(Bloomberg) — It took seven years to put in place the regulatory strictures imposed on Wall Street after the financial crisis. They won't be removed fast or easily.
President Donald Trump's Friday directive that set in motion a scaling back of the Dodd-Frank Act was more pageantry than policy, said lawyers and former government officials who worked on the 2010 law. While the expectation for quick action sent bank stocks higher Friday, numerous road-blocks remain before lenders get relief.
Chief among the hurdles is that Trump doesn't have any of his appointees running the agencies that oversee financial rules. Congress, too, will have to pass new legislation for many Dodd-Frank regulations to be eased. And the president's decision to put two former Goldman Sachs Group Inc. partners in charge of the effort — less than a decade after the bank's traders helped bring the economy to the edge of collapse — galvanized opposition from Democrats.
Trump's order is "more of a signal to the marketplace than real action," said Richard Hunt, who runs the Consumer Bankers Association, a group that represents retail banks. "This is the second inning of a nine-inning regulatory re-balancing."
Obama safeguards
Regardless of the timing, Trump's action demanding that regulators produce a study on financial rules within 120 days starts the process of getting rid of safeguards the Obama administration enacted after the 2008 meltdown. Regulations the new administration plans to target include a ban on proprietary trading, a requirement that risky financial companies be subject to tough Federal Reserve oversight, and rules for taking down failed banks. The Consumer Financial Protection Bureau may also be on the chopping block.
A separate measure Trump signed, which may delay a controversial Labor Department rule requiring brokers who manage retirement accounts to put their customer's interest first, is likely to have more teeth and move more quickly, lawyers said. That directive was embraced by much of the industry, which has long said the regulation will drive up their costs and make it harder to provide financial advice to their clients.
Trump has promised to get rid of burdensome regulations on business, though few thought he would embrace easing rules on Wall Street as much as he has. On the campaign trail, he billed himself as an economic populist and often took shots at bankers. Trump's "Argument for America," a two-minute advertisement that ran days before the election, featured Goldman Chief Executive Officer Lloyd Blankfein in an segment about corporate chieftains pocketing the wealth of American workers.
President Trump has promised to get rid of burdensome regulations on business. (Photo: iStock)
Dimon's advice
Now, ex-Goldman executives populate the top echelons of the Trump administration and two of them, National Economic Council Director Gary Cohn and Treasury Secretary nominee Steven Mnuchin, are slated to be the point men on the Dodd-Frank rollback.
On Friday, Trump vented that the law had made it difficult for his business friends to get loans, and boasted to a group of executives gathered at the White House that he was getting feedback on how to fix it from an ideal adviser: JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon.
Democrats seized on the comments.
Trump made his announcement "literally standing alongside big bank and hedge fund CEOs," said Democratic Senator Elizabeth Warren of Massachusetts. She's expected to be among those leading the fight to prevent an overhaul of Dodd-Frank in the Senate, where passing a law requires 60 votes to overcome a filibuster. Republicans hold just 52 seats.
