WASHINGTON — President Donald Trump took aim at financial regulations Friday, ordering a review of the Dodd-Frank Wall Street reform law that could lead to major changes and suspending a conflict-of-interest rule for retirement advisers before it goes into effect this spring.
Trump targeted major initiatives of the Obama administration that Republicans have strongly opposed.
In meetings with business leaders since taking office, Trump has heard consistent complaints about federal regulations, according to a senior administration official who spoke to reporters on the condition of anonymity in advance of the president’s announcement.
At a White House meeting with top corporate chief executives, including Jamie Dimon of JPMorgan Chase & Co., Trump said Friday that major reductions in financial regulations were coming.
“There’s nobody better to tell me about Dodd-Frank than Jamie,” Trump said before the meeting began.
He added that “we expect to be cutting a lot out of Dodd-Frank because frankly, I have so many people, friends of mine that had nice businesses, they can’t borrow money.”
“They just can’t get any money because the banks just won’t let them borrow it because of the rules and regulations in Dodd-Frank,” Trump said.
After the CEO meeting, Trump signed an executive order directing the treasury secretary to consult with regulators about what needs to be done to fix the Dodd-Frank Wall Street Reform and Consumer Protection Act and to report back. That report is expected to come within “a relatively short period of time,” the official said.
Trump’s nominee for treasury secretary, Steve Mnuchin, has not yet been confirmed by the Senate. He could get a full Senate vote next week.
Trump also issued a memo to the Labor Department to cease implementation of the retirement advisers rule and undertake a complete review of it. Trump’s labor secretary nominee, Andy Puzder, has yet to have a confirmation hearing.
Congressional Republicans and major financial firms have complained for years about the negative effects of Dodd-Frank.
Passed in 2010 in the wake of the financial crisis, the legislation toughened capital requirements for banks and other financial firms, set up a powerful panel of regulators to watch for signs of instability and created the Consumer Financial Protection Bureau to oversee credit cards, mortgages, payday loans and other financial products.
Trump has called Dodd-Frank “a very negative force” in the economy and vowed during the campaign to dismantle it.
Trump administration officials believe that the law “in many respects was a piece of massive government overreach,” the official said. “Some of the rules may have even been unconstitutional, creating new agencies that don’t actually protect consumers.”
That was a clear reference to the consumer bureau, which Republicans have complained has too much power and restricts consumers’ access to credit.
The agency has been praised by Democrats and consumer advocates for cracking down on abuses by financial firms. It was a key player in the $185 million settlement that Wells Fargo & Co. agreed to pay last year for the creation of as many as 2 million accounts without customer authorization.
Two Republican senators — Mike Lee of Utah and Ben Sasse of Nebraska — have urged Trump to fire the bureau’s director, Richard Cordray. They cited an October federal appeals court ruling that the consumer bureau’s structure is unconstitutional because it gives the director too much power.
The agency is appealing the ruling.
The new restrictions on retirement advisors were set to start being phased in on April 10. Known as the fiduciary rule, it requires investment brokers who handle retirement funds to put their clients’ interests ahead of other factors, such as their own compensation or company profits.
The Labor Department rule was designed to prevent consumers from being steered toward IRAs and other retirement investments with higher fees or lower returns that benefit the advisers recommending or selling them.
The Obama administration estimated that those conflicts of interest cost Americans $17 billion a year.
But Republicans, business groups and key players in the financial industry opposed it. They said the rule would drive up the cost of investments by forcing asset management firms to spend money on implementation and make it more difficult for average Americans to get retirement advice.
“We think this was a complete miss on what they were trying to do,” the senior administration official said. “It has complete unintended consequences.”
Congress voted last spring to overturn the rule, but Obama vetoed the measure.
When the fiduciary rule was released last year, Barbara Roper, director of investor protection for the Consumer Federation of America, said it would counter a “toxic web of financial incentives” for brokers, insurance agents and anyone else offering retirement investment services that often run counter to the consumer’s best interests.
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-Jim Puzzanghera and Michael A. Memoli, ©2017 Tribune Co., Distributed by Tribune Content Agency, LLC.
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