Mark W. Olson
Ever since President Trump’s election we have witnessed a flurry of activity. Some was expected, some not. Trump moved quickly in identifying and announcing his Cabinet picks. Several were predictable in that they adhere to points of view on issues Trump identified as priorities during the campaign. Others were predictable because they had been key campaign advisors. A few were surprises, as he reached out to people who were not strong supporters.
But the pace may actually slow now that Trump is in the White House. Most of his nominees will need Senate confirmation prior to taking office. Though the Senate is majority Republican, meetings and hearings by committees are determined by the committee chairs and are subject to delay. Further, the critical positions of assistant secretary and undersecretary will not be filled until the secretary of each department is in place. And a Cabinet secretary without a supporting team will have little impact on policy direction. Meanwhile, the departments have their own momentum and will continue on their current course until new leadership brings about change.
Impact on Financial Services
The question at this point is how the new leadership will impact the financial services industry. Will we see immediate change in philosophy or tone and if so to what degree? The Trump campaign voiced a very clear frustration with what was described as excessive regulation of financial services. Many suggestions were made that regulatory overkill hampered both consumer borrowing and business expansion. We expect these themes to be continued as the new administration settles in.
But the speed and magnitude of action along these lines is hard to predict. Some changes are likely to happen fairly quickly, even as Cabinet appointments await confirmations and major changes in law grind through the legislative process. At the moment there are two vacancies on the Federal Reserve Board. Expect nominees to be identified fairly quickly. Also, the currently open position of Fed Vice Chairman for Supervision may be one in which Trump could make the fastest impact, if he fills this post with a board member who shares his preference for a lighter regulatory burden.
The Consumer Financial Protection Bureau is also mentioned as a likely target for change. Depending on the outcome of a constitutional challenge, the president may be able to fire and replace the current director. It is also possible that the director’s role could be dropped and replaced by a three- to five-member commission.
Going about Business
Overall, financial institutions should not assume that a completely new anti-regulation environment is on the horizon. Bank examinations will still take place. Current capital, liquidity, and safety and soundness standards will be enforced, along with existing consumer standards. In the various states, attorneys-general will be ready to pursue presumed violators. And we can count on poorly administered or considered bank practices to make headlines at some point, which will generate calls for new laws or tighter regulations.
Remember, too, that the most permissive financial services legislation in the past 30 years occurred with a Democrat in the White House (the Gramm-Leach-Bliley Act). In the same time frame, three of the four most restrictive legislative initiatives occurred with Republicans in the White House (the Sarbanes-Oxley Act, Federal Deposit Insurance Corporation Improvement Act, and Financial Institutions Reform, Recovery, and Enforcement Act). There is little linearity to financial services legislation.
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Treliant Risk Advisors
, Compliance, Risk Management, and Strategic Advisors to the Financial Services Industry, brings to you New Coordinates, a quarterly newsletter offering insights and information regarding pertinent issues affecting the financial services industry. This article appeared in its entirety in the Outlook 2017 issue. To subscribe to our quarterly newsletter, please Contact Us