Trump's top economic aide pick has unconventional bank ideas

The potential appointment of Christopher Phelan as lead of the Council of Economic Advisers could signal a radical shift in how the federal government views the banking system. Phelan has historically critiqued fractional reserve banking, the very foundation of how modern banks lend money. While these are academic positions, his influence on the Trump administration could lead to policies that favor 'narrow banking' or require lenders to hold significantly more capital. For retailers and merchants, this is a long-term signal to watch. If banking regulations shift toward higher reserve requirements, it will likely become harder and more expensive for third-party lenders to provide consumer credit lines. You might see higher merchant discount rates (MDR) or stricter approval tiers for your customers as lenders face higher costs of capital. While no immediate changes are happening, the administration's appetite for 'unconventional' banking reform means the era of cheap, easy-to-access consumer credit might face new regulatory pressure. Retailers should keep a close eye on their lending partners' stability and diversification in the coming year.

Source: American Banker — Top News

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