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Trump Takes First Step to Scale Back Financial Regulations

Congress signed a bill letting oil and gas companies keep commerical developments hidden, and Trump planned to order a review of the Dodd-Frank financial oversight law

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    President Donald Trump signed two directives Friday, scaling back the sweeping 2010 Dodd-Frank financial regulatory framework enacted after the 2008 financial crisis and halting implementation of a rule that requires financial advisers to act in the best interests of their clients. (Published Friday, Feb. 3, 2017)

    President Donald Trump is taking his first steps aimed at scaling back financial services regulations, and the Republican-run Congress cast a vote early Friday signaling that it's eager to help.

    The president signed an executive order Friday that will direct the Treasury secretary to review the 2010 Dodd-Frank financial oversight law, which reshaped financial regulation after the 2008-09 financial crisis.

    Trump also signed a presidential memorandum that instructs the Labor Department to delay implementing an Obama-era rule that requires financial professionals who charge commissions to put their clients' best interests first when giving advice on retirement investments.

    While the financial oversight order won't have any immediate impact, the administration's intent is clear. The law has been a disaster in restricting banks' activities, Trump said earlier this week. "We're going to be doing a big number on Dodd-Frank."

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    During a meeting with business leaders, including JPMorgan Chase CEO Jamie Dimon on Friday, he said, "Frankly I have so many people, friends of mine that have nice businesses that can't borrow money. They just can't get any money because the banks just won't let 'em borrow because of the rules and regulations of Dodd-Frank."

    "The Dodd-Frank Act is a disastrous policy that's hindering our markets, reducing the availability of credit and crippling our economy's ability to grow and create jobs," said Press Secretary Sean Spicer.

    Earlier Friday, the Senate used an unusual pre-dawn vote to approve legislation, 52-47, killing a regulation that has required oil and gas companies to disclose payments to the U.S. or foreign governments for commercial development. The House approved the measure this week, and Trump is expected to sign it.

    Republicans said the rejected regulation gives foreign competitors valuable information about U.S. firms and would hurt the economy. Democrats said erasing the requirement means big companies will be able to hide questionable dealings with foreign governments like Russia.

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    Trump pledged during his campaign to repeal and replace the Dodd-Frank law, which also created the Consumer Financial Protection Bureau. A senior White House official outlined his executive order in a background briefing with reporters Thursday.

    The president discussed the topic with top CEOs and banking executives at a meeting Friday morning at the White House, where attendees included Jamie Dimon, the CEO of JPMorgan Chase.

    "There's nobody better to tell me about Dodd-Frank than Jamie, so you're going to tell me about it," Trump said.

    He told the group that he expects his administration "to be cutting a lot out of Dodd-Frank because frankly I have so many people, friends of mine that have nice businesses that can't borrow money. They just can't get any money because the banks just won't let 'em borrow because of the rules and regulations of Dodd-Frank."

    Former Congressman Barney Frank says any scale-back of his namesake financial regulations would have a difficult time passing Congress, because many Republicans' constituents favor policing Wall Street.

    The Massachusetts Democrat said Friday he found it difficult to understand how Trump now wants to give Wall Street what it wants, when he pledged to stand up to Wall Street during the presidential campaign. Frank also voiced concerns that Trump's appointees won't use their authority to enforce financial rules. 

    Trump's order won't have any immediate impact. But it directs the Treasury secretary to consult with members of different regulatory agencies and the Financial Stability Oversight Council and report back on potential changes.

    That likely includes a review of the CFPB, which vastly expanded regulators' ability to police consumer products — from mortgages to credit cards to student loans.

    Trump administration officials, like other critics, argue Dodd-Frank did not achieve what it set out to do and portray it as an example of massive government over-reach.

    "Banks are forced to hoard money because they're forced to hoard capital and they can't take any risk. We need to get banks back in the lending business," said White House National Economic Council Director Gary Cohn in an interview with Fox Business Network. "That's our number one objective."

     

    But many Democrats see it differently, including Sen. Elizabeth Warren, who was behind the formation of the Consumer Financial Protection Bureau, formed as part of the Dodd-Frank law.
    "Donald Trump talked a big game about Wall Street during his campaign — but as president, we're finding out whose side he's really on," Warren said in a statement. "The Wall Street bankers and lobbyists whose greed and recklessness nearly destroyed this country may be toasting each other with champagne, but the American people have not forgotten the 2008 financial crisis — and they will not forget what happened today."

     

    But many Democrats see it differently, including Sen. Elizabeth Warren, who was behind the formation of the Consumer Financial Protection Bureau, formed as part of the Dodd-Frank law.

    "Donald Trump talked a big game about Wall Street during his campaign — but as president, we're finding out whose side he's really on," Warren said in a statement. "The Wall Street bankers and lobbyists whose greed and recklessness nearly destroyed this country may be toasting each other with champagne, but the American people have not forgotten the 2008 financial crisis — and they will not forget what happened today."

    "You can blow up the financial system and really crush the American economy. I think that's where they're headed," said Michael S. Barr, a former assistant treasury secretary for financial institutions and a key architect of the law.

    Trump's presidential memorandum instructs the Labor Department to delay implementing the "fiduciary rule," which was aimed at blocking financial advisers from steering clients toward investments with higher commissions and fees that can eat away at retirement savings.

    "You could expect pushback, that this is about favoring Wall Street over Main Street," said Phillip Swagel, an assistant Treasury secretary for economic policy in the George W. Bush administration.

    Going after the bureau, Barr said, would likely hurt consumers, "including some of President Trump's strongest supporters."

    The rule, which was set to take effect in April, will be delayed for 90 days while it's reviewed.

    Critics argue the rule limits retirees' investment choices by forcing asset managers to steer them to the lowest-risk options.