Two executive orders were signed by Trump this Friday in Washington, reverting financial regulations on Wall Street Banks. This also included financial consultants that were involved in the marketing and distribution of high-cost investment schemes with large commissions.
A white house adviser added, that while the directives do not take effect immediately, they do request involved federal agencies to investigate the matter and remove the present or pending restrictions.President Trump is strongly against the Dodd-Frank rulings. He commented that they make the process of legitimate investing, financing, and trade significantly less efficient than they can be. In his words, the Dodd-Frank Wall Street rules lay down the core principles of the United States Financial System.
What is The Dodd-Frank Act?
After the economic meltdown and recession in 2008, to mitigate such adversities, legislative authorities responsible for framing the Dodd-Frank Act amended the bill to include an array of critical reforms. The bill sought to specify an amount – an increase to the prior one – which capital banks were required to hold onto, allowing a fail-safe in the event of loan losses. In similar lieu, it also made it mandatory for banks to invest their capital into resources which could be quickly liquidated.
A few salient features of the Act included:
-An implementation of a system of Global Systematically Important Banks (G-SIBS) which must hold and invest an additional portion of their assets.
-Making the global giants amongst banking corporations liable to a set of incremented control measures. For instance, banks with over $50 billion worth of assets were subject to the scrutiny of the Federal Reserve which must run certain annual tests under the Dodd-Frank Act.
-The founding of a Consumer Financial Protection Bureau granted the power to protect consumers from malpractice about financial products.
While the necessity of the Dodd-Frank Act can be questioned, there is no debating the fact that it has altered the financial services and banking industry significantly. The central issue lies in whether this transformation can be reversed, like a brief phase in the ages of trading, or whether it is permanent.
Trump’s view is that repealing the Dodd-Frank Act will return to the American people, the access and freedom to their retirement savings – said Rep. Ann Wagner, R-Mo who presided over the Oval Office signing ceremony with President Trump. To this effect, he signed two executive orders during the Ceremony.
The first executive order targetted the Dodd-Frank Wall Street Reform and the Consumer Protection Act. It sought to abolish the Volcker Rule preventing banks from investing in assets based on their independent jurisdiction. The order was directed towards the secretary of the Treasury to analyze and comment on the Dodd-Frank Act and correspond with the president regarding their findings.
With the proposed reforms, the provision requiring regular liquidation of assets of multinational banking organizations may be eliminated. The executive order came as a response to a controversy stirred by the Justice Department’s Office of Legal Counsel questioning the authority of courts to hold such banks liable in cases of bankruptcy.
The second executive order was a memorandum issued to the Secretary of Labor requesting a delayed implementation of a rule making it mandatory for financial consultants to act in the best interests of their clients. Called the “Fiduciary Rule,” it was due to be commenced starting April 10th. Active proponents of the rule protested that it would prevent consultants from associating with clients who did not offer a high net worth.
Democrats believe that President Trump’s actions will ultimately recreate the scenario leading to the economic meltdown in 2008. Sen. Bob Casey, D-Pa commented on Trump’s hypocrisy – pointing out that during his campaign, Trump claimed to be on Wall Street and was inclined towards implementing more regulations and restrictions on their proceedings, but then went on to recruit billionaires and bankers into his administration. “You can’t be objective when money is involved, and there is nothing stopping you from going out and getting it,” he says.