ACTION
In two executive actions – Executive Order: Core Principles for Regulating the United States Financial System and Presidential Memorandum: Fiduciary Duty Rule – Trump took on regulation in the financial industry. The first deals with loosening regulations of the financial system, including the far-reaching Dodd-Frank Act, which aims to prevent another meltdown. The second calls for an investigation into the impact of an investment-advice rule.
ANALYSIS
Repealing Dodd-Frank will be hard. Passed by Congress in 2010, the law would need a filibuster-proof 60 votes in the Senate, where even Republicans have differing views on the need to help the financial industry. The industry argues that the law is costly and too onerous – a theme of Trump’s executive order, which doesn’t mention Dodd-Frank by name. It lays out a list of core principles, including fostering “vibrant financial markets” and rationalizing financial regulations. The order directs the Treasury secretary to consult with the heads of the regulatory agencies and report back in 120 days on any laws, treaties, regulations, and reporting requirements that run counter to the core principles.
The key will be what the regulatory agencies do, says Aaron Klein, policy director of the Center on Regulation and Markets at the Brookings Institution in Washington. Over time, the administration can change the regulators as their terms come up. “An administration determined to roll back financial regulation could implement a decent amount of their agenda,” he says, but it will take years.
The White House can have quicker success with the fiduciary rule, which requires brokers to put their clients’ interests before their own when offering advice on retirement. The industry claims the rule is too complex and will boost the cost of retirement advice. The presidential memorandum calls for the Labor Department to examine whether Americans are adversely affected in accessing retirement advice. Because the rule was implemented as an executive action from President Obama, Trump can reverse it – if it goes through the notice and comment process, emails Barbara Roper, director of investor protection at the Consumer Federation of America, which supports the rule. The acting Labor secretary said in a statement that implementation of the rule, scheduled for April 10, 2017, could be delayed as the department conducts its research. It could take a year before the rule is officially scrapped or amended, an industry source says.
