How new Commerce Chief and ex-MBS exec may influence tariffs

Newly confirmed Department of Commerce Secretary Howard Lutnick, who has backed tariffs with the potential to impact housing, also has roots in the pre-crisis mortgage era that's been drawing more focus amid speculation about government-sponsored enterprise reform.

Although his role in finance extends to areas that include commercial real estate, Treasury futures, and crypto, the former Cantor Fitzgerald chair and CEO also is known for rebuilding a firm active in mortgage trading after it was hit hard by the 9/11 attacks.

His background is significant as a potential voice in discussions about the continuation of policy the Trump administration pursued during its first term that could potentially affect the mortgage-backed securities market.

Lutnick also was considered for a role at the Department of the Treasury, a key player in the fate of the enterprises that have recently played a key role in the MBS market due to government ties the Trump administration could cut back. The two departments work together.

His MBS background suggests that he'll be knowledgeable about and could favor a privatization strategy for the agencies but also have enough of a sense of the overall bond market to not want to see their large securities market unduly destabilized, a key concern in enterprise reform.

Views differ on whether a return of a reformed private mortgage market often blamed for the Great Financial Crisis would benefit or hurt lenders and how to execute it. There is some agreement that government bailout of the enterprises at the time was not meant to be permanent.

Some think the time is right for a release and potentially some rollback of the rules established after the GFC given the market has stabilized since then. But others show concern that deregulation could lead to a recurrence of the crisis' too-loose underwriting or other issues.

That said, Lutnick's influence on the housing market in his new role lies more in his backing for steel and aluminum tariffs set for mid-March as a form of protectionism but which the National Association of the Home Builders has opposed due to potentially higher costs for construction materials.

Lutnick has said that there have been too many exclusions from steel tariffs, shortchanging the U.S., and that they need to be streamlined, according to a Reuters report.

The former Cantor executive has called himself a "simple view of tariffs sort of guy."

However, if Lutnick listens to Scott Bessent, head of the Department of the Treasury, as they work together, Bessent's more moderate view on tariffs could influence him. That said, Lutnick's view may be one he does not back down from given its role in his nomination.

Lutnick was confirmed by a 51-45 vote split along party lines. There also were four abstentions divided equally between the two parties.

Republican supporters expressed confidence that Lutnick's stance would have fiscal benefits for the United States. 

"Mr. Lutnick will ensure American taxpayer dollars are spent efficiently," Ted Cruz, R.-Texas, said in a press release welcoming the confirmation.

Democrats in the Senate, where the Republican margin of victory in Washington is the thinnest, opposed Lutnick's confirmation in part due to concerns similar to those of builders.

"The policies outlined by this administration will raise prices on everyday goods, and have the potential to make housing and energy more expensive," said Sen. Jacky Rosen, D.-Nev., at Lutnick's confirmation hearing.

Sen. Amy Klobuchar, D.-Minn., raised questions about the business divestiture plans Lutnick had set up to clear a path to political office. Lutnick noted some of his successors are relatives, but acknowledged this is "ok under ethics laws" during the hearing.

Lutnick, who survived the 9/11 terrorist attack in 2001 because he was dropping his son off at kindergarten and was late to work, is now handing off his chairman role at Cantor to a group that includes two of his children and also an executive with MBS roots, among others.

(Hundreds of Cantor's employees, many of which were MBS traders, and Lutnick's brother, Gary, died in the 9/11 attacks. The firm has provided hundreds of millions of dollars to the families of employees who were killed.)

Christian Wall, global head of fixed income, has been named one of Cantor's co-CEOs. Before joining Cantor as head of the structured products group in 2017, Wall worked for seven years at what at the time was the No. 1-ranked non-agency mortgage trading business at Credit Suisse.

Brandon Lutnick has become chairman of Cantor. His brother, Kyle, is now the company's executive vice chairman. The other two co-CEOs are Pascal Bandelier and Sage Kelly, who are the global heads of equities and investment banking, respectively.

Lutnick also stepped down from some business roles he has had at other organizations like the Newmark Group, a global commercial real estate advisor and service provider. 

He left his position as chairman of the board and executive roles at the company and divesting assets. Lutnick also settled a Newmark-related investor lawsuit recently contesting a bonus he received. The settlement allowed him to keep the money, Bloomberg said.

Early last year, Lutnick made some dire pronouncements about the commercial real estate market that's faced challenges related to the pandemic wave of remote work in an interview with Fox Business in which he anticipated that debt maturing would make for an "ugly" market.

In August 2024, Moody's Investor Service subsequently reported that there were some instances of concerns of this type last year, with $880 million office loans in commercial mortgage-backed securities maturing in July with a "dismal payoff rate of 14%."