Donald Trump’s Transition Team: We Will ‘Dismantle’ Dodd-Frank
Posted by hkarner - 11. November 2016
This would definitely be the greatest disaster to the finance industry, opening the doors for speculation again. This will be the acid test on whether Trump is just a fool or criminally threatening mankind. (hfk)
Source: The Wall Street Journal
GOP eager to make litany of changes that until recently stood little chance of avoiding President Barack Obama’s veto
WASHINGTON—President-elect Donald Trump’s transition team promised to dismantle the 2010 Dodd-Frank law, declaring that the coming administration will seek to remake the way the U.S. oversees the financial sector.
Tuesday’s Republican sweep, and Mr. Trump’s commitment to focus on the issue, has the GOP salivating over a wish list of Dodd-Frank changes that until recently stood little chance of avoiding President Barack Obama’s veto pen. The lineup includes everything from regulatory exemptions for community banks and regional banks to a new regime for insurers and asset managers to curbs on the federal government’s influence over consumer-finance products such as mortgages and payday loans.
The brief note on Mr. Trump’s new website was the first time since Tuesday’s election that the president-elect addressed financial regulatory policy. It was consistent with Mr. Trump’s campaign-trail rhetoric, blaming the Obama administration’s signature response to the financial crisis for a tepid economy and promising to “replace it with new policies to encourage economic growth and job creation,” but providing few details.
Another sign that Mr. Trump may make Dodd-Frank overhaul a priority is the news that his transition team is considering as a candidate for Treasury secretary one of the leading critics of Dodd-Frank on Capitol Hill. People familiar with the matter said that in Trump aides’ preliminary discussions about possible candidates to fill that slot, they are looking at Texas Rep. Jeb Hensarling, the chairman of the House Financial Services Committee, who has crafted a deregulatory alternative to the 2010 law.
Mr. Trump’s talk of deregulation has helped fuel a rally in bank stocks this week. After struggling for much of 2016, bank stocks rose sharply Wednesday and Thursday. The KBW Nasdaq Bank index now is up nearly 12% on the year, about double the gain in the S&P 500. European bank stocks also leapt, reflecting hopes the U.S. will no longer aggressively push tougher regulations on global banks.
Banks by and large would welcome a re-examination of the Consumer Financial Protection Bureau and other elements of Dodd-Frank, but they also have much invested in the law, which they point to as evidence that bailouts are a thing of the past.
Goldman Sachs Group Inc. CEO Lloyd Blankfein said at a conference sponsored by the New York Times on Thursday that it “could be appropriate to look at” repealing some parts of Dodd-Frank, but he added that he wouldn’t “want to repeal in toto.”
Whether Mr. Trump can keep his vow to upend Dodd-Frank, and how far those changes will reach, depends in large part on what happens in Congress. Financial regulation hasn’t been mentioned by Mr. Trump as something he would thrust on the White House’s agenda during his first 100 days in office and Republicans are tempering expectations. “I don’t think that you’re going to see major efforts to throw out Dodd Frank wholesale,” said a person who has advised the Trump campaign on regulatory policy.
Mr. Hensarling last year laid out a blueprint for replacing Dodd-Frank that many observers view as a starting point. In an interview Thursday, he said the Trump team’s statement “is music to my ears,” and that he planned to make the bill, dubbed the Financial CHOICE Act, his top priority next year.
He said he had spoken with Mr. Trump’s team about the matter in the past, adding: “I think they like the thrust of the legislation and many major components of it.”
As for the prospect of him taking the Treasury slot, the Texas lawmaker said he would “certainly have the discussion” if the Trump administration comes calling, “but I’m not anticipating the telephone call.”
Mr. Hensarling’s bill is built around a trade-off: Banks can free themselves from various regulations, such as tough stress testing, as long as they maintain capital equal to at least 10% of total assets and high ratings from their regulator.
That would immediately help many small locally focused banks that tend to be better capitalized, but not necessarily megabanks with sprawling international operations that generally have capital levels below that level.
In the interview, Mr. Hensarling said he would try to convince Mr. Trump’s team to support his approach instead of their campaign-trail promise to reinstate the Depression-era Glass-Steagall law separating traditional lending from investment banking.
Mr. Hensarling’s bill also would make other significant changes, such as requiring that many financial regulations be subject to cost-benefit analysis for the first time and tying the budgets of regulatory agencies, including the CFPB, to congressional appropriations.
The CFPB has enjoyed a high level of independence by getting its funds from revenues insulated from the legislative process.
It is possible Senate Democrats could seek to block GOP efforts they view as overreach, but lobbyists and congressional aides are optimistic that some moderate Democrats up for re-election in 2018 in states that voted for Mr. Trump will be inclined to compromise. Republicans also may come under pressure to change the Senate rules to ease passage of controversial legislation, but it is far from clear they would make that move.