The incoming Trump administration clearly intends to make massive federal government cuts. In addition to what has already been brought up, The Wall Street Journal reports that potential nominees were being asked if the major bank regulators could be closed.
One agency reportedly mentioned has been the Federal Deposit Insurance Corporation, with deposit insurance moved into the Treasury Department. Elimination of any agency requires congressional action, which rarely happens. But in these latest rounds of interviews with potential nominees, there have also been discussions of restricting and integrating the FDIC, Office of the Comptroller of the Currency, and the Federal Reserve.
Although combining agencies might sound like an automatic improvement in efficiency, the opposite can be the case. The Department of Homeland Security, formed from almost two dozen agencies, has garnered long-standing heavy criticism from both Democrats and Republicans, as The Verge reported. The Government Accountability Office after the first ten years of the agency’s existence said that DHS has addressed 60% of 1,800 recommendations the GAO had made.
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Organizational change is difficult and the assumption that putting agencies together is much harder than reformers often think. The question is outside of banking, are there potential for other changes that might have an impact?
“Real estate is hyper-localized,” Alain R'bibo, a partner at real estate law firm Allen Matkins, toldGlobeSt.com. “There’s nothing that Trump is going to do that’s going to speed up my entitlements or affect rent control. I think the discussion is a little bit overblown or premature. But the whole perception of an administration coming in that is seen as business-friendly and anti-regulation has been seen as welcome by the real estate community.”
Even if not reduced or eliminated, other agencies can regulate areas that result in an indirect impact on CRE. Changes in immigration and tariffs could affect construction worker availability and materials costs, making construction and remodeling more expensive. Modifying policies in the Federal Housing Finance Agency, or at Fannie Mae or Freddie Mac, could affect multifamily policies and operations.
A fight between Trump and the Federal Reserve, if he pushes for lower interest rates as he did in his first term, could disrupt efforts in controlling inflation. “The markets hate uncertainty,” R’bibo says. “That’s definitely [Trump’s] style, and to a certain extent the country has signed up for that.” And that could shake expectations and CRE.
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