US President Donald Trump will scale back major regulations that resulted from the financial crisis, directing a review of the Dodd-Frank Act and putting the brakes on a retirement advice rule.
The executive order Trump will sign on Friday on the 2010 Dodd-Frank law on Wall Street reform will be largely symbolic because only Congress can rewrite the legislation.
Even though the directives may not have teeth, Wall Street embraced the possibility of simpler bank regulations by pushing stocks up in morning trade.
"The first thing that we are going to attack is regulation, over-regulation. It's not just in the financial markets, it's in all markets," said White House National Economic Council Director Gary Cohn. "So today you're going to start seeing the beginning of some of our executive actions to roll back regulation in the financial services market."
Analysts said Trump could make many changes without involving lawmakers, by appointing new personnel or simply choosing not to enforce rules already enacted.
"A lot of the regulations of Dodd-Frank required a bit of a cop-on-the-beat if you will, to ensure enforcement and if you have a different cop-on-the-beat, they enforce different rules, or they enforce the rules differently," said FBR & CO financial policy analyst Edward Mills. "And there are a lot of Dodd-Frank rules that are subjective."
Many prominent US financial leaders support the law. Chicago Fed President Charles Evans said on Friday Dodd-Frank "has largely been helpful" and that annual stress tests for big banks considered 'too big to fail' have led to a system with "more and better capital."
"I've heard there's a regulatory compliance burden and it has increased, there's no doubt about it," he said. "But one reason why they are there is because banks are involved with a variety of customers and while I'd like to think that everybody is just an upstanding law-abiding person there's a lot of nefarious activity."
Earlier this week, Trump described the law as "a disaster," a sentiment shared by fellow Republicans.
The Labor Department's retirement advice rule, set to take effect in April, has long been a thorn in the side of the financial services sector.
Issued by the Obama administration in 2016, the rule requires brokers to act in their clients' best interests when advising them about their retirement plans.
Trump plans to issue a memo asking the Labor Department to determine whether the rule should be revised or be scrapped altogether, according to the White House.
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