Back in November, after Donald Trump was elected President, the market surged. Bloomberg’s Joe Weisenthal used a very apt analogy to explain the upswing in optimism:
Across a range of industries right now, it feels like investors are betting on Rumspringa, the rite of passage for Amish youth where the rules go away for awhile. Crypto rules, M&A rules, carbon emissions rules… For all of them, people seem to be betting that regulation will just go away, served up with lower taxes and maybe more stimulus. From the perspective of the financial asset holder, what’s not to love? At least for right now?
This is what investors and business leaders, including bank and fintech executives, thought they were getting from the second Trump Administration — a deregulatory bonanza.
And I don’t think this expectation was unreasonable. President Trump talked about deregulation a lot on the campaign trail:
On Day One, I will sign an executive order directing every federal agency to immediately remove every single burdensome regulation driving up the cost of goods.
However, the hard lesson of the first four months of this administration is that the “how” matters just as much as the “what” when it comes to turning campaign promises into government policy.
Tariffs and the Cost of Uncertainty
Another promise that President Trump made on the campaign trail was that, if he won, the United States would embrace tariffs as a major economic tool:
“Look, the most beautiful word in the dictionary to me is tariff. I think it’s the most beautiful word. It’s going to make our country rich.”
“We’re going to have 10 to 20% tariffs on foreign countries that have been ripping us off for years.”
Almost every economist alive today disagrees with the President on the merits of tariffs, particularly when they are applied broadly and indiscriminately.
However, the real damage to the economy hasn’t been caused by tariffs. It’s been caused by the uncertainty with which they have been implemented.
Allow me to quote extensively from a recent article from the Tax Policy Center, because I think it articulates this point very clearly:
Since taking office, President Donald Trump has announced numerous plans for changing tariffs, with the latest being a temporary exemption on certain electronics. Even before April, the Trump Administration has often left the rate of tariffs, their duration, the goods subject to them, and the businesses exempt from them open to change. The recent announcement and modification of wide-reaching tariffs within a few days has only increased uncertainty. Beyond the level of the tariffs themselves, this uncertainty imposes economic costs for consumers, businesses, and trade.
Predictability, even when policies impose costs on businesses, allows businesses to plan and structure their operations for their best performance, given their current policy environment.
The most recently available value of the trade components of the Economic Policy Uncertainty Index—one of the most-used measures of uncertainty for economists—is more than 125 times higher in March 2025 than it was in January 2024, more than half of that increase in the last month alone.
Much of this reflects a plain reality: Uncertainty is expensive. Businesses may not know whether they will face lower tariffs by moving manufacturing from China to Mexico or whether they should import more now before a future tariff takes effect. They don’t have the information necessary to determine whether to lock in current contracts. The automotive industry, for example, requires confidence that tariffs on imported autos will exist for years before making long-term, expensive investments in domestic manufacturing or changes to supply chains, including importing from countries with lower tariffs.
And the impact of this uncertainty is already showing up, quite plainly, in the data.
Here’s the latest from the Federal Reserve Bank of Philadelphia’s April manufacturing business outlook survey:
Manufacturing activity in the region declined this month, according to the firms responding to the April Manufacturing Business Outlook Survey. The survey’s indicators for general activity, new orders, and shipments all fell and turned negative. The employment index registered a near-zero reading, suggesting steady employment conditions. Both price indexes continue to suggest overall price increases. The future activity indicators continue to suggest subdued expectations for growth over the next six months.
And here’s the latest from the New York Fed’s survey:
Firms expect conditions to worsen in the months ahead, a level of pessimism that has only occurred a handful of times in the history of the survey. The index for future general business conditions fell twenty points to -7.4; the index has fallen a cumulative forty-four points over the past three months. New orders and shipments are expected to fall slightly in the months ahead. Capital spending plans were flat. Input and selling price increases are expected to pick up, and supply availability is expected to worsen over the next six months.
The irony is that these outcomes are exactly the opposite of President Trump’s stated goal of reviving American manufacturing, as Derek Thompson points out:
This is relevant to banks and fintech companies because the same lack of precision, clear communication, and administrative diligence that created so much uncertainty around tariffs is also manifesting quite a bit of uncertainty regarding the deregulation of financial services.
Deregulatory Uncertainty
Allow me to run through a few different examples.
First up, we have the CFPB, which announced last month that it would be offering “regulatory relief” to small-dollar lenders by not enforcing provisions of the CFPB’s payday lending rule:
The Consumer Financial Protection Bureau is announcing today that, with respect to the Payday, Vehicle Title, and Certain High-Cost Installment Loans Regulation, it will not prioritize enforcement or supervision actions with regard to any penalties or fines associated with the Payment Withdrawal provisions and the Payment Disclosure provisions once they become operative on March 30, 2025.
The CFPB also mentioned that it may, at some point in the future, initiate rulemaking to narrow the scope of the payday lending rule, although it didn’t commit to anything definitive.
Second, we have the new Director of the Federal Housing Finance Agency (FHFA), Bill Pulte, who has claimed that the agency, under his leadership, has “reduced regulations at a pace no one has ever seen before.”
As Evan Weinberger at Bloomberg recently reported, these deregulatory efforts include ending Fannie Mae and Freddie Mac’s special purpose credit programs (designed to increase minority homeownership), waiving a requirement that Fannie and Freddie engage in equitable housing planning and reporting every three years, rescinding guidance designed to prevent unfair and deceptive practices in mortgage lending, eliminating tenant protections for renters in multifamily properties, and firing FHFA employees responsible for consumer protection at Fannie and Freddie and researching affordable housing issues.
None of this is that shocking (given President Trump’s strong opposition to anything vaguely related to diversity, equity, or inclusion), but what has been surprising is how Pulte has been informing mortgage lenders of these changes — through Twitter!
Announcing these changes, out of nowhere, through Twitter is, to put it mildly, unusual. And it is creating angst, as Evan reports:
Pulte’s deregulation through social media is also adding to industry uncertainty.
“There doesn’t seem to be much organization in what’s going on now,” said Richard Andreano, the head of Ballard Spahr LLP’s mortgage banking group.
Third, we have a recent executive order and memo from the White House.
The EO is quite specific (and rather silly). It directs the Secretary of Energy to reverse a Biden-era efficiency rule on showerheads, an issue that the President apparently cares deeply about. What’s interesting about the order is that it includes a line stating, “Notice and comment is unnecessary because I am ordering the repeal.”
This line struck many in the regulatory community as surprising and, quite frankly, alarming because the Administrative Procedure Act (APA) generally requires all federal rulemaking to include a notice-and-comment period.
In a similar vein, the memo directs government agencies to evaluate whether current regulations are in compliance with recent Supreme Court rulings (including Loper Bright) and, if not, to repeal them.
The memo directs agencies to proceed with the repeals without public notice or seeking public comment, which, again, seems like a dubious legal proposition. Here’s Todd Phillips, an assistant professor of law in the Robinson College of Business at Georgia State University:
Everything they do here is going to be challenged. Congress enacted the notice and comment process to ensure that the public has a chance to weigh in on the decisions that the government is making. It is a legally required process and I can not imagine an end run around it will stand up in court.
Fourth, and most recently, we have President Trump firing two of the three board members of the National Credit Union Administration (NCUA), which is the regulatory agency that charters, supervises, and insures all federal credit unions:
Todd Harper and Tanya Otsuka, who both served on the NCUA’s board, said in separate statements that they had been removed by Trump. The removals leave the agency, which supervises the nation’s $2.3 trillion credit union sector, with just one board member, Republican Chairman Kyle Hauptman.
Setting aside the concern that, legally, the President cannot fire NCUA board members without cause (and the fears that this same extralegal strategy might be applied to more high-profile regulatory bodies like the Federal Reserve Board), the more immediate and practical concern is that with only one board member left (the lone Republican), the NCUA board does not have a quorum and, thus, cannot issue orders against credit unions for violating the law, write regulations, or amend or repeal old ones. It’s functionally paralyzed.
Deregulation … In Name Only
Looking across these four examples, it’s easy to pick out a pattern.
The Trump Administration is prioritizing the performance of deregulation over the actual time-consuming, consensus-building work of deregulation.
Bill Pulte provides the clearest example. It’s very odd to make significant regulatory and policy changes via Twitter … unless your goal is to give your boss (who is addicted to Twitter) the impression that you are reducing regulations “at a pace no one has ever seen before.”
However, the problem with prioritizing the performance of deregulation over the work of deregulation is that it creates uncertainty among the very stakeholders to whom you promised the deregulation to in the first place:
- Simply saying that you will not prioritize supervision or enforcement regarding the payday lending rule does not create a safe harbor for small-dollar lenders. The rule is still on the books! And state attorneys general (and a potential Democratic CFPB four years from now) can still come after you for violating it. (Editor’s Note — Nothing in Fintech Takes is ever legal advice!)
- From what I understand, many mortgage lenders have found that lending programs focused on underserved communities are actually good business (in addition to being socially good). However, by abruptly ending or limiting these programs (via Tweets!), the FHFA has introduced fear and uncertainty into the market. Will the Trump Administration retaliate against mortgage lenders that continue to lend to underserved communities? That’s not an unreasonable question!
- Ordering federal agencies to repeal rules, without going through the required notice-and-comment period, based on an unsound legal theory that is guaranteed to be challenged in court, doesn’t help any of the companies that were unfairly hamstrung by those rules. Any company that is reasonably smart and prudent will likely wait until after the courts have weighed in before taking any action based on the “repeals”.
- Kicking Democrats (one of whom you appointed!) off the NCUA board might seem, in theory, like a boon for credit unions that are hoping for looser regulatory oversight. However, the reality is that paralyzing the NCUA hinders that goal because the agency cannot amend or repeal any regulations.
The result of all this uncertainty is that responsible actors — the banks, credit unions, and fintech companies we want to empower through thoughtful deregulation — will sit on their hands. And the irresponsible actors — the ones that prioritize exploiting every arbitrage opportunity over building their businesses the right way — are going to go into overdrive.
