President Trump is promising to do "a big number on Dodd-Frank," the consumer protection legislation that was passed in 2010 and, among other things, enabled the creation of the Consumer Financial Protection Bureau.
Trump says that financial regulation and consumer protection are fine, but he said that the rules put in place by Dodd-Frank, along with other government regulations, are strangling businesses.
At a White House meeting with small business leaders today, Trump called Dodd-Frank "a disaster" that stymies entrepreneurs who want to start new businesses and retards the growth of existing businesses large and small.
The meeting followed a brief event at which Trump signed an executive order calling for the repeal of two regulations each time a new regulation is implemented, fulfilling a pledge he made on the campaign trail.
Vowed to dismantle
The Dodd-Frank Act -- named for its primary sponsors, ex-Sen. Christopher Dodd (D-Connl) and ex-Rep. Barney Frank (D-Mass.) -- requires banks to undergo periodic checks to monitor their liquidity and withstand financial shocks like the 2008 collapse of the housing market. It also provides the legal framework for the Consumer Financial Protection Bureau (CFPB), which has clamped down on financial services of all sorts, including mortgage and student loan lending and servicing, payday loans, auto finance, and credit cards.
The CFPB also faces a serious legal threat. In an October 2016 ruling, a divided federal appeals court found the structure of the CFPB unconstitutional. The CFPB filed a petition for a rehearing of the decision, and that petition is currently pending before the court. Consumer advocates and 17 state attorneys general have filed briefs supporting the CFPB.
Trump's advisers have vowed to dismantle Dodd-Frank but haven't said how they would go about it, and Trump did not elaborate on that today.
While there has been some pressure from parts of the financial services industry to abolish Dodd-Frank, not everyone thinks that's a good idea. Financial service firms have adapted to the regulations and, in some cases, expanded into other lines of business and a wholesale change now could upend their strategies, the theory goes.
"We're not asking for wholesale throwing out Dodd-Frank," J.P. Morgan Chase CEO Jamie Dimon said at a December 2016 conference, according to a New York Times report.
2 for 1 order
Trump's decree that two regulations be eliminated for each new one isn't being well-received by legal experts who say it sounds good but will be difficult to administer.
"The simplicity of the 2 for 1 Executive Order will have a lot of popular appeal to the anti-Washington crowd but it will be extraordinarily difficult to implement," said Laurence Platt, Consumer Financial Services partner at Mayer Brown.
"The standard that the incremental cost of new regulations shall be no greater than zero really means that there will be no new regulations," Platt said. "What does an agency do if Congress mandates an agency to issue implementing regulations? And how can an agency repeal two regulations that Congress previously mandated the agency to issue?”
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