Regulatory Time-out

 “U.S. President Donald Trump on Friday will fire the opening salvo in his campaign to scale back major regulations that resulted from the financial crisis, directing a review of the Dodd-Frank Act and putting the brakes on a retirement advice rule.” – Reuters 2/3/2017

Speaking as someone who has dealt with these Regulations and proposals, the President’s actions are (hopefully) the first steps toward sane regulatory oversight and away from rampant unintended consequences.

The parts of the DFA that deal with TBTF and capital requirements are useful, especially for the largest institutions. Stress tests and other solvency related requirements seem reasonable. The headline item is always the Volcker Rule. It’s primarily symbolic in nature, and it certainly doesn’t impact the activities of smaller institutions.

However, the parts of the DFA that are concerned with matters wholly unrelated to the financial crisis of 2007 and 2008 (like the CFPB) could be reduced or eliminated completely. It’s simply a full employment program for compliance officers and attorneys.

My favorite anecdote relates to the 2018 HMDA revisions. A simple designation of ethnicity (Hispanic or Non-Hispanic) was deemed insufficient for government monitoring. Starting in 2018 you have to identify what “type” of Hispanic (Mexican, Puerto Rican, Cuban, Other Hispanic). Interesting information, but it has nothing to do with the financial crisis precipitated by the poor lending practices sanctioned by the GSEs and HUD. Just extra compliance cost with no corresponding benefit.

The DOL rule. Well intentioned…totally the wrong approach. As presented, it would hurt the people it was meant to help. The small investor would pay more, have fewer options, and get no assistance. It’s hard to see how the little guy would gain in that scenario.

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” – Commonly attributed to Mark Twain (but someone else probably said it first)