1 00:00:00,080 --> 00:00:03,440 Speaker 1: The Trump administration has laid out its plan for overhauling 2 00:00:03,520 --> 00:00:07,200 Speaker 1: banking rules, calling on the government to ease, though not eliminate, 3 00:00:07,480 --> 00:00:10,120 Speaker 1: many of the restrictions that were imposed on Wall Street 4 00:00:10,200 --> 00:00:14,160 Speaker 1: after the financial crisis. Joining us is Nathan Dean, government 5 00:00:14,160 --> 00:00:17,720 Speaker 1: analysts for Bloomberg Intelligence. Nathan, what are some of the 6 00:00:17,720 --> 00:00:21,400 Speaker 1: most important parts of the plan? So, I think the 7 00:00:21,440 --> 00:00:24,200 Speaker 1: most important part of the plan is the recognition that 8 00:00:24,239 --> 00:00:26,920 Speaker 1: Treasury knows that they can roll back dot frank via 9 00:00:26,920 --> 00:00:30,040 Speaker 1: the regulatory process, and they highlight this report was only 10 00:00:30,080 --> 00:00:33,080 Speaker 1: for the depository institutions, so it talked about things like 11 00:00:33,120 --> 00:00:36,080 Speaker 1: capital requirements, the vocal rule. But what the report laid 12 00:00:36,120 --> 00:00:38,879 Speaker 1: out was is that you know, we can gut or 13 00:00:38,960 --> 00:00:40,760 Speaker 1: we can you know, tweak a lot of dot frank 14 00:00:40,840 --> 00:00:43,400 Speaker 1: via the regulatory process, and we can do it without 15 00:00:43,479 --> 00:00:47,040 Speaker 1: Congress's input. And so I think it's a great blueprint. 16 00:00:47,159 --> 00:00:50,320 Speaker 1: It can show the path of dot frank. But you know, 17 00:00:50,440 --> 00:00:53,080 Speaker 1: just just remember that it takes the financial regulators to 18 00:00:53,120 --> 00:00:55,000 Speaker 1: actually implement this, and that's going to take a lot 19 00:00:55,000 --> 00:00:59,200 Speaker 1: of time. So tell us some of the major rules 20 00:00:59,320 --> 00:01:02,760 Speaker 1: that it's aim debt. So this report really put in 21 00:01:02,840 --> 00:01:07,040 Speaker 1: great detail a lot about capital requirements and liquidity requirements. 22 00:01:07,120 --> 00:01:09,680 Speaker 1: So uh, it called for the next stable funding ratio 23 00:01:09,760 --> 00:01:13,920 Speaker 1: proposal to be indefinitely delayed. It changed called for changes 24 00:01:13,959 --> 00:01:17,080 Speaker 1: to how the liquidity coverage ratio is put in place, 25 00:01:17,280 --> 00:01:20,160 Speaker 1: all these big bank capital requirements. You know, in the 26 00:01:20,200 --> 00:01:23,039 Speaker 1: United States, there's a lot of banks. There's eight banks 27 00:01:23,040 --> 00:01:25,200 Speaker 1: that are considered g SIPs uh, and they have this 28 00:01:25,240 --> 00:01:28,040 Speaker 1: additional g SIP surcharge. And so the Treasury reports said 29 00:01:28,040 --> 00:01:31,080 Speaker 1: that we're going to ask the regulators to look into this. Now, 30 00:01:31,160 --> 00:01:33,679 Speaker 1: we expect those rules to be tweaked over time. But 31 00:01:33,760 --> 00:01:36,240 Speaker 1: you know what, one one thing the report didn't do 32 00:01:36,319 --> 00:01:38,440 Speaker 1: is it just said didn't get it. Didn't say just 33 00:01:38,480 --> 00:01:40,280 Speaker 1: get rid of the rules. And so this was a 34 00:01:40,400 --> 00:01:43,360 Speaker 1: very measured and I think reasonable approach to how they're 35 00:01:43,360 --> 00:01:45,840 Speaker 1: going to tackle dot frank. But again that the downside 36 00:01:45,880 --> 00:01:47,440 Speaker 1: to the report is it's going to take years to 37 00:01:47,480 --> 00:01:50,480 Speaker 1: implement all this. How is it different from the bill 38 00:01:50,640 --> 00:01:53,400 Speaker 1: passed by the House Republicans last week? So the bill 39 00:01:53,440 --> 00:01:55,480 Speaker 1: that was passed last week is the House Finitial This 40 00:01:55,520 --> 00:01:58,600 Speaker 1: is the Financial Choice Act. It was the kitchen Sink bill. Uh. 41 00:01:58,640 --> 00:02:00,960 Speaker 1: You know, this was the one that gut dot frank 42 00:02:01,040 --> 00:02:02,920 Speaker 1: and so there are a lot of elements in here 43 00:02:03,040 --> 00:02:05,480 Speaker 1: that the Democrats just won't go with, and that's why 44 00:02:05,520 --> 00:02:07,280 Speaker 1: this bill is dead on arrival when it goes to 45 00:02:07,280 --> 00:02:10,320 Speaker 1: the Senate. This report said, okay, fine, so we're gonna 46 00:02:10,400 --> 00:02:12,680 Speaker 1: keep dot Frank as it is, but we're gonna look 47 00:02:12,680 --> 00:02:14,920 Speaker 1: at the regulations that have been put in place under 48 00:02:14,960 --> 00:02:17,840 Speaker 1: dot Frank, and we're gonna ask the regulatory agencies, which 49 00:02:17,880 --> 00:02:20,320 Speaker 1: by mid two thousand eighteen are gonna be under Donald 50 00:02:20,360 --> 00:02:23,120 Speaker 1: Trump's influence. We're gonna ask the regulators to look at 51 00:02:23,160 --> 00:02:25,960 Speaker 1: these regulations and begin tweaking things to make it a 52 00:02:25,960 --> 00:02:27,880 Speaker 1: little bit better. You know, a lot of the financial 53 00:02:27,880 --> 00:02:30,520 Speaker 1: services industry has been coming out and saying, don't repeal 54 00:02:30,600 --> 00:02:34,320 Speaker 1: dot Frank, just tweak it, make things a little bit better. Obviously, 55 00:02:34,320 --> 00:02:35,880 Speaker 1: there are some big points in here where the banks 56 00:02:35,880 --> 00:02:37,160 Speaker 1: just want to get rid of the rule, and that's 57 00:02:37,160 --> 00:02:40,360 Speaker 1: where they would prefer. But this Treasury report essentially was 58 00:02:40,560 --> 00:02:43,480 Speaker 1: something that both the big banks and the small banks like. Uh. 59 00:02:43,520 --> 00:02:46,440 Speaker 1: And so it's it's something that I think the industry 60 00:02:46,480 --> 00:02:48,440 Speaker 1: expects to happen. It's just gonna take a lot of time. 61 00:02:49,120 --> 00:02:52,919 Speaker 1: Democrats who say that Dodd Frank is vital for Wall 62 00:02:52,960 --> 00:02:57,560 Speaker 1: Street to be kept in check. Criticize the report, do 63 00:02:57,600 --> 00:03:00,519 Speaker 1: they have a point? Well, you know there they criticize 64 00:03:00,560 --> 00:03:02,320 Speaker 1: the report, and I think they're going to continue to 65 00:03:02,320 --> 00:03:05,440 Speaker 1: criticize the report. But you know, about two thirds about 66 00:03:06,440 --> 00:03:09,520 Speaker 1: this report, you know they can do without Congress's input. 67 00:03:09,560 --> 00:03:11,600 Speaker 1: And so if i'm you know, we put out a 68 00:03:11,639 --> 00:03:13,480 Speaker 1: note to our clients this morning saying that, you know, 69 00:03:13,520 --> 00:03:16,639 Speaker 1: if we expect the Democrats to actually begin negotiating over 70 00:03:16,680 --> 00:03:19,280 Speaker 1: dot Frank, maybe not this year, but maybe next year, 71 00:03:19,320 --> 00:03:22,000 Speaker 1: because you know, if I'm at the Consumer Financial Protection 72 00:03:22,000 --> 00:03:24,600 Speaker 1: Bureau and Richard Cordray leaves and Donald Trump puts his 73 00:03:24,680 --> 00:03:26,919 Speaker 1: own person in place, they can do a lot of 74 00:03:27,000 --> 00:03:29,520 Speaker 1: damage to the CFBB and there's nothing the Democrats can 75 00:03:29,560 --> 00:03:32,200 Speaker 1: do to stop this. So, you know, this report could 76 00:03:32,240 --> 00:03:35,560 Speaker 1: be an incentive for the Democrats to begin negotiations, you know. 77 00:03:35,640 --> 00:03:38,200 Speaker 1: And Senator Mike Crepo is chairman of the Ranking or 78 00:03:38,240 --> 00:03:40,640 Speaker 1: the chairman of the Senate Banking Committee, a Republican even 79 00:03:40,680 --> 00:03:43,000 Speaker 1: just told Bloomberg News a couple of minutes ago that, uh, 80 00:03:43,240 --> 00:03:45,000 Speaker 1: this is a great starting point, but they're gonna have 81 00:03:45,040 --> 00:03:48,000 Speaker 1: their own legislation out sometime this fall. That's the legislation 82 00:03:48,040 --> 00:03:50,160 Speaker 1: we're telling our clients to look at because the Democrats 83 00:03:50,240 --> 00:03:53,200 Speaker 1: probably will start negotiating on it. You mentioned how long 84 00:03:53,240 --> 00:03:55,000 Speaker 1: it's going to take. Let's go into that a little 85 00:03:55,000 --> 00:03:58,960 Speaker 1: bit longer because there are scores of regulations that would 86 00:03:59,000 --> 00:04:02,680 Speaker 1: have to be rewritten, and it's a long process not 87 00:04:02,720 --> 00:04:05,760 Speaker 1: only to rewrite but also getting them approved. Talk about 88 00:04:05,800 --> 00:04:08,400 Speaker 1: the process. Yeah, so there's really three things to point out. 89 00:04:08,400 --> 00:04:10,480 Speaker 1: The first stuff that we expect from the regulators are 90 00:04:10,880 --> 00:04:13,640 Speaker 1: changes to compliance. There's these things called no action letters, 91 00:04:13,640 --> 00:04:16,560 Speaker 1: interpretive guidance more on the technical side. That's something the 92 00:04:16,600 --> 00:04:19,440 Speaker 1: regulators can do fairly quickly. If you're a compliance officer, 93 00:04:19,560 --> 00:04:22,080 Speaker 1: this is what you care about. The regulation still remains 94 00:04:22,080 --> 00:04:24,800 Speaker 1: on the books. Next thing is changing the actual regulation. 95 00:04:25,080 --> 00:04:27,640 Speaker 1: Regulators have to follow the Administrative Procedures Act. They have 96 00:04:27,680 --> 00:04:29,120 Speaker 1: to put out a proposal, they have to have a 97 00:04:29,120 --> 00:04:31,240 Speaker 1: common period, they have to have a cost benefit analysis. 98 00:04:31,440 --> 00:04:33,880 Speaker 1: The quickest I've ever seen done is nine months. The 99 00:04:33,960 --> 00:04:35,919 Speaker 1: third thing to put in play is that you know 100 00:04:35,960 --> 00:04:38,680 Speaker 1: the Federal Reserve, and Janet Allen remains in at the 101 00:04:38,720 --> 00:04:41,400 Speaker 1: FED until February of two thousand eighteen. The Federal Reserve 102 00:04:41,600 --> 00:04:43,560 Speaker 1: is so much involved in a lot of these big 103 00:04:43,560 --> 00:04:45,719 Speaker 1: bank rules. So if I'm at the Vocal rule, for example, 104 00:04:46,160 --> 00:04:49,360 Speaker 1: and it's a five agency rule o CC, FED, fd A, C, SEC, 105 00:04:49,480 --> 00:04:52,320 Speaker 1: c FDC, you really need the Fed on your side 106 00:04:52,480 --> 00:04:55,080 Speaker 1: to you know, change the vocal rule. And if Janet 107 00:04:55,080 --> 00:04:57,719 Speaker 1: Allen says no, uh, you know, it could be pushed 108 00:04:57,720 --> 00:05:00,040 Speaker 1: out to mid two thousand eighteen. You have to with 109 00:05:00,040 --> 00:05:02,960 Speaker 1: through the Administrative Procedures Act. It could be before the 110 00:05:03,040 --> 00:05:06,760 Speaker 1: change regulation actually begins to impact the banks. Nathan about 111 00:05:06,800 --> 00:05:11,760 Speaker 1: thirty seconds. How much pushback do you expect from consumer advocates? Well, 112 00:05:11,880 --> 00:05:13,880 Speaker 1: I think the consumer advocates are going to continue to 113 00:05:13,920 --> 00:05:16,359 Speaker 1: push back. Um, you know, this Treasury report is the 114 00:05:16,400 --> 00:05:17,920 Speaker 1: long term game. So I think a lot of their 115 00:05:17,920 --> 00:05:19,919 Speaker 1: focus is going to be on the Senate. You know, 116 00:05:20,040 --> 00:05:22,479 Speaker 1: this Senate bill that's expected this fall. That's where a 117 00:05:22,520 --> 00:05:24,320 Speaker 1: lot of the action is going to be. Because the 118 00:05:24,400 --> 00:05:26,680 Speaker 1: quickest thing to do anything in terms of rolling back 119 00:05:26,720 --> 00:05:28,480 Speaker 1: Dot Frank, it's an Act of Congress. So I would 120 00:05:28,480 --> 00:05:30,640 Speaker 1: expect the consumer advocates to spend most of their time 121 00:05:30,720 --> 00:05:34,000 Speaker 1: up on the hill and on the whole. How do 122 00:05:34,040 --> 00:05:37,080 Speaker 1: you how do you view this this these rules favorable 123 00:05:37,200 --> 00:05:40,479 Speaker 1: to banks? The report definitely is favorable to banks. I 124 00:05:40,480 --> 00:05:42,440 Speaker 1: think this is something that they've been wanting for a while. 125 00:05:42,760 --> 00:05:45,200 Speaker 1: It's the first time we've seen a policy statement that says, 126 00:05:45,320 --> 00:05:47,400 Speaker 1: you know, we've heard from the banking industry. There's a 127 00:05:47,440 --> 00:05:50,039 Speaker 1: lot of banks that provided input to this report. UH, 128 00:05:50,080 --> 00:05:51,880 Speaker 1: and I think this is something that the banks have said, 129 00:05:51,880 --> 00:05:53,640 Speaker 1: you know, this is the first time a policymaker has 130 00:05:53,640 --> 00:05:56,440 Speaker 1: actually hurt our concerns. UH and somewhat agree with us. 131 00:05:56,800 --> 00:05:59,240 Speaker 1: All Right, thank you for being on Bloomberg Law. That's 132 00:05:59,320 --> 00:06:02,360 Speaker 1: Nathan Dean, government analyst for Bloomberg Intelligence.