The Reckoning
How many civil servants will quit in anticipation of the new Administration?
We were told that the civil service is policy-agnostic. They serve the country. They execute the policy of the Executive Branch.
Apparently, in anticipation of having to support policies that are not consistent with their own beliefs, the civil service is bracing itself for mass resignations. This is separate from Schedule F.
This reinforces the argument that the civil service is one-sided and in the bag for the Democrats, true or not.
It’s also telling that they were willing to stick it out for four years in the first Trump administration but not now.
Either they believe that Trump has figured out the way the machine works and/or they think that his policies will persist after his four-year second term.
‘POLITICO spoke with more than a dozen civil servants, political appointees under President Joe Biden and recently departed Biden administration staffers in the days since the presidential election was called for Trump, who were granted anonymity due to the sensitivity of the topic and the risk to their jobs. Many are bracing for a wave of departures from key federal agencies in the coming months, amid fears that the next president will gut their budgets, reverse their policy agendas and target them individually if they do not show sufficient loyalty. The result is likely to be a sizable brain drain from the federal workforce — something Trump may welcome.’
Inside the Federal Work Force That Trump Has Promised to Eviscerate
The bureaucracy’s only comfort is that this is the same Trump team as before: naïve, inexperienced, “mercurial,” and unsophisticated about how the bureaucracy works.
If that turns out to be incorrect, then all hell is going to break loose.
‘Three midlevel E.P.A. officials said they feared that the subject of climate change would be off limits in the new administration. At the Pentagon, officials were trying to game out what policies might catch Mr. Trump’s attention and prompt edicts like the one he announced five years ago on social media, forbidding transgender people from serving “in any capacity in the U.S. Military.” There also are fears inside the Education Department that its legacy of civil rights reforms could soon be terminated, or that Mr. Trump will make good on his vow to dissolve the department altogether.
‘Aaron Ament, who served as chief of staff of the Education Department’s general counsel’s office during the Obama administration, said that even if the Trump administration kept the agency intact, it could immediately test the resolve of its staff by cutting back many of the department’s main regulatory and enforcement functions.’
The Deregulation Trade Reaches the Bond Market
Easier financial regulation bodes well for banks.
The SLR is the Supplementary Leverage Ratio.
Deregulation could mean lower required capital levels for banks.
The election portends higher deficits. Higher deficits suggest higher yields, especially the further out the yield curve we look.
Swap spreads refer to the premium borrowers pay to lock in a fixed rate over the equivalent yield on a risk-free Treasury rate. Let’s say that they currently pay a rate that floats and resets every three months. If they’re concerned about rates going up, then they would try to convert their debt to one in which they pay a fixed rate. The locked in fixed rate is known as the swap rate.
Normally, markets might have anticipated narrowing swap spreads in the face of higher Treasury yields. Swap rates, one would have thought, would move less. But they’re moving more because Treasury yields are backing up and swap spreads are widening.
If banks hold less capital, then the counterparty risk of entering into a swap with a bank counterparty increases. Hence the counter-intuitive joint move in swap spreads and yields.
‘“This week’s widening move in swap spreads appears to reflect a measure of de-regulatory optimism, particularly with regards to SLR relief for US Treasuries. Indeed, the potential for a UST-exclusion from bank leverage capital rules has been a topic of much speculation among market participants this week. Such speculation is hardly unfounded — indeed, it was granted on a temporary basis after the onset of the pandemic, and has recently been discussed at the TBAC ... As such, it is certainly a possibility.”’ (JP Morgan)
Wall Street drafts Trump wish lists over bank capital, SEC regulation
The interesting comment here is that the Trump transition team seems to understand they’re in a race. They didn’t have this sense of urgency last time.
They know exactly what kind of resistance to anticipate.
‘The speed at which the transition team and industry are moving to identify potential regulatory relief underscores how aggressively the new administration could move.
Following Trump's resounding victory on Tuesday, that effort has gained momentum, with Trump allies asking industry players to detail what governmental issues they have and how they should be fixed.’
What to Expect for Crypto Under Trump's New Administration
Goodbye regulation-by-enforcement.
Hello regulatory clarity.
‘He cautioned, however, that real legislative change will require bipartisan collaboration. “Any legislative advancements are contingent upon congressional action,” he clarified. “While Republicans may eventually control both the House and Senate, digital assets legislation will require bipartisan support, cannot be achieved through budget reconciliation, and it’s unclear the parties will reach a consensus in the short term.”
‘The anticipated leadership shift at the U.S. Securities and Exchange Commission (SEC) further underscores potential changes in the regulatory landscape. Trump has pledged to replace current SEC Chair Gary Gensler, who has been widely criticized by the crypto sector for his “regulation-by-enforcement” strategy, which many industry leaders view as an impediment to innovation. Coinbase CEO Brian Armstrong and others have called for a new SEC leader focused on transparency and a supportive regulatory framework. SEC Commissioner Hester Peirce, known in the industry as “Crypto Mom,” has received praise for her advocacy of a clear and innovation-friendly regulatory approach.’