As President-elect Trump prepares to assume office in January, many questions have been raised about what kind of approach he will take in key policy areas, a result of the relative lack of specific proposals that emerged during his campaign. What’s in store for Wall Street and financial reform remains one of the larger unknowns about a Trump administration. Let’s examine a few clues that suggest how a Trump administration will handle this area of policy.

Views from the Financial Sector

What does Wall Street think of Donald Trump, anyway, and vice versa? In one key barometer, donations flowing to the two candidates from the financial sector during the campaign favored Secretary Clinton over Trump by a ratio of 40 to 1 ($71.8 million vs. $1.8 million), suggesting a far greater level of comfort with the candidate who not long ago represented the industry as a Senator from New York. This donation gap has not gone unnoticed by Trump, who has shown an apparent unwillingness to let perceived slights pass by lightly. Indeed, Trump’s unpredictable nature and strongly populist campaign themes make him anything but a traditional Republican ally to bankers. As Mr. Trump said at an October 26^th rally in Charlotte, NC (home to major banking operations of BofA and Wells Fargo):

“Equal justice also means the same rules for Wall Street. The Obama administration never held Wall Street accountable.”

Given the decidedly unsettled relationship between President-elect Trump and establishment financial sector interests, how likely is he to include Wall Street in his vision for “regulatory reform” and make regulatory life in the financial sector easier? Let’s examine what may and may not be possible over the next few years.

Role of the Senate

It’s important to keep in mind first and foremost that wholesale legislative change will be difficult, if not impossible, to accomplish given the current make-up of the Senate. While both chambers of Congress remain Republican, the GOP’s narrow grasp on the Senate of 51 (pending the run-off in Louisiana) seats is far from the filibuster-proof majority needed to carry out sweeping legislative change on any issue that sparks controversy. Add an increasingly empowered Sen. Elizabeth Warren to the mix, who is likely to seek high-profile opportunities to “stand tough” on Wall Street as she eyes her own Presidential prospects for 2020, and the chances of Democratic grandstanding against any loosening of Wall Street rules loom increasingly large.

As a result, though sought by the financial industry and many Congressional Republicans alike, wholesale changes to Dodd-Frank—substantially revamping the Consumer Financial Protection Bureau, eliminating the Volcker Rule, or rolling back burdensome governance and liability standards on smaller credit rating agencies, to name a few—are unlikely to come to pass as long as legislative action is required.

The takeaway for now: For at least the next two years, pending sweeping GOP gains in the Senate in 2018, look for incremental change rather than large-scale reform vis-à-vis the financial sector.

Dodd-Frank Outlook

If incremental reform is the name of the game, what might that look like?

The first order of business may come with tweaks to Dodd-Frank designed to provide relief to community banks and credit unions from burdensome requirements originally meant to “rein in” larger financial institutions in the wake of the Great Recession of ’08-’09. There is considerable bipartisan support for alleviating aspects of the legislation that are perceived to have an outsized effect on smaller institutions. Targeted, small-scale reforms that lighten some of the more onerous requirements in the area of mortgage-lending rules, data-collection and other reporting mandates could make a meaningful difference to community financial institutions and align nicely with the Trump administration’s mantra of helping “disadvantaged” segments of the economy and spurring renewed growth by reducing regulations.

Nevertheless, as mentioned above, other potential areas of reform, including many contained in House Financial Services Committee Chairman Jeb Hensarling’s “Financial Choice Act” (viewed by many as a blueprint for Dodd-Frank reform in the coming term), will be exceedingly tough to pull off without buy-in from Senate Democrats.

What about pressure from Donald Trump’s base to strike a blow against Wall Street on behalf of Main Street? One option that might fit with the President elect’s perceived leanings, a variation of which is supported by Chairman Hensarling, would enhance executive and institutional accountability for fraud and deception by creating “skin in the game” for financial industry executives under which individuals could take a direct hit on compensation if institutionally risky losses occur under their watch.

Federal Reserve

Unlike the President-elect, Chairman Hensarling is not a proponent of reducing the independence of the Federal Reserve to set monetary policy as it sees fit. However, Chairman Hensarling has supported efforts in the past to increase the transparency and predictability of the Fed in communicating its monetary decisions to the public, and providing greater insight into its decision-making rationale.

The transparency concept stops well short of the President-elect’s campaign rhetoric about an “overly politicized” Fed contributing to a “false economy,” but may in the end provide an avenue of reform that could see debate in the Senate. Moreover, in lieu of direct attacks from President Trump on the Fed, look to a shift toward large-scale fiscal policy tools to trigger economic growth, such as major infrastructure spending, as well as tax reform and broad-based deregulation, in effect steering away from reliance on low interest rates to stimulate the economy.