On February 3, President Donald J. Trump signed an executive order that signaled the beginning of the Trump Administration’s efforts to dismantle parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).
The executive order, entitled Core Principles for Regulating the United States Financial System (“Order”), lays out seven core principles (“Core Principles”) to guide the Trump Administration’s regulation of the financial industry. Specifically, the Order makes it the executive branch’s policy to:
(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;
(b) prevent taxpayer-funded bailouts;
(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;
(d) enable American companies to be competitive with foreign firms in domestic and foreign markets;
(e) advance American interests in international financial regulatory negotiations and meetings;
(f) make regulations efficient, effective, and appropriately tailored; and
(g) restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.
The Order also requires the Secretary of the Treasury to consult with the heads of the Financial Stability Oversight Council within 120 days of the executive order (and periodically thereafter) regarding whether current laws and regulations “promote the Core Principles.” The Secretary of the Treasury then must report to the President on the extent to which current laws and regulations promote the Core Principles as well as “what actions have been taken, and are currently being taken, to promote and support the Core Principles.”
Although the Order never explicitly addresses Dodd-Frank, as we have previously reported, President Trump has long been a vocal critic of the Act. Originally signed into law in 2010 during the Obama Administration, Dodd-Frank imposed sweeping regulatory reforms on the financial industry and created the Consumer Financial Protection Bureau (CFPB). During his campaign, President Trump repeatedly voiced his disapproval of the Dodd-Frank, going as far as calling the Act “a disaster” that “mak[es] it harder for small businesses to get the credit they need.”
On Friday, shortly before signing the Order, President Trump and Press Secretary Sean Spicer reiterated the Trump Administration’s commitment to dismantling Dodd-Frank. In remarks at the Strategy and Policy Forum, Trump—citing continued concerns that over regulation is negatively affecting American businesses—told the forum that “we expect to be cutting a lot out of [the Act].”
Spicer went further during his comments on the new executive order. According to Spicer, the new Core Principles “sets the table for a regulatory system that mitigates risk, encourages growth, and more importantly, protects consumers.” Then contrasting the new policy with Dodd-Frank, Spicer called Dodd-Frank, “a disastrous policy that’s hindering our markets, reducing the availability of credit, and crippling our economy’s ability to grow and create jobs.” Spicer claimed that Dodd-Frank “imposed hundreds of new regulations on financial institutions” without adequately protecting consumers.
Given President Trump and Press Secretary Spicer’s passionate remarks, it appears that the Trump Administration does not believe that Dodd-Frank is “efficient, effective, and appropriately tailored” or that it empowers “Americans to make independent financial decisions and informed choices” as required by the new Core Principles. Thus, expect the Secretary of the Treasury’s report on the Core Principles this June to address Dodd-Frank and its perceived shortcomings.
House Financial Service Committee Chairman Jeb Hensarling (R-Tx) was also quick to point out on Friday that the Order “mirrors provisions that are found in the Financial CHOICE Act.” As we previously reported, the Financial CHOICE Act, which was first introduced by Congressional Republicans in 2015, is a likely blueprint for any legislative attempt by the GOP to repeal parts of Dodd-Frank this year. The Order is another sign that President Trump is ready and willing to work with Republicans to remove parts of Dodd-Frank.