US President Donald Trump has signed an executive order that could potentially eradicate the Dodd-Frank financial regulations.
Trump Orders A Scale Back Of US Banking Regulations
President Trump has taken his first step to deregulate the US financial system through an executive order.
Signed in 2010 following the 2008-09 global economic meltdown, the Dodd-Frank financial regulations were put in place to mitigate yet another financial crisis.
With some on Wall Street claiming that the laws are excessively restrictive, Mr. Trump has asserted that the piece of legislation is a ‘disaster’.
While on the campaign trail, Mr. Trump pledged to eliminate this particular Act under which the Consumer Financial Protection Bureau (CFPB) was create.
The CFPB is tasked with the responsibility of ensuring that financial institutions are fair in their treatment of US consumers.
Some supported the move while others denounced it. According to Jim Himes, a Democrat congressman, the Dodd-Frank Act was aimed at, “Getting at those things that went horribly wrongs especially problems in the mortgage market.”
However, those in the Trump administration have asserted that the legislation only created ‘big government’ that is overly controlling and did not actually achieve its initial objective.
News of the executive order saw a spike in the value of banking shares in European stock markets and on Wall Street with JP Morgan Chase and Goldman Sachs shares rising 3% and 4% respectively.
Gay Cohn, a Trump advisor and a former executive at Goldman Sachs said, “Banks will now be able to provide products that are priced more efficiently.”
Jasper Lawler, a market analyst at the London Capital Group also noted that eliminating some parts of the Dodd Frank legislation would be beneficial in that it would allow competition between smaller banks, which would in turn translate into competitively priced products for the consumer.
Lawler however added that a complete scrapping of the legislation increases the risk of a repeat of the events of 2008.
The executive order requires the Treasury secretary to discuss with other regulatory bodies and with the Financial Stability Oversight Council to determine areas of the Act that could potentially be changed.
The US president further signed a presidential memorandum that would require the Labor department to delay a rule brought in during the Obama administration that requires financial institutions to put the needs of their client first when providing retirement investments advice.
This fiduciary rule was to be effective starting April but will now be placed under review for 180 days while it is reviewed.
According to critics, the rule is too restrictive as forces financial advisors to steer retirees to low risk investment options.