Trump Shakes Up Wall Street With Orders on 401(k)s, ‘Debanking’

The move would fulfill a long-sought goal of Wall Street hedge funds and private-equity firms, which for years have wanted to tap in to the giant pool of money in 401(k) and other defined-contribution plans.

It is a different story for big banks. A second order directs regulators to look into whether banks discriminate on political or religious grounds, and take disciplinary action against those found to have done so. Big banks, in anticipation of such an action, have been updating their policies to fend off accusations that they discriminate against firearm manufacturers or oil-and-gas companies.

Earlier this week, Trump amplified the issue, known as “debanking,” when he said he was discriminated against by JPMorgan Chase and Bank of America after his first term as president. Both banks said they don’t drop customers on political grounds.

Here’s a look at the two orders expected today.

401(k) plans

The executive order on retirement plans is expected to direct the Labor Department to consult with the Treasury Department and the Securities and Exchange Commission, as well as other federal agencies, to determine what regulatory changes need to be made to facilitate the goal of expanding private-markets access to 401(k)s.

It remains to be seen how successful the order will be in getting employers to provide such 401(k) options to employees. Private assets tend to be harder to buy and sell than other investments and typically come with higher fees.

Firms that invest in private markets say those fees are justified by the potential for higher returns, but employers have been sued over fees in the past. The risk of such litigation has prevented many from adding private-markets offerings to their plans.

The executive order is also expected to extend to cryptocurrencies and other digital assets, which have been a focus for Trump.

Debanking

JPMorgan, Bank of America and other big banks largely blame pressure from regulators for their decisions to drop certain customers. 

Banks have pointed in particular to pressure to avoid businesses or industries that pose a “reputational risk.” Thursday’s other order is expected to direct regulators to withdraw the use of reputational risk as well as any other policies or guidance that could lead to debanking. 

“The heart of the problem is regulatory overreach and supervisory discretion,” said a spokesman for the Bank Policy Institute, one of Wall Street’s trade groups.

But some Republicans say banks still use arbitrary internal rules or amorphous legal risks to justify what is a political decision.

“There is always a nonideological fig leaf they can choose” as an excuse, said Kansas Attorney General Kris Kobach.

Kobach led a group of state attorneys general who sent a letter to Bank of America Chief Executive Brian Moynihan last year over concerns about discrimination against conservatives. Bank of America and others drew the ire of Republicans for providing information to the Federal Bureau of Investigation as part of a probe into the Jan. 6, 2021, attacks on the U.S. Capitol.

Bank of America has said it provided the information lawfully under a Treasury Department program. 

Trump has acknowledged that banks are under pressure from regulators, but the executive order on debanking leaves the door open to concessions from banks along the lines of those he has sought from universities and law firms.

Write to Dylan Tokar at dylan.tokar@wsj.com and Miriam Gottfried at Miriam.Gottfried@wsj.com