President Trump and congressional Republicans, with the help of some Democrats, are enjoying a sudden burst of progress in their agenda to lighten regulations on the financial industry.
On Thursday, Trump signed the biggest rewrite of the 2010 Dodd-Frank law since President Barack Obama signed it after the 2008 financial crisis. Among other changes, the legislative package would lighten the burden of federal oversight for many regional banks and ease mortgage rules and other restrictions for smaller banks and credit unions.
A bipartisan group of senators had worked for years to assemble the bill. Although it is not the replacement of Dodd-Frank that Republicans and Trump once hoped for, it is a significant legislative achievement given the divisions in Congress.
“As a candidate, I pledged that we would rescue these community banks from Dodd-Frank — the disaster of Dodd-Frank — and now we are keeping that commitment,” Trump said at the signing ceremony.
The legislation was just one of the advancements for the Trump administration and GOP effort to ease the restrictions put in place after the financial crisis.
Also on Thursday, the Senate confirmed Jelena McWilliams to head the Federal Deposit Insurance Corporation. With McWilliams installed at the regulatory agency, Trump’s bank regulatory team is nearly complete and poised to implement administrative changes to Dodd-Frank.
The installment of McWilliams, a former bank lawyer and GOP aide, will “drive regulatory modernization,” said Anthony Cimino, head of government affairs for the Financial Services Roundtable.
Speaking on the Senate floor, liberal Sen. Elizabeth Warren, D-Mass., agreed with the assessment that McWilliams was set to accelerate Dodd-Frank rollbacks. “Donald Trump’s Wall Street mercenaries have taken aim at a lot of critical post-crisis rules,” Warren said, and McWilliams will aid them.
First in the crosshairs is the Volcker Rule, the Dodd-Frank regulation that prohibits banks that receive deposit insurance from speculative trading.
The Federal Reserve announced Wednesday that it would meet next week to vote on a proposal to revise the rule. Banks expect that the Trump administration will significantly lift the burdens of complying with the rule, partly by allowing more short-term trades to proceed without the presumption that they are speculative.
Separately, regulators have moved toward lowering one of the capital requirements imposed on big banks.
Also, on Wednesday, Comptroller of the Currency Joseph Otting opened the door to banks offering more payday-like loans. Otting, a Trump appointee and former banker, encouraged banks to offer short-term installment loans to people with poor credit, effectively reversing Obama-era guidance to banks to get out of the market.
In all, it was a productive week for Republicans, the banking industry, and centrist Democrats who gained a bipartisan accomplishment.
For Congress’ Wall Street critics, it was a setback.
“What problem is this Congress trying to solve?” asked Sen. Sherrod Brown of Ohio, a lawmaker with populist tendencies who is the top Democrat on the Senate Banking Committee.
In a floor speech, Brown railed against the banking bill, McWilliams’ confirmation, the payday guidance, and more. His colleagues, he said at one point, are “a bunch of politicians that shill for the banks.”
