It is often said that beauty is in the eye of the beholder, and that certainly seems to be the mantra of “the swamp” these days. To those who reside in the left section of the smelly marsh, there is nothing appealing about rewriting the rules for Wall Street by easing up on regulations. However, if you hail from the right side, deregulation has the alluring power to loosen the chains of oversight and boost the economy.
After the financial crisis in 2008, the knee jerk reaction by lawmakers to regulate everything related to financial institutions did more harm than good. Across the United States, those hit the hardest were small and medium size lenders in the banking sector who experienced death by paralysis. Community banks closed their doors, as they could not afford the increase in labor and technology costs required to be compliant with the mandates. That is not to say the “big banks” didn’t suffer under from the enactment of Dodd-Frank. Giant players like Citibank, Bank of America and Chase lost significant market share in the mortgage loan arena and are required to submit balance sheets annually for stress tests and hold more shareholder capital in cash.
While President Trump awaits the Senate confirmations of some key posts, he and other members of his administration are beginning discussions to pave the way for deregulation efforts. Of course, this has many liberals warning nothing short of a full on a financial crisis like none we have seen in the past; while conservatives believe the more government rules there are, the more problematic it will be to grow a prosperous and robust economy.
A Recent article in The Wall Street Journal summarizes the six main issues under consideration for change and reveals that the regulations are massive, every bit as tedious as the tax code, and will not be easy to unravel.
Partisan tensions on Capitol Hill will make it difficult to make changes through legislation, meaning some items on the industry’s wish list, such as the full repeal of the Volcker rule, are unlikely. But that inertia doesn’t restrict agency officials, who typically have broad discretion on how to implement rules that stem from legislation Congress has passed.
Each issue is complex, with multiple tentacles reaching out to trading desks, banks, and corporate boardrooms, not to mention the Federal Reserve, SEC, Labor Department, and Consumer Financial Protection Bureau to name a few. Get the picture? President Trump and his team seem to fully understand this is going to be yet another uphill battle. If support to pass legislation is insufficient, it will require plenty of negotiation and creativity to find ways to achieve leniency and flexibility through wider interpretations of current law.
It makes sense that some oversight is necessary and reasonable to remove rulings that unduly stifle growth. The recent positive jobs report, record stock market levels, and strong consumer confidence all indicate that since President Trump took office in January, the economy is gaining momentum and moving in the right direction. However, it will take a collective effort to maintain and build upon these gains, and therein lies the risk. Currently, Congress is unwilling to work in a mutual and bipartisan manner to achieve what is in the best interest of our nation. They are inept, complacent, and quite frankly, grossly negligent when it comes to doing the jobs for which they have been elected. So here is a question for American voters: Are the Representatives and Senators we put into office the ones who need stringent regulation to be held accountable?
