U.S. capitol dome

Wall St and Washington

April 13th, 2017 by

Does the “Washington Consensus” on big finance still exist under the Trump administration?

One must begin by determining what such a consensus is all about before analyzing whether or not it still applies to the American government as it is operating today.

U.S. capitol dome

Photo by DAVID ILIFF. [License: CC-BY-SA 3.0]

Open for Business

Originally, the term “Washington Consensus” was quite specific, referring to a White Paper produced by an economic think tank led by John Williamson, a Briton. Williamson et al laid out 10 key points that defined their vision for what principles the U.S. should champion in terms of its (and, for all intents and purposes, the world’s) economy.


More broadly, however, the phrase has been seized upon as a generic stand-in for free-market capitalism and neoliberal economics. The idea of a “consensus” also has to do with how the two parties in Congress and the White House have tended to agree on only two things without fail: war and—of concern to this discussion—greater government spending. The debate is usually only about how much each side’s pet projects or biggest lobbyists get to divvy up the spoils. In turn, the biggest corporations in America’s major industries invest heavily in the U.S. government (usually in the form of bonds).

Will this system continue to operate the same way under President Trump? Is that possible, or even preferable?

The answers to the these questions are hardly straightforward, and will ultimately have to play out over the next few years, regardless of what any of us believe about “business as usual” in Washington right now. However, there are signs that such a consensus may indeed be breaking up.

Cracks in the Foundation

Jamie Dimon, the well-known CEO of megabank JPMorgan, recently penned a letter to investors where he claimed to see “something  . . . wrong” with the direction the U.S. is headed. Dimon did concede the notion of American exceptionalism, expressing some optimism about the country’s economic future, but such a negative assessment by the CEO of a major financial institution is rather uncommon. It echoes the concerns raised by prominent fund manager Bill Gross last year.


The point is that it doesn’t sound like the country’s leaders in business and finance feel confident about the new administration’s agenda. Even within the administration, there seem to be clear fault lines about whether the Washington Consensus holds. For instance, Gary Cohn, a former Goldman Sachs executive and current White House economic advisor, supports reviving the Glass-Steagall requirement that investment and lending (i.e. commercial) banks remain separate firms. He believes doing so will be a boon for lending and help protect certain markets from monopolization.

Cohn’s publicly-stated view is likely to be at odds with the populist philosophy of the Steve Bannon wing of the White House. The clash of both strongly pro-Wall St and vehemently anti-Wall St views are having an internecine effect on Trump’s inner circle, so there doesn’t seem to be any reliable indication of how the executive branch will manage the relationship between private business and the federal government during President Trump’s time in office.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.