Saturday, February 4, 2017

Donald Trump launches the unwinding of the financial regulation – The World

The us president has signed two decrees intended to return on the Dodd-Frank act passed in 2010 by Congress.

World | • updated | By

In the financial district of Wall Street, New York, in December.

Donald Trump has officially launched, Friday, 3 February, the process of dismantling of the reform on financial regulation, launched by Barack Obama in the aftermath of the 2008 crisis. The us president has signed two decrees intended to return on the Dodd-Frank act, which was passed in 2010 by Congress.

The gesture was for the symbolic moment. The first decree gives one hundred and twenty days to the secretary of the Treasury, Steven Mnuchin, to make recommendations for the purpose of amending this law, the purpose of which was to strengthen the stability of the financial sector. But, in fine, any repeal substantive law will require the agreement of Congress.

” today we sign the basic principles for the regulation of the u.s. financial system, said Mr. Trump, by initialling the two decrees. the Hard to do something more important than that, huh ? “ For him, the Dodd-Frank act is a ” a disaster “, nefaisant that complicate the lives of businesses and consumers, while slowing the growth.

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” Even if the intentions are strong, the dismantling of the law is complicated, warns Aurelian Borde, consultant at Sia Partners, New York. the In a first time, the Congress will have to enter adjustments, before regulators will interpret the new law and say how it should be applied. It can take years. On the other hand, in the short term, the new administration may attempt to weaken some regulators in placing, for example, at their head the leaders with positions much more accommodating to the banks, or reducing their means. “

address to the rule the so-called ” Volcker “

the Two provisions are particularly in the crosshairs of Mr. Trump. It is first to tackle the so-called rule ” Volcker “. This text prohibits, inter alia, to banking institutions to practice speculation for their own account. It also provides strong restrictions on the holding of participations in hedge funds or funds of private equity (invested in companies not listed on a stock Exchange). The main objective is to prevent the financing of risky assets, with deposits guaranteed by the federal State.

Read also : “Protectionism and financial liberalization, the explosive cocktail of Donald Trump “

the Other point of the Dodd-Frank act under the microscope : the Bureau of consumer financial protection (CFPB). This agency, created at the initiative of Elizabeth Warren, democrat senator from Massachusetts, is charged with regulating mortgages and credit cards, which had been the subject of numerous abuses during the financial crisis of 2008. But the republicans complain that the CFPB have imposed undue restrictions on consumers ‘ access to credit. The days of Richard Cordray to head the CFPB seem to now be counted.

Mr. Trump has signed on Friday, a second decree calling on the ministry of labour to delay the application of the ” rule trust “), which requires financial professionals to act primarily in the interest of their clients when it comes to giving advice about investments for their retirement. This rule is intended in particular to prevent them to direct their clients to investments for which the commissions are the highest. The lobbies of financial support that this rule limits the investment choices of retirees, forcing asset managers to offer the options the least risky. This measure should enter into force in April, but it is extended by ninety days in order to be rewritten.

” The banks are the most regulated in the world “

” Americans will be able to make better choices and access to better products [financial], because we’re not going to overwhelm banks with regulations that cost them, every year, billions of dollars “, argued Gary Cohn, the director of the national economic Council at the White House, in an interview with the Wall Street Journal. the ” I’m not telling you that we want to go back to the good old days. in We the best banks of the world and the best-capitalized, and we should use our competitive advantage. On the other hand, we also have the banks, the most regulated in the world. “

The question that arises is who will benefit the most this deregulation. During his electoral campaign, Mr. Trump spoke to the people neglected, who have been hit hard by the real estate crisis of 2008, blaming the attitude of banks on Wall Street. However, today, they are widely represented in the new administration.

Steven Mnuchin, after having held responsibilities at Goldman Sachs, took over OneWest, a savings bank specializing in mortgage loans, which had filed for bankruptcy after the subprime crisis. It has quickly built a reputation as a company without scruples, and multiplying the number of seizures. As to Gary Cohn, he was number two at Goldman Sachs, just before joining the team of Mr. Trump. The objective of the deregulation of financial markets ” has nothing to do with Goldman Sachs [or] with JPMorgan, Citigroup or Bank of America “ defended.

” A return to the box departure “

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Mr. Trump wants to allow banks ” to lend again “ (” pay again “). The new president believes that the financial institutions are too constrained by regulation to make loans. In the lightening, he hopes to improve the situation of the Americans.

This vision is, however, partially contradicted by the numbers. According to statistics from the federal Reserve (Fed, american central bank), the total amount of loans to facilities that have exceeded the 9 000 billion ($ 8 344 billion euros) in 2016, which is 25 % more than in 2013. Of course, the total amount of loans granted to SMES, has still not recovered to its pre-crisis level, but, now, the banks are forced to be much more scrupulous about the repayment capacity of their customers.

also Read : Donald Trump is ready to get back on the financial regulation

” The public discourse is to say that allowing a maximum of flexibility, everyone will enjoy it. But the historical reality shows that this is not quite what happened in 2007. In terms of state of mind, it looks a bit like a return to the box departure, “ says Borde.

pending the recommendations of Mr. Mnuchin, the wind of deregulation has already begun to blow in the Senate. The republican Patrick McHenry, vice-president of the financial services commission, in a letter dated January 31, was called to order severely the president of the Fed, Janet Yellen, demanding that she put an end, on the field, in any negotiations regarding banking regulation at the global level. According to him, the participation of the american central bank in such discussions goes against the political intentions of Mr. Trump and american interests. An attitude referred to as” not acceptable “.

Read also : The City is concerned the deregulation of Wall Street


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