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You're Hired: Tracking the Trump Administration Transition - February 8, 2017
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This is the February 8, 2017, edition of an email sent from November 2016 to September 2017 that covered Donald Trump's presidential transition, cabinet appointees, and the different policy positions of those individuals who may have had an effect on the new administration. Previous editions of "You're Hired" can be found here.
Dismantling Dodd-Frank
Much of the focus of President Trump’s early days in office has concerned his executive orders on immigration and his initial steps to fulfill a campaign promise to lead a repeal and replacement of the Affordable Care Act. Last Friday, Trump turned his pen to the issue of financial regulation, specifically key aspects of the Dodd-Frank Act passed after the 2008 financial crisis and recession. Today, we run down what Dodd-Frank does, how Trump intends to change the law, and how his proposed actions have been received.
Read our overview of Dodd-Frank here.
What is Dodd-Frank?
The Dodd–Frank Wall Street Reform and Consumer Protection Act, also known as the Dodd-Frank Act, is a financial regulation law passed on July 21, 2010. The act was passed by the majority Democratic 111th Congress and signed into law by President Barack Obama. The stated purpose of the law was "to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end 'too big to fail,' to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes." The Dodd-Frank Act created four new federal agencies responsible for financial regulation: the Consumer Financial Protection Bureau (CFPB), the Office of Financial Research (OFR), the Federal Insurance Office (FIO), and the Financial Stability Oversight Council (FSOC). In addition, the law introduced new regulations and changed some existing ones.
What does Trump plan to do?
The administration is expected to address the regulations in Dodd-Frank in a piecemeal fashion by weakening or repealing portions of the law that Trump and his treasury secretary consider to be over-regulation. As president, Trump has signed two executive actions concerning financial regulations. The first action, a memorandum, asked the secretary of labor to review the Fiduciary Duty Rule, which requires brokers giving retirement advice to act in their clients' best interests and is not part of Dodd-Frank. The second, an executive order, outlined six core principles of financial regulation under the Trump administration and ordered the secretary of the treasury to review all legislation in light of these principles. In essence, this executive order gave the Department of the Treasury the go-ahead to review Dodd-Frank in anticipation of substantive cuts to the law.
Why is Trump targeting Dodd-Frank?
Since the presidential campaign, Trump has rejected Dodd-Frank, arguing that it over-regulates the financial industry and impairs bankers’ ability to lend. In a February 3, 2017, strategy and policy forum, Trump said, “[W]e expect to be cutting a lot out of Dodd-Frank, because, frankly, I have so many people, friends of mine that have nice businesses that can’t borrow money, they just can’t get any money because the banks just won’t let them borrow because of the rules and regulations in Dodd-Frank.”
His opposition to Dodd-Frank is in line with his larger effort to reduce all government regulation. In a January 30 executive order, Trump ordered that “for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”
How have others reacted?
- Former U.S. Rep. Barney Frank (D-Mass.), one of Dodd-Frank’s primary sponsors, said in an interview: “I will point out that the bill we passed moves the banks more in a direction of lending. It discourages them, to some extent, from the financial razzle-dazzle that Warren Buffett called ‘instruments of financial mass destruction.’ This rule that they are abolishing says that your broker has to take into account your best interest. What has that got to do with banks lending?”
- Bart Chilton, former commissioner at the U.S. Commodity Futures Trading Commission, wrote in an opinion piece for CNBC: “I understand how easy it is on the campaign trail to rip on regulation. Heck, there's never a cheering section for more regulation. But once someone has been elected, they have a responsibility to get down and dirty with the deets and understand what any changes might mean. Repealing or scaling back Dodd-Frank wouldn't just be a poor policy decision, it could once again put us back in the circumstance where U.S. taxpayers might have to fund another big government, budget-busting bailout of Wall Street. Haven't we had enough of that? People should simply say: heck no, we won't go down that road again.”
- Alan Greenspan, former chair of the Federal Reserve, said in a speech: “The complexity of unwinding such regulation embedded in the system makes it [repealing the entire law] nearly impossible. The Trump administration might take half of it down, but I don’t think that’s enough.”
- U.S. Rep. Jeb Hensarling (R-Texas), chair of the House Financial Services Committee, said in a statement: “Republicans on the Financial Services Committee are eager to work with the president and his administration to unclog the arteries of our financial system so the lifeblood of capital can flow more freely and create jobs.”
Confirmations
Betsy DeVos
Yesterday, school choice advocate and philanthropist Betsy DeVos was confirmed as the next secretary of education. For the first time in the history of the U.S. Senate, the vice president had to break a tie vote on a Cabinet confirmation, and DeVos was confirmed 51-50. Democrats uniformly voted against DeVos and were joined by two Republicans, Sen. Lisa Murkowski (Alaska) and Sen. Susan Collins (Maine).
Jeff Sessions
Today, the Senate is likely to vote to confirm Alabama Sen. Jeff Sessions (R) to be the next attorney general. Sessions’ nomination has been opposed by Democrats over concerns regarding his stances on the Voting Rights Act and over allegations that Sessions had made racist remarks throughout his professional career as a lawyer and as United States Attorney for the Southern District of Alabama. Read more about these allegations and how Sessions responded to criticisms in our January 10 edition, here.
See also
- You're Hired: Tracking the Trump Administration Transition
- Donald Trump presidential transition team
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