Trump ignites political fight over U.S.
banking law reforms
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[February 04, 2017]
By Sarah N. Lynch and Lisa Lambert
WASHINGTON (Reuters) - 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. <.DJUSBK> [.N]
At a White House forum on Friday with U.S. business leaders, including
JPMorgan Chase's <JPM.N> CEO Jamie Dimon, Trump said his administration
expects "to be cutting a lot out of Dodd-Frank."
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 in Dodd-Frank."
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 banks.
"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 <GS.N>. Billionaire investor Carl Icahn, meanwhile, is counseling
Trump on regulation across the government.
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 official.
Trump's pick for Treasury secretary, Steve Mnuchin, also a former
Goldman banker, has yet to be confirmed by the full Senate.
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 for delaying.
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After signing, U.S. President Donald Trump holds up an executive
order rolling back regulations from the 2010 Dodd-Frank law on Wall
Street reform at the White House in Washington February 3, 2017.
REUTERS/Kevin Lamarque
Representatives of the six largest U.S. banks – JPMorgan Chase & Co
<JPM.N>, Bank of America Corp <BAC.N>, Citigroup Inc <C.N>, Wells Fargo
& Co <WFC.N>, Goldman Sachs Group Inc <GS.N> and Morgan Stanley <MS.N> –
either declined to comment or did not have an immediate comment.
BANKERS CAUTIOUS
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 <BKU.N>, 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 appeal.
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."
(Reporting by Sarah N. Lynch and Lisa Lambert; additional reporting
by Suzanne Barlyn, Ayesha Rascoe, Richa Naidu, Ann Saphir and Lauren
Tara LaCapra; Editing by Kevin Drawbaugh and Chizu Nomiyama and
Clive McKeef)
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