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Trump, Republicans Make Bogus Case for Bank Deregulation as Senate Certain to Curtail House Dodd Frank Reform

By anonymous following x   2017 Jun 12, 5:28pm 626 views   0 comments   watch   sfw   quote     share    


We’ve argued from the crisis onward that the limited re-regulation of banking that took place was inadequate. But the Republicans are whinging that banks nevertheless are being treated badly despite a lack of evidence behind virtually all of their claims.

The effort to give already-overly-coddled banks an even better deal is lumbering forward. The House last week passed a “Financial Choice” Act which sought to dismantle large parts of Dodd Frank. We won’t dwell on that because the Senate is certain to nix large portions of it. However, as we were drafting this post, the Wall Street Journal published a story saying that the Trump Administration is supporting one of the worst ideas in this bill, that of cutting back the power of the Consumer Financial Protection Bureau. From its account:

The Trump administration will recommend limits on the U.S. consumer-finance regulator and a reassessment of a broad range of banking rules in a report to be released as early as Monday, according to people familiar with the matter.

The report from the Treasury Department, drafted in response to a February executive order from President Donald Trump, is less sweeping than financial legislation approved by the House of Representatives last week, these people said…

The report is around 150 pages and makes recommendations on policy goals, without laying out a specific process for achieving them, these people said. It is harshly critical of the Consumer Financial Protection Bureau and recommends that the bureau be stripped of its authority to examine financial institutions, people familiar with the matter said. By law, the bureau has the authority to enforce consumer laws as well as to examine individual firms on a continuing basis.

One person familiar with the report’s contents said it is likely to recommend that the CFPB continue to be led by a single director, but that the president be able to remove the director at will.

It’s going to be interesting to see how exactly the Treasury lambastes the CFPB given that the Wells Fargo fake accounts fraud would never have been blown open in the absence of the CFPB’s complaint database. It might try to ding the CFPB for not having found it through its exams, but exams are not designed to find penny-ante frauds, even when executed across huge numbers of customers. And if the CFPB is faulted for not finding it, the remedy would seem to be giving it or some other regulator even more intrusive exam authority.

Put it another way: it’s not going to be hard for consumer advocates to make a case against the Treasury’s likely arguments to editorial boards.

The Journal reports that the Treasury document will recommend that banks with less than $10 billion in assets be exempt from the Volcker Rule and includes a section on what bank regulators could to on their own. This is particularly important since the recent Fed governor in charge of large bank supervision, Danny Tarullo, fought the banks hard to get some important reforms implemented, the most important being higher capital levels.

John Dizard of the Financial Times over the weekend pointed out that opponents of bank deregulation may be missing the real game by focusing on the effort to roll back Dodd Frank rather than the Administration’s planned Fed appointments.

The “creative destruction” argument serves as justification for “Let them carry on. If they blow themselves up, no one will try that again.” The problem is that all of this “let the chips fall where they may” talk tends to go by the wayside when the financial markets are imploding.

And that’s before we get to the bigger problem: that these assertions that banks need more waivers, gloss over the fact that what is good for banks is typically not good for the broader economy.

The officialdom has managed to draw a veil over the fact that the rescue effort, both in immediate costs, and the ongoing transfer from savers and distortions to the economy resulting from sustained negative real interest rates, is the largest looting of the public purse in history.

Much More: http://www.nakedcapitalism.com/2017/06/republicans-make-bogus-case-for-bank-deregulation-as-senate-certain-to-curtail-house-dodd-frank-reform.html

#Economics #Trump #CFPB

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