TRUMPED! The Message Behind Soaring Bank Stocks (It’s Not All Good)

By Brian Page

December 9, 2016

Donald Trump is a singular force that promises to reshape the economy in ways that every student would do well to understand. From tax policy to student loans to consumer protections, the personal financial world under a Trump administration will look nothing like it has under President Obama. Starting now, financial literacy teachers must adjust their lessons to reflect this new reality. In our series TRUMPED! award-winning personal finance school teacher Brian Page offers guidance. This is the fifth in the series.

BANK STOCKS JUMPED 17% following the election, a move that can be interpreted many ways. Clearly, Wall Street believes the Trump administration will be good for growth in America. But part of that torrid run-up has nothing to do with the economy or interest rates; traders expect a lighter touch from regulators, which may help banks become more profitable.

It’s this second message that financial literacy teachers need to pay attention to. Bank profits sometimes come at a cost to consumers, who have enjoyed robust regulatory protection gains since the financial crisis. Trump thinks the regulators have gone too far.

Banking industry lobbyists are salivating at the prospect of fewer regulations, according to a recent report in the American Banker. Meanwhile the House Financial Services Committee in September passed the Financial Choice Act, which among other things would repeal the fiduciary rule and threatens funding for the Consumer Financial Protection Bureau.

Trump might thus upend a good chunk of what financial education teachers have become comfortable with in the classroom. For example, both Jump$tart and the Council for Economic Education have national standards for personal finance lessons that include the following knowledge statements:

Give examples of how the Consumer Financial Protection Bureau protects borrowers and provides information about credit issues.

Government and independent agencies combat fraud and oversee various financial services industries.

Laws and regulations exist to help protect consumers from unsafe products, unfair practices and marketplace fraud.

Thousands of educators teach to these knowledge statements. A central theme of this series has been the likely roll back of regulatory authorities under a Trump administration, which sees the heavy hand of government as stifling innovation and growth. There may be some truth to that thinking, for sure.

But regulation has a place too. Trump won’t get rid of it entirely and maybe he and Congress will find a way to strike the perfect balance between free markets and consumer safeguards. What financial educators need to focus on is that the protections they have been conditioned to teach young people about may not be there when their students graduate.

As always, the best safeguard is genuine knowledge—not of how government agencies work or don’t work, or how they get funded or don’t get funded, but of how not to have to rely on them in the first place. Classic lessons centered on wants versus needs, living within your means, compound growth, and fees and penalties will never go out of style.

PART ONE: TRUMPED! Back to the Future for Consumer Protections

PART TWO: TRUMPED! How Student Loans May Get  More Complicated

PART THREE: TRUMPED! Why Payday Lenders Must Be in Crosshairs of Financial Literacy Teachers

PART FOUR: TRUMPED! How Obamacare Repeal and HSA Focus Would Change Financial Education

PART FIVE: TRUMPED! The Message Behind Soaring Bank Stocks (It’s Not All Good)

Posted in Classroom, Home & Community on December, 2016