President Donald Trump signed an executive order Friday ordering a 180-day review of two parts of the Dodd-Frank Act — the Orderly Liquidation Authority (OLA) and the construct and function of the Financial Stability Oversight Council.
Trump signed the orders at the same time that he directed Treasury Secretary Steve Mnuchin to begin the process of tax simplification.
As he signed the directives on Dodd-Frank, Trump said: "This is the subject of Financial Stability, the Oversight Council. Very important."
"This is Orderly Liquidation Authority. It doesn't sound like much, but it is. That's a biggie. It doesn't sound good, but it is," the president explained.
At least one industry group was quick to comment on the president's actions.
"SIFMA has long supported a regulatory authority to wind down a failing financial institution and eliminate taxpayer bailouts. We believe the current Orderly Liquidation Authority largely accomplishes this goal … yet stand ready to work with regulators and all stakeholders to evaluate possible enhancements that ensure taxpayers do not bear any future losses," said Kenneth E. Bentsen, Jr., president and CEO of the Securities Industry and Financial Markets Association, in a statement.
House Financial Services Committee Chairman Jeb Hensarling applauded Friday Trump taking action to stop regulators' ability to designate companies "too big to fail" and the use of the Dodd-Frank Act's bailout authority pending reviews by the Department of the Treasury.
Trump ordered Mnuchin to conduct a thorough review of OLA and provide a report to the President within 180 days of the date of this memorandum.
The review shall include:
- The potential adverse effects of failing financial companies on the financial stability of the United States;
- Whether the framework for using OLA is consistent with the principles set out in sections 1(b) and 1(c) of Executive Order 13772 of Feb. 3, 2017 (Core Principles for Regulating the United States Financial System);
- Whether the availability or use of OLA leads or could lead to excessive risk taking on the part of creditors, counterparties, and shareholders, or otherwise leads market participants to believe that a financial company is "too big to fail"; and
- Whether a new chapter in the U.S. Bankruptcy Code, in which the claims against a failed financial company would be resolved pursuant to the procedures of bankruptcy law rather than the provisions of the Dodd-Frank Act, would be a superior method of resolution for financial companies.
- Trump also directed Mnuchin to conduct a thorough review of the FSOC determination and designation processes under section 113 and section 804 of the Dodd-Frank Act and provide a written report to the President within 180 days of the date of this memorandum.
"Democrats promised the American people that Dodd-Frank would end 'too big to fail' and bailouts, but with Dodd-Frank the big banks got even bigger and bailouts are enshrined into law," Hensarling said in a statement.
