Trump moves to roll back financial regulation

President Donald Trump took the first step Friday to undoing key reforms enacted after the 2008 financial crisis, aiming to scale back regulatory burdens on the banking industry. The initiative aims to scrap parts of the so-called Dodd-Frank law, which backers say is aimed at curbing the actions of the finance sector that led to the "Great Recession," but which critics claim creates red tape that stifles the industry.
Officials said Trump was set to sign two executive actions asking the Treasury and the Labor Department to study ways of reforming regulations that were designed to make markets safer and give consumers more protection.
One order will ask the Treasury Department to identify possible changes to the "Wall Street Reform and Consumer Protection Act" signed into law in 2010 by president Barack Obama. Among other things, the legislation created the consumer financial protection bureau and required banks to keep more capital on hand to prevent over-leveraging.
The review will also target the so-called "Volcker Rule," which curbs some speculative investments. "(We) believe that Dodd-Frank in many respects was a piece of massive government overreach," said a senior administration official.
"It imposed hundreds of new regulations on financial institutions, it established an enormous amount of work and effort for financial firms." Republicans have made no secret of their dislike for the consumer financial protections bureau, which looks set to be targeted in the review. Any substantial repeal of Dodd-Frank would require congressional action, but the Trump White House is keen to send a signal that it is ready to slash red tape.
"We want to have very deep, very vibrant, very open, very transparent markets without having an enormous burden of regulation," said the official. Another executive order to be signed takes aim at the so-called fiduciary rule, which legally obliges financial advisors to act in their clients'' best interest. "We think this was a complete miss on what they were trying to do," the official said, adding it had been expensive for investment firms.
The rule was scheduled to come into effect in April, but will be deferred, pending review. "Americans are going to have better choices and better products because we''re not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year," Trump advisor and head of the White House National Economic Council, Gary Cohn, told The Wall Street Journal.
"The banks are going to be able to price products more efficiently and more effectively to consumers," said Cohn, a former Goldman Sachs executive. John Berlau of the Competitive Enterprise Institute welcomed the moves, saying they would "greatly benefit middle-class investors, entrepreneurs, and consumers." In a blog post, Berlau said the fiduciary rule opens financial firms to arbitrary lawsuits and said Dodd-Frank "has been a huge burden on community banks, credit unions, and consumers." Trump is signing the measures on the same day he meets with business leaders that include J P Morgan Chase chief executive Jamie Dimon and BlackRock CEO Laurence Fink.
Market analyst Jasper Lawler at the London Capital Group believes that "unwinding some of Dodd-Frank is a good thing because it will enable smaller community banks to compete, offering competition to consumers." However, repealing too much of Dodd-Frank "puts the entire system at risk of a repeat of 2008," the analyst said. Sweden''s minister for financial stability Per Bolund meanwhile warned the moves could destabilise markets. Bolund told Swedish news agency TT that these actions were "dangerous, harmful and extremely unfortunate," and called for efforts to oppose the Trump actions.