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In two executive memoranda, President
Donald J. Trump directed the U.S. Department of the
Treasury to review key elements of the Dodd-Frank post-crisis
regulation. The memoranda authorizes the Treasury Secretary to
review (i) the processes of the Financial Stability Oversight
Council ("FSOC") for designating "systemically
important" institutions, and (ii) the Orderly Liquidation
Authority ("OLA") including a review of potentially
adverse consequences posed by the framework.
In a
statement, Treasury Secretary
Steven Mnuchin said that during the review process, the
Treasury will not designate any new non-bank financial institutions
as systemically important under the FSOC. The goal of the review,
he said, is to "make this a smarter, more effective process
that reduces the kinds of systemic risk that harmed so many
Americans during the financial crisis of 2008."
Secretary Mnuchin said that the review of the OLA will
attempt to determine (i) whether the OLA is encouraging
"inappropriate risk-taking," (ii) "the
extent of taxpayer liability," and (iii) how the
bankruptcy code "may be a more appropriate avenue of resolving
financial distress."
"I'm . . . issuing two directives that instruct
Secretary Mnuchin to review the damaging Dodd-Frank regulations
that failed to hold Wall Street firms accountable. . . . These
regulations enshrine 'too big to fail' and encourage risky
behavior."
Politically, these executive actions are promoted as being for
the purpose of holding Wall Street accountable. The larger benefit
they provide is to put a check on the very broad discretionary
powers afforded the government under Dodd-Frank. These executive
actions move financial regulation back toward a system of rules
governed by written procedures and not by grants of broad
discretion.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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