We went through The Heritage Foundation’s 922 page document 'Mandate for Leadership 2025: The Conversative Promise' so you didn’t have to.
While it is common for think-tanks from opposite sides of the political spectrum to propose policies for governments-in-waiting, the initiative dubbed ‘Project 2025’ has resulted in recent widespread concern despite being published in 2023.
Former President Trump has
denied association with the ideas presented in the document, but with more than 100 conservative organisations being involved in its creation, according to Heritage, if Republicans take back the White House in November, a number of these policies could
be implemented.
Further, Paul Dans, former chief of staff at the office of personnel management while Donald Trump was president, and Russell Vought, another former Trump administration official and Republican National Committee’s 2024 platform policy director, were key
contributors to Project 2025.
Project 2025 details how the President’s power could be expanded, how millions of people’s rights could be taken away, how thousands of civil servants could be sacked, how diversity and inclusion initiatives could be banned and this is just the tip of the
iceberg. But what does this mean for the financial services and fintech industry in the US? Here’s a breakdown of the proposals mentioned.
US Economy
“…under the Biden Administration, the Treasury Department has failed to achieve any of the agency’s core objectives. Under the leadership of Secretary Janet Yellen, Treasury has placed ‘equity’ and ‘climate change’ among its top five priorities. The
next Administration must act decisively to curtail activities that fall outside of Treasury’s mandate and primary mission.”
Equity and climate change are considered inconsequential throughout the 'Mandate for Leadership' and there is no positive connection made between treating all people equally, or taking action to protect the environment.
The document indicates that the initiatives set out by the Biden Administration would have a minimal impact on “changing global weather patterns” because “most nations – notably China” are not presenting as cooperative.
It is also included in the foreword that “the next Administration will face a significant challenge in unwinding policies and procedures that are used to advance radical gender, racial, and equity initiatives under the banner of science. Similarly, the Biden
Administration’s climate fanaticism will need a whole-of-government unwinding.”
In another chapter, the appointment of a counselor for racial equity, the establishment of an advisory committee on racial equity, and the creation of an office for diversity, equity, inclusion, and accessibility under the Biden Administration’s Treasury
Department was mentioned.
“All these should be eliminated,” Project 2025 reads and continues: “The avowed purpose of these initiatives is to implement policies that deliberately favor some races or ethnicities over others. The casual acceptance and rapid spread of racist policymaking
in the federal government must be forcefully opposed and reversed. The next conservative Administration should take affirmative steps to expose and eradicate the practice of critical race theory and diversity, equity, and inclusion (DEI) throughout the Treasury
Department.”
Instead, Heritage believe that the Treasury’s focus must be on reforming the tax policy and “reducing marginal tax rates, reducing the cost of capital, and broadening the tax base to eliminate tax-induced economic distortions by eliminating special-interest
tax credits, deductions, and exclusions.” Further, Project 2025 claims that tax compliance costs would decline if the system were to be “simplified.”
There are also calls for the US to withdraw from both the World Bank and the IMF in the text. The World Bank's goal is to reduce poverty by offering assistance to middle-income and low-income countries, and the US is it’s the largest shareholder. Despite
the IMF’s purpose being to oversee the stability of the world's monetary system, Project 2025 advises the incoming US President to withdraw from the organisation because the IMF “has intervened in American policy debates” and recommended raising taxes.
Heritage also believe that the “IMF’s record of advancing global financial stability has been mixed at best.” Currently, the US is the largest shareholder in the IMF and as a result, has a significant amount of influence. The US also contributes 17.67% of
the IMF's capital subscriptions and has 17.33% of the votes on the executive board. Further, the IMF has provided the US with foreign currencies
28 times, which is more than any other country.
US Currency
“In free banking, neither interest rates nor the supply of money is controlled by the government. The Federal Reserve is effectively abolished, and the Department of the Treasury largely limits itself to handling the government’s money.”
Project 2025 offers the incoming President the option of
free banking, which was a system that was used in certain regions of the US from 1824 to the 1850s, whereby banks issued liabilities denominated in dollars, but backed by a valuable commodity such as gold coins, another currency, equities or other assets
like real estate. The text explains: “Competition would determine the right mix of assets in banks’ portfolios as backing for their liabilities” and would keep “banks from overprinting or lending irresponsibly.”
It continues: “any bank that issues more paper than it has assets available would be subject to competitor banks’ presenting its notes for redemption. In the extreme, an overissuing bank could be liable to a bank run. Reckless banks’ competitors have good
incentives to police risk closely lest their own holdings of competitor dollars become worthless. In this way, free banking leads to stable and sound currencies and strong financial systems because customers will avoid the riskier issuers, driving them out
of the market.”
Heritage believe that free banking would strengthen the economy, ensure USD is the currency of choice globally, cash earns a positive rate of return, end indirect financing of federal spending, and removes the central bank from the equation. Other options
include commodity-backed money where the dollar could be defined in terms of both gold and silver, and the Federal Reserve would remain.
Further to this, Heritage is staunchly against the institution of a
CBDC, claiming that “a CBDC would provide unprecedented surveillance and potential control of financial transactions without providing added benefits available through existing technologies.” Alongside this, Project 2025 believes that both the
SEC and the
CFTC have been “irresponsible actors in the digital asset area. They have had more than a decade to promulgate rules governing digital assets, yet the SEC has utterly failed to do so, and the CFTC has provided only minimal guidance. Instead, both agencies
have chosen regulation by enforcement—and have done it poorly. They neither adequately protect investors nor provide responsible market participants with the regulatory environment that they need to thrive. The SEC and CFTC should clarify the treatment of
digital assets (coins or tokens).”
US Regulation
“One of the priorities of the incoming Administration should be to restructure the outdated and cumbersome financial regulatory system in order to promote financial innovation, improve regulator efficiency, reduce regulatory costs, close regulatory
gaps, eliminate regulatory arbitrage, provide clear statutory authority, consolidate regulatory agencies or reduce the size of government, and increase transparency.”
Project 2025 proposes the merger of the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Reserve’s non-monetary supervisory and regulatory functions.
Does financial regulation in the US need a refresh? The answer is not no, but drastic overhauls could prove to be more problematic. In comparison to the advancement of technology, policymaking has moved at a slow speed with regulators struggling to keep
pace. However, it can also be argued that when necessary, bank policymaking has been established -
Dodd-Frank being an example.
Dodd-Frank prevents excessive risk-taking similar to that seen before and that led to the financial crisis of 2008. The law also provided protections for American families and created new consumer watchdogs to prevent mortgage companies and pay-day lenders
from exploiting US citizens.
The text states that Congress should repeal titles of the Dodd-Frank Act that created the Financial Stability Oversight Council (FSOC), a federal government organisation which identifies risks, promotes market discipline and responds to emerging threats.
Project 2025 defines the FSOC as a “super-regulator tasked with identifying so-called systemically important financial institutions and singling them out for especially stringent regulation.”
Further to this, the Mandate for Leadership calls for the Orderly Liquidation Authority (OLA) to be repealed, which was instated with Dodd-Frank to allow financial companies to be liquidated if their failure poses a significant risk to the financial
stability of the US.
Project 2025 believes this is “based on the faulty premise that large financial institutions cannot fail in a judicial bankruptcy proceeding without causing a financial crisis. It gives such companies access to subsidized funding and creates incentives for
management to overleverage and expand high-risk investments. Congress should repeal each of these provisions to guard against bailouts and too-big-to-fail problems.”
US Security
“Although FinCEN makes a significant contribution to law enforcement efforts, it also does demonstrable, substantial and widespread economic harm….”
In 2023, when this text was published, the authors thought that the costs associated with
AML-CFT were too high, stating that “there is little evidence that this massive expenditure of resources is doing much good, and there is no evidence regarding which aspects of the AML-CFT regime are effective and which are not. The AML-CFT regime is a
major contributing factor causing the decline in the number of small broker-dealers and the decline in the competitiveness of community banks.”
In January 2024, however, the US government put in place a requirement where firms must report information about who owns and controls them in an effort to “make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies
or other opaque ownership structures,” as explained by Steve Marshall, director of advisory services, FinScan in a Finextra
article.
He writes: “The new requirement is enforced through the Beneficial Ownership Information (BOI) Reporting Rule, the first of three rules in this area required by the Corporate Transparency Act (CTA). It requires firms to submit details of their beneficial
owners, i.e., those people who benefit from ownership or control of the company, to the Financial Crimes Enforcement Network (FinCEN). While the theory behind the new rule is clear, in practice, things become a little more complicated.” Project 2025 has proposed
for the CTA to be repealed.
US Technology
“U.S. businesses are aiding Beijing in this effort— often unwittingly—by feeding, training, and improving the AI datasets of companies that are beholden to the CCP. One way that U.S. companies are doing this is by giving Beijing access to their high-powered
cloud computing services. Therefore, it is time for an Administration to put in place a comprehensive plan that aims to stop U.S. entities from directly or indirectly contributing to China’s malign AI goals.”
Since the start of this decade, both Trump and Biden Administrations have focused research and development funding on different, so-called Industries of the Future (IOTF). Trump prioritised artificial intelligence (AI), quantum information science (QIS),
advanced communications/5G, advanced manufacturing, and biotechnology. Biden expanded this list to include advanced materials, robotics, battery technology, cybersecurity, green products and clean technology, plant genetics and agricultural technologies, nanotechnology,
and semiconductor and microelectronics technologies.
Project 2025 believes that this list should be substantially cut down and the threats, analysed. In other chapters of the document, focus is placed on reining in Big Tech and “its attempts to drive diverse political viewpoints from the digital town square.”
The advantages of a one-stop-shop tech solution are not mentioned, but a request for imposing transparency rules on Big Tech is, with an emphasis on ensuring the likes of Facebook, Google and TikTok do not continue to have the power they currently have.
In Heritage’s view, Big Tech needs to be reined in due to the dangers that they perceive to be emerging from China and the CCP’s authoritarian approach, particularly in regard to AI. “In exchange for cheap labor and regulatory special treatment from Beijing,
America’s largest technology firms funnel data about Americans to the CCP. They hand over sensitive intellectual property with military and intelligence applications to keep the money rolling in. They let Beijing censor Chinese users on their platforms. They
let the CCP set their corporate policies about mobile apps. And they run interference for our rival’s political priorities in Washington. One side of Big-Tech companies’ business model is old-fashioned American competitiveness and world-changing technological
innovation; but increasingly, that side of these businesses is overshadowed by their role as operatives in the lucrative employ of America’s most dangerous international enemy.”
Secure use of AI and cloud can have substantial benefits to the US and its financial services industry, and in some cases, helpful in eradicating some of the key challenges Project 2025 has highlighted. While there has been an increase in attention around
this document recently, especially as Trump has extended his polling lead after Biden's poor debate performance, it remains to be seen whether what is outlined in Project 2025 should be a cause for concern or not.