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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple podcast, SoundCloud

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Speaker 1: and on Bloomberg dot com slash podcasts. Since his first

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Speaker 1: days in office, President Trump has repeatedly vowed to loosen

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Speaker 1: the leash on Wall Street with less regulations, But some

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Speaker 1: of the regulator's most meaningful efforts to revamp post crisis

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Speaker 1: constraints on big banks are running into problems. Joining me

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Speaker 1: as Robert Hockett, a professor at Cornell Law School, Bob,

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Speaker 1: let's begin with the Vulgar Rule, which restricts banks from

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Speaker 1: making risky market bets with their own money. Federal agencies

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Speaker 1: rushed to rewrite it, issued an overhaul plan. Last may

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Speaker 1: tell us about Vulgar two point oh. So the Vulcar

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Speaker 1: case is actually quite interesting. On the one hand, I

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Speaker 1: think it's sort of maybe best to look at this

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Speaker 1: sort of poetic justice and two distinct ways. The first

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Speaker 1: way is that you might remember the original knock on

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Speaker 1: the Vocal rule itself was that it was sort of

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Speaker 1: too clever by half, that something like Glass Eagle was

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Speaker 1: much more effective, just because it was so much simpler,

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Speaker 1: more easily administered, and more easily complied. With Volker trying

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Speaker 1: to sort of get things a little bit more precise, right,

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Speaker 1: to try to retain as much of the legitimate market

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Speaker 1: making and hedging activity as possible while still screening out

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Speaker 1: the so called speculative stuff that required a great deal

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Speaker 1: of tinkering. And one way then of looking at what's

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Speaker 1: going on now as they try to redo it is that, well,

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Speaker 1: you know, you're working on something that was already quite complicated,

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Speaker 1: and so the work on it is quite complicated as well.

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Speaker 1: That's the first sense in which this product justice. The

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Speaker 1: second is this, you know, Mr Trump of course campaigned

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Speaker 1: on a kind of anti Wall Street, pro industrial renewal

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Speaker 1: sort of platform, and of course it's been anything but

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Speaker 1: since he took office, right, he seems to be all

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Speaker 1: about deregulating Wall Street and doing very little for industry

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Speaker 1: as far as I can tell. And so you know,

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Speaker 1: here we are. He's trying then to you know, kind

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Speaker 1: of take the leash off, but he's bungling this just

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Speaker 1: as much as he seems to have bungled infrastructure and reindustrialization.

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Speaker 1: So I guess there's a kind of poetic justice in

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Speaker 1: that too. He's basically being forced to comply with his

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Speaker 1: campaign promises, which work course not to deregulate Wall Street

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Speaker 1: further to reregulate it. What is in the Vulcar reproposal

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Speaker 1: that makes it unacceptable to much of the banking community.

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Speaker 1: I think it's basically that they're still having difficulty coming

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Speaker 1: up with a sort of easily administered, easily complied with

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Speaker 1: definition of legitimate hedging and market making activity on the

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Speaker 1: one hand, as distinguished from not so legitimate purely speculative

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Speaker 1: activity on the other hand. Right, so they're trying to

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Speaker 1: kind of continue sort of with the spirit of Vulcar,

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Speaker 1: but maybe to allow a little bit more trading than

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Speaker 1: Vulcar in its sort of one point oh rendition to

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Speaker 1: continue with your metaphor was allowing. But that turns out

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Speaker 1: to be quite difficult to do for the very same

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Speaker 1: reasons essentially that Volker one point oh was difficult to do.

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Speaker 1: Another key proposal from Trump regulators that hit a stumbling

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Speaker 1: luck as well would revise what's known as the leverage

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Speaker 1: ratio rule. You're laughing, tell us what happened? With that. Well,

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Speaker 1: this one, this one's funnier than ever. I mean, you know,

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Speaker 1: there's a sort of a certain sort of Keystone comps

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Speaker 1: quality right to the case with the vulcal rule, but

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Speaker 1: it's even more Keystone Cops when it comes to the

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Speaker 1: leverage ratio. They left out the f d i C

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Speaker 1: in the proposed rulemaking, right, So basically it was just

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Speaker 1: the o c C in the fed that engaged in

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Speaker 1: the sort of new rulemaking or the new sort of

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Speaker 1: formulation of the rule, basically because the fd i C

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Speaker 1: was still being run by Obama leftovers right when they

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Speaker 1: formulated the rule. The problem with that is that the

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Speaker 1: f d i C A is the principal capital regulator, right,

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Speaker 1: so it's a little bit you know like sort of

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Speaker 1: changing the local traffic laws without you know, notifying the

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Speaker 1: local police. Right. It's just makes no sense at all.

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Speaker 1: So the FDC is being asked to sort of approve

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Speaker 1: or sign off. But of course the fd I S

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Speaker 1: has to do its own analysis on an the sort

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Speaker 1: of proposed rule and has to do its own proposing

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Speaker 1: to the public and to take comment. You know, the

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Speaker 1: notice and comment period seeking input from the public is

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Speaker 1: something that the f d i C also has to

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Speaker 1: go through, so it can't just sign off on what

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Speaker 1: the FED in the o CC have given it, particularly

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Speaker 1: given it is again the primary capital regulators, so they're

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Speaker 1: gonna have to go back to the drawing board on

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Speaker 1: this one. So it's another case of total total bungling.

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Speaker 1: The time one obviously is moving up. But will delays

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Speaker 1: have any effect besides trying bankers patients, Yeah, I think

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Speaker 1: they will. I mean, so it takes a while to

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Speaker 1: go through these rulemakings, right, and that's all thanks to

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Speaker 1: Republican legislation in the past that tries to sort of

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Speaker 1: limit the speed with which federal administrative agencies can do

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Speaker 1: things right, So it's a fairly lengthy process that's involved

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Speaker 1: in any kind of rule change. That's one reason it

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Speaker 1: took so many years to implement the Dog Frank Statute itself. Right.

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Speaker 1: The regulations under that statute took a long time to

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Speaker 1: promulgate because of all of these restrictions that Republicans long ago.

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Speaker 1: But I'm on administry of agencies when it comes to regulating.

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Speaker 1: So now it's sort of again more poetic justice is

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Speaker 1: sort of coming back to bite them. It's taking at

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Speaker 1: least as long to redo these things, and of course

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Speaker 1: what that means in turn is that we're going to

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Speaker 1: be well into the elect le season, I think, before

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Speaker 1: they can come up with anything. And for that reason,

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Speaker 1: I think in a way those who are pro regulation

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Speaker 1: might actually be celebrating now that we sort of dodged

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Speaker 1: a bullet. What winds has the financial industry not under Trump.

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Speaker 1: So there's several um. One of course is you know,

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Speaker 1: we sort of really began right away with getting a

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Speaker 1: buy on the so called fiduciary rule when it comes

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Speaker 1: to pension fund management, which of course took everybody by

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Speaker 1: surprise in early because again Trump had campaigned in a

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Speaker 1: kind of pro pension fund, anti Wall Street sort of platform,

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Speaker 1: and then he did a complete about face upon taking office.

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Speaker 1: So that was a bit of a win for them, basically,

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Speaker 1: you know, sort of overturning or sidelining the Department of

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Speaker 1: Labor in its attempt to impose or keep imposing with

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Speaker 1: the Duchy Rule. It also, of course got the changes

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Speaker 1: that Congress itself has enacted over the last year or

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Speaker 1: two to sort of lighten the load. Those were legislative victories.

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Speaker 1: But again the problem that the face now is that

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Speaker 1: regulations have to be changed under those legislative changes, and

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Speaker 1: that's what takes longer. So they have a kind of

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Speaker 1: paper victory in the form of statutory change, but they

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Speaker 1: don't have a victory so much on the ground until

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Speaker 1: actual regulations are developed and then implemented, and that's what

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Speaker 1: takes longer. Again, ironically, thanks to Republican actions long ago

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Speaker 1: taken to sort of slow down the rate at which

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Speaker 1: agencies can do what they do. Bob with the e

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Speaker 1: p A, a lot of its new regulations, new rules

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Speaker 1: are challenged in court because the PA didn't follow what

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Speaker 1: they were supposed to do the steps one to three.

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Speaker 1: Is that what's happening with the financial regulators or is

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Speaker 1: it something different? At this point it's something different. Um,

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Speaker 1: it's it's basically, I mean, they have to worry about

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Speaker 1: litigation if they don't jump through all the hoops that

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Speaker 1: Congress requires them to jump through, of course, but at

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Speaker 1: this point it's just it's the hoop jumping itself that's

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Speaker 1: taking the time. The other thing that's sort of slowing

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Speaker 1: things down is again sort of ironic. So this is

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Speaker 1: the third set of ironies for you. The set is

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Speaker 1: of course quite busy at the moment trying to implement

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Speaker 1: or develop rules that are designed to relax things even

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Speaker 1: further for yet another class of institutions that the Republican

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Speaker 1: Congress showed solicitude for in the last year or two,

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Speaker 1: and that's the so called community banks, the kind of

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Speaker 1: mid size banks that have been getting a bit of

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Speaker 1: regulatory relief over the last year or two UM. And

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Speaker 1: of course the FETE is now developing rules under that

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Speaker 1: regulatory relief that was satutorially determined or or legislated. And

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Speaker 1: that's got that's sticking up a lot of its time

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Speaker 1: as well. That's Bob Hockett. He's a professor at Cornell

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Speaker 1: Law School. Thanks for listening to the Bloomberg Law Podcast.

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Speaker 1: You can subscribe and listen to the show on Apple Podcasts, SoundCloud,

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Speaker 1: and on Bloomberg dot com slash podcast. I'm June Brolso.

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Speaker 1: This is Bloomberg