US President Donald Trump has taken his first step to try to scale back US financial services regulations.
He signed an executive order to review the 2010 Dodd-Frank financial regulations, which some people on Wall Street say are overly-restrictive. The law was brought in after the 2008-09 financial crisis with the aim of avoiding another financial meltdown. “Dodd-Frank is a disaster,” Mr Trump said earlier this week. He added: “We’re going to be doing a big number on Dodd-Frank.” Mr Trump made it a campaign pledge to repeal and replace the Dodd-Frank act, which also created the Consumer Financial Protection Bureau (CFPB). This US government agency seeks to make sure banks, lenders, and other financial companies treat US consumers fairly. Dodd-Frank, named after the Congressmen who campaigned for the legislation, was introduced to rein in banks’ risky practices by banks and other financial companies. Democrat congressman Jim Himes told the BBC: “Dodd-Frank of course was the legislative response to the economic carnage that came about because of the financial meltdown of late 2008. “Much of the legislation… is designed to get at those things which went horribly wrong, that is to say, problems in the mortgage market” he said.
Good move, bad move
But Trump administration officials have said Dodd-Frank did not achieve what it set out to do, and argue that is an example of government being overly-controlling. News that a review was imminent sent banking shares higher on Wall Street and on the main stock markets in Europe. Goldman Sachs and JP Morgan Chase rose 4% and 3% respectively. “The banks are going to be able to price products more efficiently and more effectively to consumers,” Gary Cohn, an adviser to Mr Trump and a former Goldman Sachs executive, told the Wall Street Journal. Market analyst Jasper Lawler at the London Capital Group said that “unwinding some of Dodd-Frank is a good thing because it will enable smaller community banks to compete, offering competition to consumers.” But he said that scrapping the whole of Dodd-Frank “puts the entire system at risk of a repeat of 2008”. And Sweden’s minister for financial stability Per Bolund told the country’s TT news agency that a repeal would be “dangerous, harmful and extremely unfortunate”.