaders who are dedicated to small business job creation.”
The path Trump took was “a businessman’s victory, from the perspective that Donald Trump did not use the traditional political playbook and the political establishment. He understood the environment and charted a new course. He took the path of a businessman,” DiFrancesco added.
“I thought nothing would surprise me, but this did. The blow-out nature of the victory shocked me,” he continued.
“Trump had to be anti-establishment to get where he did,” DiFrancesco said, but he predicts that the candidate’s brash, abrasive style will not endure. “On a practical level, it can’t.”
“Winning is one thing, but success requires the implementation of sound economic policies,” DiFrancesco said. “He must reach across the lines (of division) and build unity.”
Because Trump’s legacy rests not on the election, but in what he accomplishes while in office, DiFrancesco predicted that Trump cannot and will not continue to alienate large segments of the population.
“President Obama’s words of good will resonated loudly, too,” DiFrancesco said. George W. Bush extended enormous courtesy to his White House successor when Obama was newly elected, and Obama has done the same for Trump.
Trump and Congress
Will this one-man show, known for his perfunctory “You’re fired” one-liner from TV’s “Celebrity Apprentice,” be able to bridge the gap with so many, including Congress? Can a man known for wanting to build a wall build bridges?
According to Rep. Perry, “Republicans maintained control of the House and Senate, and will control the White House in January. President-elect Trump has indicated that he’s more than willing to work with the legislative branch in implementing a pro-growth agenda to get our economy moving again.”
Rep. Perry pointed out that Republicans lack a filibuster-proof majority in the Senate, “so someone dedicated to blocking such actions can be successful. Still, we remain hopeful about making progress.”
Rep. Barletta, who co-led the Trump for President effort in Pennsylvania with Rep. Tom Marino, said that the House has repeatedly voted to reign in the Consumer Financial Protection Bureau’s “un-elected bureaucrats.”
“At the very least, they should be accountable to the American taxpayer by submitting a yearly budget request to Congress and make their case for funding,” Barletta said. “Right now, they do not have to do that, nor do they have Congressional oversight. This needs to change.”
According to Novak, “Donald Trump is entrepreneurial. He has a strong personality and is a strong leader, and his entrepreneurial background means he will surround himself with good people. He knows he needs to work together to get things done.”
“He has the chance to get a lot done, with his numbers in the House and Senate,” Novak predicted.
Patti said: “If he lets bygones be bygones with Paul Ryan,” good things can happen. Patti hopes Trump will ask House leaders to show him their plans, and then he could agree to all or parts. “They could get a lot done.”
Patti also noted that Sen. Chuck Schumer (D-NY) is no Harry Reid, and Schumer’s deal-maker approach can pay huge dividends.
Patti thinks bankers should advocate “not more regulation, but more effective regulation.”
U.S. Sen. Pat Toomey, (R-PA) who announced his vote for Trump only in the waning hours of the campaign season, was quoted by Associated Press reporter Marc Levy saying that he will not be a rubber stamp for Trump. Still, he is upbeat and eager to work with the new Administration, while maintaining his independence.
U.S. Rep. Keith Rothfus (R-Sewickley), who also won re-election, said he is a supporter of Trump and is hopeful that Trump will embrace the Better Way platform, which includes health care, tax and regulatory reforms, sponsored by House Republicans.
Rep. Rothfus expects legislative initiatives that have been debated in the House of Representatives for the last four to six years to now be green-lighted. Those sentiments are shared by other experts.
“I expect great things as a result of Tuesday’s election,” DiFrancesco said. “Congressional leaders understand the energy that was unleashed across the country, and they know that their constituents are expecting them to follow through with policies that will spur job creation and economic prosperity. President-elect Trump knows his legacy rests on his ability to enact the economic policies he advocated during the election. The environment is primed for these leaders to successfully meet the expectations of the people. There are no barriers, nor is there room for any excuses.”
The Future of Dodd-Frank
Of course, for community bankers, the future of Dodd-Frank is a marquee issue.
The 850 pages of the Wall Street Reform and Consumer Protection Act, or “Dodd-Frank” in Beltway shorthand, passed in 2010 with the best of intentions to curb the Wall Street abuses that spawned the 2008 recession. It has come under increasing fire over the past six years. The latest proof of the law’s failure lies in the Wells Fargo scandal, where this “big bank” met sales goals by opening more than two million authorized accounts, despite Dodd-Frank’s claim to prevent abuses.
In the wake of Dodd-Frank, instead of hiring lenders, bankers were forced to hire compliance staff. The increased workload meant increased costs, which are difficult for smaller banks to absorb. Many banks got eaten by larger ones.
DiFrancesco said his hope is that the Trump Administration does not lump all banks into one pot, and that he carves out small banks from the behemoths. Like Obamacare, the hope is to repeal and replace.
DiFrancesco said federal regulators should not ultimately hold small community banks accountable because bank customers already do. In their zeal, regulators are running the banks.
Rep. Barletta reports that Trump is marching toward PACB’s objectives. He said the transition team’s first policy action was “To issue a statement calling for the replacement of Dodd-Frank with pro-growth policies. This is welcome news because Dodd-Frank’s regulations are stifling growth. Regulators are trying so hard to protect the American workers from themselves that they are grinding out all risk from the economy. Without risk, there is no reward, and no chance to start a small business and make life better for your family and community.”
He shared his own experience with private sector entrepreneurship and public sector obstacles.
“When I started my line-painting business with my wife, I walked into a bank with a dream and came out with a line of credit that helped me to purchase equipment and get my business off the ground,” Barletta shared. “You can’t do that anymore because of the excessive regulations and red tape coming out of Washington, particularly the Consumer Financial Protection Bureau. These regulations are stifling the entrepreneurial spirit in this country. Some of the proposed regulations would make it more difficult to buy a house, mobile home, and even a car. Dodd-Frank is impacting every facet of our economy by layering on excessive reams of regulatory red tape.”
DiFrancesco agreed. “I expect that many of the regulations promulgated because of Dodd-Frank will be repealed. More importantly, I foresee leaders in Congress reclaiming their oversight of the regulatory realm. For too long, the regulatory agencies have wielded the equivalent of unrestrained legislative powers, enacting sweeping policies that have hurt our national economy. This practice should not continue, and I believe the leaders who were elected on November 8th understand their mandate to change this practice.”
“This election restored my hope in the American people,” DiFrancesco went on to say. “We can debate the issues that caused the revolt, but no one can deny the revolt took place. For too long the dysfunctional partisanship in Washington has been failing the American people. With the House, Senate and White House in control of the same political party, there is no excuse for gridlock. Voters across this country spoke loudly, and they expect a Trump Administration to restore our national economy.”
Rep. Perry cataloged the unintended consequences of Congress’s well-intended solution. “Since the passage of Dodd-Frank, the big banks are bigger and the small banks are fewer. Today there are fewer community banks serving the needs of small businesses and families due to Dodd-Frank. Dodd-Frank must be repealed and replaced with policies that restore market discipline, end taxpayer bailouts and protect consumers with innovative, competitive markets policed for fraud and deception.”
“Pro-growth economic policies, not a redistribution of wealth,” will benefit community banks more than anybody, said Novak.
He admitted that, “While Dodd-Frank was a solution to the problems of large banks, the federal government over-reached and over-applied, and it affected community banks, who were never the problem,” Novak said.
That elitism and over-reach is driving much of this anti-establishment wave, analysts and elected leaders said.
Rep. Perry noted, “The American people said loudly and clearly that they’re fed up with the status quo in Washington. Since my first election to Congress, I’ve fought against the ‘Washington knows best’ mentality that’s so pervasive in the political class.” He pledged to work with the Trump Administration to modify that mindset.
DiFrancesco sees not just Trump, but Toomey, Barletta, Perry, Rep. Charlie Dent, and other local leaders assuming an outsized role in shaping the future of banking. He noted that Sen. Toomey co-founded Bethlehem Township-based Team Capital Bank, which was acquired by Provident Financial Services in 2014. Toomey is a PACB supporter who has had a front-row seat to the challenges facing community bankers.
Patti thinks that Trump may tell community bankers that, yes, indeed, overregulation is bad, then encourage them to write their own rules, and live by them.
Clearly, the regulatory pendulum is swinging back toward a pro-community-bank position.
Many bankers wish that, at the very least, the pendulum would stop swinging at all.
The Election’s Message for Community Bankers
Trump’s ascension to the White House showed that the working class he courted is not forgotten.
Rep. Perry said, “I see immense hope for community bankers. I’ve been told time and time again that instead of ending ‘too big to fail,’ Dodd-Frank created ‘too small to succeed.’ It gives big banks an advantage over small ones that can’t keep up with the size, cost and complexity of regulations. I look forward to working with my colleagues and the Trump Administration to get government out of the bailout business and level the playing field so small banks have a better chance to compete and help our economy grow stronger.”
“I see great opportunities for community banks in 2017 and beyond, thanks to the results of this election. I’ve been hearing their frustrations about the perils of Dodd-Frank since I came to Congress. I want to help ease those frustrations by helping community banks worry less about excessive regulatory burdens and get back in the business of serving local communities and growing our economy,” Perry said.
Novak predicts an end to “smothering, over-reaching regulations,” and maintains an optimism that “sensible regulations” will replace them.
“With a change in the direction of the country and the reining in of over-regulation that the federal government has been issuing for the last ten years at least, there is a real opportunity for growth again, and for revival,” Novak predicted. “Community banks are best situated for success as the economy comes back in our communities.”
He thinks a revival of economies in both Pennsylvania and throughout the U.S. will happen, and it should happen in every community, not just Wall Street, or only on the East and West Coasts.
“It’s a good time for community banks,” Novak said.
Patti agreed. “Community bankers have a great story to tell compared to the Wells Fargos” of the world. He encouraged community bankers to tell their story early and often.
He noted all is not sunshine and sugar though.
“There is distrust and disenfranchisement and alienation. If you want a good brand image under this context, be transparent. Be trustworthy.” He urged banks to study the pages of the Trump playbook.
Trump’s message to community bankers is to make customers feel like they are winning.
“Community bankers must understand what is appealing about Donald Trump,” Patti said. Trump has demonstrated such lessons as “Say what you mean.” “Be transparent.” “Don’t play with fees.” “Don’t bait and switch.”
People want their community banks, like their president, to “Help me live the American dream. Don’t just give me a loan then forget about me.”
DiFrancesco interprets the election as a clarion call for political involvement. “As an industry, now is the time to get active. We need community bankers across the country to join with the ICBA and their state association to add their voice to the message that a strong community banking industry is a critical component of a strong national economy. My hope is that PACB will set a record for Pennsylvania attendance at this spring’s ICBA Washington Policy Summit.
“Now is the time for action. Now is the time to ensure that our collective voices are heard.”
Rep. Barletta, in his starring role in this brand-new Administration, said: “My message for community bankers is that we all should be excited for the Trump administration. I have seen ‘Board Room Donald Trump’ many times when I have been in meetings with him. He has always sought the input of those around him, and he has listened to their opinions and ideas. That is a welcomed change from the last eight years. I will continue to make sure that the needs of our community financial institutions are heard, because they succeed when businesses are growing and paying better wages to their employees.”
Only time will tell if Trump can tower above this nation’s divisions and apply his know-how in the “art of the deal” to fixing what is broken.
But the first signs are positive. Together, community bankers, Congress, and the commander-in-chief can make American banking –and the American economy– great again.