Last week, a Semafor article argued that bank lobbying has lost its punch. Maybe, but before one reaches that conclusion, it’s important also to recognize that banking as an industry has also lost some of its punch while virtually every traditional business sector is bewildered day after day by the manner in which this Administration steps into markets to anoint winners and losers. Mr. Trump doesn’t much like banks, especially big ones, and this is not a problem a new PAC can solve.
Until recently, banks big and small had secure market niches and largely lobbied against each other because no one else meaningfully competed against banks. Bankers were big men (yes, they mostly were men) in each city and town and thus among each Member of Congress’ most important constituents. Due to this, smaller banks almost always beat big banks because what were then tens of thousands of small bankers were a critical presence in almost every district even though the Senate often took big banks’ side because the biggest cities had the biggest banks with the deepest pockets.
Very little lobbying was partisan because most of it was hometown-dependent, not ideological. This approach to advocacy was relatively inexpensive because banks generally relied on themselves and their trade associations, not contributions, in-house lobbyists, hired guns, PR campaigns, extensive analytics, and all the costly appurtenances of modern advocacy.
The power of incumbency once was manifest, but it has dramatically ebbed in the face of new competitors willing to spend as much as it takes in Washington to establish a firm financial-market foothold. Once these competitors were MMFs – the first to crash into banks – along with retailers, investment banks, private-equity firms, broker/dealers, finance companies, and nonbank mortgage companies. Due in part to victories at the expense of banks, many of these competitors remain, but added to them now of course are tech-platform companies and super-scrappy digital-asset firms. Thus, whenever federal policy turns to the relative balance between incumbent banks and new entrants, banks may well take a beating because their advocacy model is only just now catching up to modern competitors and the manner in which they expensively and effectively conduct business in the nation’s capital.
Still, it’s not all bad news for bankers. The Administration’s inclinations are strongly for light-touch regulation, and this will correct badly-designed Biden proposals. But it won’t end regulatory asymmetry. Indeed, as we have noted, tech-based competitors are crowding banks out of fast-growing markets thanks to embedded advantages and hyper-active advocacy. Mr. Trump’s personal investments in crypto also don’t hurt.
Other, older nonbank competitors cherry-picked the bank business model. Tech-based competitors are going for the jugular. While crypto use cases sometimes remain to be proven, there is no doubt that technology is redefining banking and that giant tech-platform companies lie in wait.
And then there’s the White House. What could happen if, for example, the President decides he wants a piece of a bank? Or a bank makes a loan to someone he doesn’t like? Or …?
Washington politics now knows neither quarter nor mercy. As a result, the old, genteel, and remarkably-effective bank-advocacy model is anachronistic. I don’t know many who like it this way, but that’s the way it is.