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WASHINGTON U.S. President Donald Trump on Friday
ordered reviews of major banking rules that were put in place
after the 2008 financial crisis, drawing fire from Democrats who
said his order lacked substance and squarely aligned him with
Wall Street bankers.
Though the order was short on specifics, financial markets
embraced Trump’s signal that looser banking regulation is coming
and pushed bank stocks higher. The Dow Jones U.S. Banks stocks
index closed up 2.6 percent.
At a White House forum on Friday with U.S. business leaders,
including JPMorgan Chase’s CEO Jamie Dimon, Trump said
his administration expects “to be cutting a lot out of
That will involve a lot more than issuing an order, said
former Democratic congressman Barney Frank, co-author of the
2010 Dodd-Frank Wall Street reform law that raised capital
requirements for banks, restricted their trading by means of the “Volcker Rule,” and created the Consumer Financial Protection
Bureau to guard against predatory lending.
Trump “can’t make any substantial change in the financial
reform bill without Congress,” Frank told Reuters. “The language
in the order doesn’t do anything. It tells the secretary of the
Treasury to give them something to read. The tone of it is to
weaken the bill.”
Trump and other critics of the Dodd-Frank law say its
regulations have hindered lending. At the meeting with CEO’s on
Friday Trump said, “I have so many people, friends of mine, that
have nice businesses that can’t borrow money…because the banks
just won’t let them borrow because of the rules and regulations
Despite such criticisms, recent data from the Federal
Reserve Bank of St. Louis showed U.S. commercial-bank lending at
a 70-year high, climbing steadily since late-2010.
Democratic Senator Elizabeth Warren who lobbied for the
creation of the Consumer Financial Protection Bureau accused
Trump of forsaking middle and lower-income individuals to help
“The Wall Street bankers and lobbyists whose greed and
recklessness nearly destroyed this country may be toasting each
other with champagne, but the American people have not forgotten
the 2008 financial crisis – and they will not forget what
happened today,” she said in a statement.
Trump’s adviser leading the deregulation effort, National
Economic Council Director Gary Cohn, was previously a top
official at Goldman Sachs. Billionaire investor Carl
Icahn, meanwhile, is counseling Trump on regulation across the
One order signed by Trump requires the U.S. Treasury
Secretary to submit possible regulatory changes and legislation
modifying Dodd-Frank in 120 days, according to a White House
Trump’s pick for Treasury secretary, Steve Mnuchin, also a
former Goldman banker, has yet to be confirmed by the full
Meanwhile, a memo tells the Labor Department to review a “fiduciary rule” for brokers offering retirement advice that was
finalized in 2016. While early reports said Trump wanted to push
off the rule’s implementation, originally slated for April, by
180 days, the order did not mention any delay. The Labor
Department late on Friday said it was considering legal options
Representatives of the six largest U.S. banks – JPMorgan
Chase & Co, Bank of America Corp, Citigroup Inc
, Wells Fargo & Co, Goldman Sachs Group Inc
and Morgan Stanley – either declined to comment or did
not have an immediate comment.
Bankers, lawyers and lobbyists privately said Trump’s order
would not do much immediately. Also they said that they would
prefer less-extensive modifications to Dodd-Frank after spending
billions of dollars complying with the law.
Many want to make it “a little bit more user-friendly,” said
John Kanas, chairman of BankUnited, a lender with less
than $20 billion in assets.
House of Representatives Financial Services Committee
Chairman Jeb Hensarling, a Republican, told reporters at the
White House that Trump’s approach reflects legislation he has
drafted to review Dodd-Frank. Hensarling is expected to
re-introduce his bill allowing banks to choose between complying
with Dodd-Frank and holding more capital later this month.
Trump could also make changes simply by appointing new
personnel or not enforcing rules.
“A lot of the regulations of Dodd-Frank required a bit of a
cop-on-the-beat if you will, to ensure enforcement and if you
have a different cop-on-the-beat, they enforce different rules,
or they enforce the rules differently,” said FBR & CO financial
policy analyst Edward Mills.
Many regulators, though, were appointed by Trump’s
predecessor, President Barack Obama, and intend to complete
their terms. Trump cannot fire heads of independent agencies,
including the three top bank regulators: Federal Reserve Chair
Janet Yellen, Comptroller of the Currency Thomas Curry, and
Federal Deposit Insurance Corp Chairman Martin Gruenberg.
In addition, the term for Richard Cordray, the Consumer
Financial Protection Bureau director, stretches into next year.
Republican lawmakers are pushing Trump to fire Cordray, but a
federal court’s decision allowing him to has been stayed pending
Meanwhile, some U.S. financial policy leaders want to keep
the law. Chicago Fed President Charles Evans said on Friday
Dodd-Frank “has largely been helpful” and led to a banking
system with “more and better capital.” (Additional reporting by Suzanne Barlyn, Ayesha Rascoe, Richa
Naidu, Ann Saphir and Lauren Tara LaCapra)
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