President Donald Trump signed executive orders this morning that deal directly with the banking industry’s most difficult obstacle for success. The executive order mandates a comprehensive review of all regulations stemming from the Wall Street Reform and Consumer Protection Act – commonly referred to as “Dodd-Frank.”
The order directs the Department of Labor to stop implementing the so-called fiduciary rule. Earlier this week, the president called Dodd-Frank a “disaster” and vowed to “do a big number on it.”
Although we would prefer repeal of all 2,719 pages, but as you know instinctively, in this political environment the idea is simply not feasible. Such an effort could never get 60 votes in this Senate.
The executive order will not make any immediate changes to the rules and regulation that govern your bank’s operation.
What we’re trying to do with our colleagues and the national groups (ABA, ICBA) is to push for certain, specific sections to eliminate or modify and get the message to the federal banking regulators. We think by doing so, our effort should result in attitude changes at the federal regulatory agencies in Washington and be less confrontational when conducting their exams.
We’d also like to see President Trump dismiss Director Richard Cordray of the Consumer Financial Protection Bureau.
“I think he has the authority to fire Cordray now,” OBA President and CEO Roger Beverage said. “The ruling in the PHH Mortgage case declared the Bureau itself was structured in a way that is unconstitutional, but the case was appealed and the lower court’s finding has been put on hold pending the outcome of the appeal. Nevertheless, I still think the president has the authority regardless of what the state says about only being able to fire him for cause.’
“One thing is for sure. If the president fires Cordray, there will be a lawsuit by him claiming the president can’t fire him. In addition, Democrats on Capitol Hill will go nuts, and the minority leader and Sen. Warren (D-Mass.) have clearly said they will challenge Cordray’s dismissal with every tool or process they can get their hands on. That should be fun to watch.”
One other related development: last week, President Trump issued an executive order that will restrain the growth of federal regulations. New regulations must have a net budgetary cost of zero or less. The order also mandates that for every new regulation that’s issued, the issuing agency must get rid of two existing regulations.
The key question for bankers is whether the order applies to federal banking regulators. The order’s language is not specific about which agencies are covered. Nevertheless, we understand the intent is to exclude from this order all independent regulatory agencies, including the Federal Reserve, the OCC and the FDIC.
The order appears to significantly increase the Office of Management’s power in the regulatory process. Beginning in fiscal year 2018, the OMB will provide each agency a total incremental cost cap on regulations in the upcoming fiscal year. Agencies will be required to avoid exceeding the cap and, in cases where a reduction in total regulatory costs is required, the agencies will have to rescind or rewrite rules to meet the lower cap.