President Donald Trump recently signed two executive orders aimed at reshaping U.S. finance. Knewz.com has learned that while one seeks to give 401(k) retirement savers access to private-market investments such as private equity, cryptocurrency and real estate, the other targets “debanking,” directing regulators to investigate whether banks are cutting ties with customers for political or religious reasons.
Trump’s first executive order directs the Department of Labor to work with other agencies to ease restrictions on 401(k) and similar retirement accounts, enabling them to include private-market investments. It has been reported that Wall Street has long sought access to the vast pool of retirement savings, and the move is viewed as a potential breakthrough for hedge funds and private equity firms. “It’s a critical step in starting the ball down the track,” said Marc Lipschultz, co-CEO of Blue Owl Capital, which is working on offerings that incorporate private markets into all-in-one funds known as target-date funds. He urged federal regulators tasked with executing the order to be “thoughtful and methodical” about opening up access to private investments.
Critics have cautioned that private investments are typically harder to trade and carry higher fees. Marc Pinto, who oversees global private credit at Moody’s, warned that allowing 401(k) dollars into private markets could also expose investment managers to additional risks. “If these new investments don’t live up to their promise, asset managers could face lawsuits and regulatory heat,” he warned. It is worth noting that employers offering 401(k) plans have historically avoided such products, fearing lawsuits over excessive costs. However, supporters argue that access to private markets could help retirement accounts grow more rapidly, especially as traditional pension plans continue to decline. Pension funds already rely heavily on private assets, often to meet long-term obligations. “I really think of it as putting people back to where we were 30 years ago in terms of having your retirement funded by the growth of the U.S. economy,” said Rajib Chanda, global head of asset management at Simpson Thacher.
Trump’s second executive order targets the practice known as “debanking,” in which banks allegedly cut ties with customers based on political or social considerations. Trump has recently accused JPMorgan Chase and Bank of America of discriminating against him after his presidency. Both banks deny making decisions based on politics. The order instructs regulators to stop relying on “reputational risk” or other broad justifications when evaluating banks’ customer decisions. Industry groups have pointed to regulatory guidance as the reason for dropping certain businesses, such as firearm manufacturers or oil and gas companies. “The heart of the problem is regulatory overreach and supervisory discretion,” said a spokesman for the Bank Policy Institute, one of Wall Street’s trade groups.
Source: By Samyarup Chowdhury knewz.com
