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January 19, 2017 | Bankers Excited: Trump to Make Wall Street Great Again

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

As attendees at the economic forum in Davos this week wax curious about the “populism” and “inequality” undermining world order today, irony and hypocrisy are thick and cognitive dissonance plentiful.

What has been great for grotesquely enriching Davos-ites and the .1%–finanicalization, globalization, debt securitization, asset bubbles, government bailouts, central bank largess, corporate welfare and environmental abuse–have been extracted directly at the expense of the masses and world stability everywhere. The resulting extreme wealth for some has begat extreme fragility for many, and yet few of the ‘elites’ acknowledge the connection.

None of this seems likely to change soon, as bankers and the corporate class are quietly expressing renewed excitement that the incoming Trump administration is set to make conditions even more favorable for them. To wit: Bankers in Davos see Trump’s Team making Wall Street great again.

Bank executives, speaking on condition of anonymity at events around the Swiss ski resort, said they’re not counting on Trump to overturn Dodd-Frank. Instead, they expect the federal agencies that enforce the rules to ease up on them and support bankers’ efforts to limit how much capital and liquidity their companies need to pay bills or absorb losses in a crisis…

Several bankers in Davos said they’re optimistic that regulators under Trump could do away with the gold-plating by the U.S. of the latest Basel benchmarks and ease the process by which banks are stress-tested annually to ensure they have adequate capital to absorb losses in a hypothetical crisis.

Corporate mergers, amalgamations, deregulation and increasing political purchase since the 1980’s, led to an explosion in the size, influence and leverage of global investment banking, financial engineering, non-GAAP corporate earnings and the executive pay linked to them.  This chart of CEO pay relative to the average worker since 1965 tells the tale.

CEO pay to worker

Lest there be any doubt, this chart of the mirror rise in the US stock market capitalization (S&P 500) and CEO pay, shows the direct impact of ‘financialization’ on c-suite compensation.
CEO comp and S&P

Want to truly understand the cause of extreme wealth imbalance and today’s increasing global angst? Start here.  But realize that historically those who have benefited from undue privilege, have never relented anything until forced to by insurrection or financial collapse.  We wonder which one of these will prove the mean reversion catalyst this time.

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January 19th, 2017

Posted In: Juggling Dynamite

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