WEBVTT - Treasury Unveils Plans for Wall Street Rule Overhaul (Audio) 0:00:00.080 --> 0:00:03.440 The Trump administration has laid out its plan for overhauling 0:00:03.520 --> 0:00:07.200 banking rules, calling on the government to ease, though not eliminate, 0:00:07.480 --> 0:00:10.120 many of the restrictions that were imposed on Wall Street 0:00:10.200 --> 0:00:14.160 after the financial crisis. Joining us is Nathan Dean, government 0:00:14.160 --> 0:00:17.720 analysts for Bloomberg Intelligence. Nathan, what are some of the 0:00:17.720 --> 0:00:21.400 most important parts of the plan? So, I think the 0:00:21.440 --> 0:00:24.200 most important part of the plan is the recognition that 0:00:24.239 --> 0:00:26.920 Treasury knows that they can roll back dot frank via 0:00:26.920 --> 0:00:30.040 the regulatory process, and they highlight this report was only 0:00:30.080 --> 0:00:33.080 for the depository institutions, so it talked about things like 0:00:33.120 --> 0:00:36.080 capital requirements, the vocal rule. But what the report laid 0:00:36.120 --> 0:00:38.879 out was is that you know, we can gut or 0:00:38.960 --> 0:00:40.760 we can you know, tweak a lot of dot frank 0:00:40.840 --> 0:00:43.400 via the regulatory process, and we can do it without 0:00:43.479 --> 0:00:47.040 Congress's input. And so I think it's a great blueprint. 0:00:47.159 --> 0:00:50.320 It can show the path of dot frank. But you know, 0:00:50.440 --> 0:00:53.080 just just remember that it takes the financial regulators to 0:00:53.120 --> 0:00:55.000 actually implement this, and that's going to take a lot 0:00:55.000 --> 0:00:59.200 of time. So tell us some of the major rules 0:00:59.320 --> 0:01:02.760 that it's aim debt. So this report really put in 0:01:02.840 --> 0:01:07.040 great detail a lot about capital requirements and liquidity requirements. 0:01:07.120 --> 0:01:09.680 So uh, it called for the next stable funding ratio 0:01:09.760 --> 0:01:13.920 proposal to be indefinitely delayed. It changed called for changes 0:01:13.959 --> 0:01:17.080 to how the liquidity coverage ratio is put in place, 0:01:17.280 --> 0:01:20.160 all these big bank capital requirements. You know, in the 0:01:20.200 --> 0:01:23.039 United States, there's a lot of banks. There's eight banks 0:01:23.040 --> 0:01:25.200 that are considered g SIPs uh, and they have this 0:01:25.240 --> 0:01:28.040 additional g SIP surcharge. And so the Treasury reports said 0:01:28.040 --> 0:01:31.080 that we're going to ask the regulators to look into this. Now, 0:01:31.160 --> 0:01:33.679 we expect those rules to be tweaked over time. But 0:01:33.760 --> 0:01:36.240 you know what, one one thing the report didn't do 0:01:36.319 --> 0:01:38.440 is it just said didn't get it. Didn't say just 0:01:38.480 --> 0:01:40.280 get rid of the rules. And so this was a 0:01:40.400 --> 0:01:43.360 very measured and I think reasonable approach to how they're 0:01:43.360 --> 0:01:45.840 going to tackle dot frank. But again that the downside 0:01:45.880 --> 0:01:47.440 to the report is it's going to take years to 0:01:47.480 --> 0:01:50.480 implement all this. How is it different from the bill 0:01:50.640 --> 0:01:53.400 passed by the House Republicans last week? So the bill 0:01:53.440 --> 0:01:55.480 that was passed last week is the House Finitial This 0:01:55.520 --> 0:01:58.600 is the Financial Choice Act. It was the kitchen Sink bill. Uh. 0:01:58.640 --> 0:02:00.960 You know, this was the one that gut dot frank 0:02:01.040 --> 0:02:02.920 and so there are a lot of elements in here 0:02:03.040 --> 0:02:05.480 that the Democrats just won't go with, and that's why 0:02:05.520 --> 0:02:07.280 this bill is dead on arrival when it goes to 0:02:07.280 --> 0:02:10.320 the Senate. This report said, okay, fine, so we're gonna 0:02:10.400 --> 0:02:12.680 keep dot Frank as it is, but we're gonna look 0:02:12.680 --> 0:02:14.920 at the regulations that have been put in place under 0:02:14.960 --> 0:02:17.840 dot Frank, and we're gonna ask the regulatory agencies, which 0:02:17.880 --> 0:02:20.320 by mid two thousand eighteen are gonna be under Donald 0:02:20.360 --> 0:02:23.120 Trump's influence. We're gonna ask the regulators to look at 0:02:23.160 --> 0:02:25.960 these regulations and begin tweaking things to make it a 0:02:25.960 --> 0:02:27.880 little bit better. You know, a lot of the financial 0:02:27.880 --> 0:02:30.520 services industry has been coming out and saying, don't repeal 0:02:30.600 --> 0:02:34.320 dot Frank, just tweak it, make things a little bit better. Obviously, 0:02:34.320 --> 0:02:35.880 there are some big points in here where the banks 0:02:35.880 --> 0:02:37.160 just want to get rid of the rule, and that's 0:02:37.160 --> 0:02:40.360 where they would prefer. But this Treasury report essentially was 0:02:40.560 --> 0:02:43.480 something that both the big banks and the small banks like. Uh. 0:02:43.520 --> 0:02:46.440 And so it's it's something that I think the industry 0:02:46.480 --> 0:02:48.440 expects to happen. It's just gonna take a lot of time. 0:02:49.120 --> 0:02:52.919 Democrats who say that Dodd Frank is vital for Wall 0:02:52.960 --> 0:02:57.560 Street to be kept in check. Criticize the report, do 0:02:57.600 --> 0:03:00.519 they have a point? Well, you know there they criticize 0:03:00.560 --> 0:03:02.320 the report, and I think they're going to continue to 0:03:02.320 --> 0:03:05.440 criticize the report. But you know, about two thirds about 0:03:06.440 --> 0:03:09.520 this report, you know they can do without Congress's input. 0:03:09.560 --> 0:03:11.600 And so if i'm you know, we put out a 0:03:11.639 --> 0:03:13.480 note to our clients this morning saying that, you know, 0:03:13.520 --> 0:03:16.639 if we expect the Democrats to actually begin negotiating over 0:03:16.680 --> 0:03:19.280 dot Frank, maybe not this year, but maybe next year, 0:03:19.320 --> 0:03:22.000 because you know, if I'm at the Consumer Financial Protection 0:03:22.000 --> 0:03:24.600 Bureau and Richard Cordray leaves and Donald Trump puts his 0:03:24.680 --> 0:03:26.919 own person in place, they can do a lot of 0:03:27.000 --> 0:03:29.520 damage to the CFBB and there's nothing the Democrats can 0:03:29.560 --> 0:03:32.200 do to stop this. So, you know, this report could 0:03:32.240 --> 0:03:35.560 be an incentive for the Democrats to begin negotiations, you know. 0:03:35.640 --> 0:03:38.200 And Senator Mike Crepo is chairman of the Ranking or 0:03:38.240 --> 0:03:40.640 the chairman of the Senate Banking Committee, a Republican even 0:03:40.680 --> 0:03:43.000 just told Bloomberg News a couple of minutes ago that, uh, 0:03:43.240 --> 0:03:45.000 this is a great starting point, but they're gonna have 0:03:45.040 --> 0:03:48.000 their own legislation out sometime this fall. That's the legislation 0:03:48.040 --> 0:03:50.160 we're telling our clients to look at because the Democrats 0:03:50.240 --> 0:03:53.200 probably will start negotiating on it. You mentioned how long 0:03:53.240 --> 0:03:55.000 it's going to take. Let's go into that a little 0:03:55.000 --> 0:03:58.960 bit longer because there are scores of regulations that would 0:03:59.000 --> 0:04:02.680 have to be rewritten, and it's a long process not 0:04:02.720 --> 0:04:05.760 only to rewrite but also getting them approved. Talk about 0:04:05.800 --> 0:04:08.400 the process. Yeah, so there's really three things to point out. 0:04:08.400 --> 0:04:10.480 The first stuff that we expect from the regulators are 0:04:10.880 --> 0:04:13.640 changes to compliance. There's these things called no action letters, 0:04:13.640 --> 0:04:16.560 interpretive guidance more on the technical side. That's something the 0:04:16.600 --> 0:04:19.440 regulators can do fairly quickly. If you're a compliance officer, 0:04:19.560 --> 0:04:22.080 this is what you care about. The regulation still remains 0:04:22.080 --> 0:04:24.800 on the books. Next thing is changing the actual regulation. 0:04:25.080 --> 0:04:27.640 Regulators have to follow the Administrative Procedures Act. They have 0:04:27.680 --> 0:04:29.120 to put out a proposal, they have to have a 0:04:29.120 --> 0:04:31.240 common period, they have to have a cost benefit analysis. 0:04:31.440 --> 0:04:33.880 The quickest I've ever seen done is nine months. The 0:04:33.960 --> 0:04:35.919 third thing to put in play is that you know 0:04:35.960 --> 0:04:38.680 the Federal Reserve, and Janet Allen remains in at the 0:04:38.720 --> 0:04:41.400 FED until February of two thousand eighteen. The Federal Reserve 0:04:41.600 --> 0:04:43.560 is so much involved in a lot of these big 0:04:43.560 --> 0:04:45.719 bank rules. So if I'm at the Vocal rule, for example, 0:04:46.160 --> 0:04:49.360 and it's a five agency rule o CC, FED, fd A, C, SEC, 0:04:49.480 --> 0:04:52.320 c FDC, you really need the Fed on your side 0:04:52.480 --> 0:04:55.080 to you know, change the vocal rule. And if Janet 0:04:55.080 --> 0:04:57.719 Allen says no, uh, you know, it could be pushed 0:04:57.720 --> 0:05:00.040 out to mid two thousand eighteen. You have to with 0:05:00.040 --> 0:05:02.960 through the Administrative Procedures Act. It could be before the 0:05:03.040 --> 0:05:06.760 change regulation actually begins to impact the banks. Nathan about 0:05:06.800 --> 0:05:11.760 thirty seconds. How much pushback do you expect from consumer advocates? Well, 0:05:11.880 --> 0:05:13.880 I think the consumer advocates are going to continue to 0:05:13.920 --> 0:05:16.359 push back. Um, you know, this Treasury report is the 0:05:16.400 --> 0:05:17.920 long term game. So I think a lot of their 0:05:17.920 --> 0:05:19.919 focus is going to be on the Senate. You know, 0:05:20.040 --> 0:05:22.479 this Senate bill that's expected this fall. That's where a 0:05:22.520 --> 0:05:24.320 lot of the action is going to be. Because the 0:05:24.400 --> 0:05:26.680 quickest thing to do anything in terms of rolling back 0:05:26.720 --> 0:05:28.480 Dot Frank, it's an Act of Congress. So I would 0:05:28.480 --> 0:05:30.640 expect the consumer advocates to spend most of their time 0:05:30.720 --> 0:05:34.000 up on the hill and on the whole. How do 0:05:34.040 --> 0:05:37.080 you how do you view this this these rules favorable 0:05:37.200 --> 0:05:40.479 to banks? The report definitely is favorable to banks. I 0:05:40.480 --> 0:05:42.440 think this is something that they've been wanting for a while. 0:05:42.760 --> 0:05:45.200 It's the first time we've seen a policy statement that says, 0:05:45.320 --> 0:05:47.400 you know, we've heard from the banking industry. There's a 0:05:47.440 --> 0:05:50.039 lot of banks that provided input to this report. UH, 0:05:50.080 --> 0:05:51.880 and I think this is something that the banks have said, 0:05:51.880 --> 0:05:53.640 you know, this is the first time a policymaker has 0:05:53.640 --> 0:05:56.440 actually hurt our concerns. UH and somewhat agree with us. 0:05:56.800 --> 0:05:59.240 All Right, thank you for being on Bloomberg Law. That's 0:05:59.320 --> 0:06:02.360 Nathan Dean, government analyst for Bloomberg Intelligence.