Following up on his February executive order on financial regulations, President Trump said Tuesday that his administration is currently “streamlining” Dodd-Frank regulations and may replace many of them entirely. However, any actual changes to the law may not be felt by treasury and finance for quite a while.
Speaking to a room full of chief executives from PepsiCo, Wal-Mart, IBM and others, Trump said that the bankers present will be “very happy” about the work his administration is doing. While he conceded that some parts of Dodd-Frank will need to remain in place, he said that his administration is doing a “major elimination” of the “horrendous” regulations in the Wall Street reform law, which was enacted in 2010 to curb the unethical and irresponsible activity that led to the 2008 financial crisis.
But, as Reuters noted, making drastic changes to the law would require congressional approval—though there is some “wiggle room” for regulators to make changes through a formal rule-making process.
Whatever might be coming, we won’t find out until June when Treasury Secretary Steve Mnuchin releases his report outlining potential changes to the legislation. But any actual changes may come much later, given that Congress is currently focused on healthcare and tax reform.
Financial CHOICE Act 2.0
Also on Tuesday, House of Representatives Financial Services Committee Chairman Jeb Hensarling (R-Texas) revealed that he plans to introduce an updated version of the Dodd-Frank-gutting Financial CHOICE Act by the end of the month. The new version requires the chairman of the Securities and Exchange Commission to establish an advisory committee on the SEC’s enforcement policies and practices, and increases the threshold for Regulation A+ offerings from $50 million to $75 million.
Like the original version, the new bill severely curtails the Consumer Financial Protection Bureau (CFPB)’s power. However, it takes a different approach to reestablishing the CFPB’s leadership. Whereas the original version would have replaced the CFPB director with a bipartisan commission, CHOICE 2.0 renames the agency itself as the Consumer Financial Opportunity Agency, an executive agency with a sole director removable at will and a deputy director appointed and removed by the president.
But new version of bill isn’t as aggressive as the original version, in some respects. While the original version would have restructured the Federal Housing Finance Agency (FHFA) and the Office of the Comptroller of the Currency (OCC) as bipartisan commissions, the new version only makes the FHFA director removable at will by the president, and doesn’t touch the OCC. However, the changes that CHOICE 1.0 would have made to the the Federal Deposit Insurance Corporation (FDIC)—establishing it as a bipartisan commission with all five commissioners appointed by the president and removing the Comptroller of the Currency and the CFPB director from the board—remain intact.
Regardless of any changes, the new Financial CHOICE Act is bound to face opposition from Democrats and possibly even some Republicans in Congress. Rep. Maxine Waters, (D-Calif.) already nicknamed the bill “Wrong CHOICE Act 2.0”, condemning it for stripping the CFPB’s authority and repealing the Volcker Rule.
Waters also criticized the CHOICE Act for repealing the Financial Stability Oversight Council (FSOC)’s tool for designating certain non-banks as systemically important financial institutions; that tool subjects them to enhanced supervision and regulation. She noted that only four non-banks have been designated as such, and one, GE Capital, de-risked and has already been taken off the list.
So again, the battle over financial regulation is bound to continue for the foreseeable future.