Steven T. Mnuchin, the Treasury Secretary, has called for changes to be made to the Dodd-Frank regulations. The Dodd-Frank Regulations were established after the economic crisis of 2008, giving the Consumer Financial Protection Bureau more regulatory powers over the swaps marketplace.
However, the Trump Administration is now looking at reducing the powers held by the Bureau.
The report, ordered by Trump, suggests reducing the monitoring of financial institutions, offering more relief to small banks in terms of regulation, and reducing restrictions on mortgages in order to prevent another crisis caused by sub-prime mortgages.
It is the first attempt by the Trump administration to roll back on regulations that the Republican Party considers to be a hindrance to economic expansion.
The report also claims that the rolling back of regulations is warranted, as the financial system and economy of the country seem to be improving.
However, Democrats have criticized the move citing that the strict Dodd-Frank regulations are what led to the improvement after the 2008 crisis. They have vowed to stand against any major alterations to the current regulations.
According to the Executive Director of Americans for Financial Reform, Lisa Donner, more regulations and enforcement were the need of the hour instead of more roll-backs.
The report is one of the three ordered by President Trump as his administration aims to keep up its campaign promise of doing away with the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The act was approved in 2008 despite no support from the Republicans. It prohibited risky trading by banks that were federally insured, stopped the bailout of underperforming banks, and helped create regulatory bodies that would oversee financial products and identify any instability.
Last week, the House voted in favor of the Financial Choice Act, which is similar to the new report, however, not as moderate in some areas. For example, the Financial Act does away with trading restrictions under the Volcker Rule. In comparison, the Treasury report only suggests that the restrictions be less stringent.
However, it cannot be denied that the Republicans will likely face complete disapproval from the Democrats on this matter.
But, the Treasury has called for the administration to adopt one of the Financial Act’s key clauses – the reduction of regulatory oversight on high performing banks that can secure themselves against future losses through capital acquisition.
On the whole, the Treasury report and the House Bill, together, will drastically reduce the powers held by the Consumer Financial Protection Bureau.