US President Donald Trump on Friday ordered a review of key reforms enacted after the 2008 financial crisis, in the first step toward scaling back toughened regulations on the banking industry.
The Dodd-Frank Wall Street Reform and Consumer Protection Act aimed to curb the actions of the financial sector that led to the Great Recession, but critics have claimed it created red tape that stifles the industry.
“Today we are signing core principles for regulating the United States’ financial system,” Trump said in the Oval Office as he signed two executive orders aimed at scrapping parts of the 2010 law.
“Doesn’t get much bigger than that, right?” he said.
The president’s move gives the upper hand to opponents of the landmark legislation, who have long battled attempts to rein in Wall Street excesses.
Addressing a White House meeting with industry leaders earlier in the day, Trump said: “We expect to cut a lot out of Dodd-Frank.”
“I have friends who can’t start businesses because the banks wouldn’t let them borrow because of rules and regulations and Dodd-Frank,” he added.
Trump’s directives were quickly denounced by US Senator Chuck Schumer, leader of the US Democrats in the upper house of US Congress, who vowed to fight to prevent the law’s undoing.
“President Trump promised to stand up to the big banks, now he’s letting them write the rules of the road,” Schumer said in a statement.
Like Trump, the Democratic senator hails from New York State, home to the financial industry’s largest global hub.
The mammoth Dodd-Frank legislation was adopted after a systemic crisis in the global financial system caused by the failure of widely traded, but complex derivatives backed by poor-quality mortgages.
The resulting taxpayer bailout of failing banks and financial institutions deemed “too big to fail,” or so large their collapse could cause widespread economic harm, provoked lasting public outrage.
“If we allow Wall Street to go unchecked again, it’s only a matter of time before history repeats itself,” US Representative Chellie Pingree said on Twitter.
The Dodd-Frank rules required banks to demonstrate their solid financial grounding in annual “stress tests,” as well as refrain from certain risky transactions and significantly expanded the role securities regulators play in overseeing the investment industry.
Trump’s twin decrees came on the heels of his meeting with business leaders, including the chiefs of the largest banks and investment firms, such as JPMorgan Chase & Co, Blackstone Group LP and BlackRock Inc, which might stand to gain from looser rules.
The directives would also delay a fiduciary rule adopted under the previous administration, which had yet to take effect but would have required investment advisers handling retirement funds to put their clients’ interests before maximizing their own profits.
Among the many provisions of the 2,300-page legislation, Dodd-Frank also gave rise to the US Consumer Financial Protection Bureau, an agency meant to police how banks and others provide services to the public.
US Republicans and industry lobbyists have made no secret of their criticism of the bureau and other checks on industry imposed by Dodd-Frank, waging battles against it in court and on Capitol Hill.
The US Federal Reserve, which plays a key role in banking regulation, had yet to react to Trump’s move.
Any repeal of Dodd-Frank itself would require congressional action, but the Trump White House is keen to send a signal that it is ready to slash red tape.
Gary Cohn, a former Goldman Sachs Group Inc president who now heads Trump’s National Economic Council, told the Wall Street Journal ahead of the signing that freeing up the financial services sector again would be a boon to consumers.
“The banks are going to be able to price products more efficiently and more effectively to consumers,” Cohn was quoted as saying.
However, Bartlett Naylor of consumer activist group Public Citizen called Trump’s actions “a betrayal of his campaign promises” and a gift to big banks.
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