In 2010, amid the backlash in 2007-2008 of financial bailout set upon the banks by the Federal government, the Obama administration put into place what came to be known as the Dodd-Frank Act (also formally known as the “Dodd-Frank Wall Street Reform and Consumer Protection Act – a mouthful). The basic gist of the law was meant to protect tax payers and consumers by setting certain conditions, regulations, and preventive protocols into place so financial institutions would not succumb to such tragedies dumbed down to streetwise colloquialisms such as, “too big to fail.”
Now, President Trump seeks a work-around to reform these policies.
Attempts to circumvent Congress in order to apply a slew of changes to the regulatory policies set in place by the Dodd-Frank Act, many speculate, would heavily favor Wall Street while simultaneously dismantling many pieces crucial to the structure of the Act signed in 2010 by President Barack Obama. It has been noted that President Trump continues to nominate heads of prominent financial agencies that favor his political ideals, and so far he has managed to get Secretary of the Treasury Steven Mnuchin and Securities and Exchange Commission Chairman Jay Clayton past the initial test that is Congressional approval, while other positions wait to be filled and are temporarily held by “acting” heads or maintained by those instated by President Obama.
Secretary Mnuchin recently proposed over 100 changes within a 150-page document on behalf of President Trump, many of which – he maintained – would go through channels of approval with regulators rather than Congress itself. In fact, Mnuchin himself estimated, “80% of the substance in the report can be accomplished by regulatory changes, and about 20% by legislation.”
Many of these changes, Democrats noted, would likely impose relaxing effects on the currently-implemented Dodd-Frank Act – changes such as restricting authority of the Consumer Financial Protection Bureau, relaxing restrictions on trade operations for big banks and easing back on the stress tests the same banks must undergo annually to ensure they can perform.
The proposals, while met with high regard from trade groups, did receive some light points of criticism – particularly in setting specific levels for bank assets before subjecting them to more rules regarding operation. But, the greatest criticisms came, without surprise, from the Democratic party – many of whom believe that the new regulations ready to be put into place are little more than a “handout to Wall Street” that could negatively impact the typical American consumer. Senator Elizabeth Warren, specifically, made claims that the regulatory reforms would only lend themselves to favor big banks and would further run the risk of corruption within financial institutions and the abuse of these institutions against American consumers. Others such as Senator Sherrod Brown also pointed out the Treasury’s significant neglect toward consumer groups as opposed to trade industry groups during consultations regarding these proposed regulatory reforms.
Unfortunately, hinging on the success of implementing these changes through regulatory channels as opposed to legislative ones, it doesn’t appear as if the Democratic party or any reform advocates will have much say in the new policies that the Trump administration will attempt to impose against the framework of the Dodd-Frank Act.