Trump's Family Joins the Sprint to Get a National Bank Charter

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1:50Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Well, President Trump's family is on the verge of having its very own bank. The president's relatives and their business associates have won preliminary approval to start one, riding a wave that doesn't come around often. It's now easier than at any time in almost 20 years to get a national bank charter, thanks to the Trump administration's deregulation push. I'm reading right from one of the most read stories on the Bloomberg Terminal. It is today's big take.

2:26Paige Smith is Bloomberg News finance reporter. She's part of the team behind the story. She joins us here in the Bloomberg Interactive Brokers Studio. The process for getting a national bank charter. Before we get into what the president's family is doing and what World Liberty Financial is doing, which you detail in the piece. Just talk to us about how that happens and how it traditionally works. Certainly. So first of all, I think it's important to note that there are a number of different bank charters that anyone or any entity can pursue at any given time. The president's family is pursuing a trust charter and has received conditional approval from one financial regulator to do that.

3:07That regulator is the office of the comptroller of the currency. The OCC. The OCC, as we know it, run by Jonathan Gould, who is actually a Trump appointee himself. So there are a lot of different charters that anyone can pursue. Take Nubank, for example, a really well-known fintech that's Brazil-based. They've received approval to be a national bank, so it's slightly different. And maybe a little bit more vanilla or bread and butter than a trust bank, for example. So, I mean, the Trump family now on the verge, though, of having its own bank. What exactly are they trying to build? So the entity is known as World Liberty Financial, and it's owned by members of the Trump family and their business associates.

3:57And they are best known for a stable coin called USD1. And when they received this conditional approval and also before they received approval when they were applying, World Liberty Financial essentially said that they want to grow the reach of this stablecoin and build out that business specifically. You make the point in your piece that there have been other presidents who've had connections to the financial industry. The Roosevelt's operated their New York based financial firm for more than a century. You write. I learned from your reporting that George H.W. Bush's father was managing partner of the financial services firm Brown Brothers Harriman.

4:41But is there any precedent for a sitting president to have children who actually are starting a bank? As far as we know, there's not. This is a sort of one, this is as far as we've reported, this is the first time that something like this has occurred. And it is really noteworthy because like I mentioned, the application was reviewed by staff members at the OCC and leaders of that agency were appointed by this sitting precedent by President Donald Trump. For those out there watching or listening right now who might say, wait a second, there is a conflict of interest or there could be the appearance of a conflict of interest.

5:22You and the team reached out to the White House. What did they say? The White House essentially said that there is no conflict of interest here. And when we looked at the actual documents approving this entity to become a bank, they acknowledged that members of the public had raised the question or raised the question of the appearance of conflicts of interest and essentially said senior members of the OCC have reviewed this application and it may move forward. So why exactly does World Liberty Financial want to become a bank in the first place? So there are a lot of reasons for becoming a bank.

5:58Cheaper funding is one of them. But especially at this moment in time, if you think about it, if you're a bank in the U.S. financial system, that comes with a level of legitimacy and sort of an inherent stamp of approval from the U.S. government to operate. And that's a big deal when you're a smaller digital asset firm or a fintech or an up-and-coming entity to be able to say, we have been approved by this U.S. financial regulator to operate in the U.S. financial system. That's a big deal. So what I found to be particularly interesting is in the piece, you know, you essentially note that this isn't happening in isolation.

6:34You found that it's easier to get a national bank charter right now than it was maybe 20 years ago in the past. Or maybe even during the Biden administration. Fair play. So what's changed? Really, the pace has changed. We include a number of graphics in the story that I would encourage everyone to read that really note just how different it is. The timing is from the point of application to some sort of a decision, whether an approval or disapproval or any sort of decision on a bank charter. So that pace has really been expedited, but also just the number of banks that are being approved. In the first 19 months of the president's second term, the OCC approved 22 bank charters.

7:21That's more than the previous five years combined. You know, you've done a lot of reporting on fintechs. And traditionally with fintechs, they haven't actually been banks. what they've been is like, okay, well, if you deposit money or you put your money with this FinTech, they hold it in a bank that they have a partnership with. Is that changing because it is easier to become a bank now? That's such a good question. So it is changing in some ways, but it's not changing entirely. So for example, some, um, there may be some banks that will still work with a third party bank for another branch of their business.

7:55When you apply to become a bank or a new bank as a fintech, you have to present a very clear plan of how you plan on operating for the next few years. So if an opportunity presents itself and you deviate from that plan in any way, you need to perhaps have a third-party relationship with someone else to execute that new opportunity. So if we were to zoom out, are we essentially running an experiment here? Or what happens when you suddenly allow many of these crypto and fintech companies to actually go this route into traditional banking? I think that is a great question. And I think we're going to have to see how it plays out.

8:38I would note that some of these companies have operated before. A lot of them have not. Some of these companies are coming from other countries. Some of them are U.S.-based. It really is a very interesting moment in time and a moment in history to see how these sort of non-traditional firms will fare within the parameters of the U.S. financial system. You go through some of the firms. You mentioned NewBank, for example. There's also, I'm not a Lord of the Rings guy, so I don't know if I'm going to say this. Erebor. It's all everything with Palmer Luckey's Lord of the Rings, I guess. I don't know.

9:13So, okay. Erebor Bank with Palmer Luckey is the guy behind that. He's the guy behind Anduril and Oculus, which was acquired by what was then Facebook. Why should Erebor be on our radar? I think that this influx of new banks should be on everyone's radars to see, first of all, how successful they can be within the parameters of the traditional system, but also to see if they slip up in any way, frankly. I think that it is the job of regulators to monitor that, and it sounds like they intend to do so, to watch these players closely. But they offer maybe less traditional services than the biggest banks that you know, and might be, yeah, I would say offer less traditional services.

10:01Should I become a Lord of the Rings guy? Maybe so. I haven't watched a Lord of the Rings. I don't hate Lord of the Rings. I think it's like a hero's journey kind of situation. Gollum. Gollum. The stuff that I wasn't interested in when I was a kid, like now that I have older kids. You circle back. Well, now they're not older, but like kids that are growing up and like getting interested in stuff. Like I can experience this stuff for the first time. So maybe he'll like. Yeah. That was me with the Hunger Games. And I'll be able. Oh yeah. Yeah. Circle back as an adult. And you're like, whoa. Yeah.

10:27That came out when I was an adult. So maybe you don't just like introduce them to Game of Thrones anytime soon though. No, that's not going to happen anytime soon. No, don't worry. Perhaps not. But, I mean, do you expect to see a trickle of these types of situations happening moving forward? Is this essentially just starting the beginning of a pattern? I would say as early as last week, the head of the OCC said that that regulator is, quote, open for business. So it is a dynamic situation. It's evolving. We'll see what happens, obviously, after the midterms in November. There may be more scrutiny of how many banks and which banks are receiving approval.

11:02um but yeah i would say that it's a dynamic evolving situation where does the fdic come into this and in within um i don't want to say allowing because treasury works on this as well but like are there are there bank failures playing into this at all i think that it again kind of goes back to the first question which is which charters are available for these entities so So if you're a bank accepting consumers' deposits, then that would fall under the purview of the FTIC. So New Bank, for example, would be an FTIC-regulated entity. But you also are interacting with the Fed if you're one of these banks in some way.

11:48And FinCEN, which is another enforcement entity, Jamie Dimon bemoans the levels of enforcement that banks endure all the time. And this is kind of what he's talking about. there are a lot of regulators that you interact with as a bank. This is a great story. It's today's big take. It's one of the most read stories on the Bloomberg terminal. It is a story that used data from the OCC and the Bloomberg reporters, including Paige Smith, found that President Trump's more welcoming regulatory posture had dramatically increased the pace of new bank creation, including preliminary approval for a bank charter for the Trump family's world liberty Financial.

12:24Check it out on the Bloomberg Terminal and at Bloomberg.com.

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