Donald Trump aims to cut a lot out of Dodd-Frank Act

President Donald Trump issued another Executive Order (EO), this time on Core principles for regulating the United States financial system. At a White House meeting with a panel of CEOs from corporations including Tesla, JPMorgan Chase, General Motors and Wal-Mart on February 3, 2016, Trump said “we expect to be cutting a lot out of Dodd-Frank (Act),” he once called a “disaster” and that requires banks to undergo periodic checks to monitor their liquidity and withstand financial shocks like the 2008 collapse of the housing market.

Seen as a countermove of his predecessor Barack Obama’s stricter financial regulation enforced from 2010 after the banqueroute of Lehman Brothers in 2007 and the global financial crisis in 2008, Trump promised on several occasions during his presidential campaign that he’d help “friends of (his), that have nice businesses, (and) just can’t borrow money” because of Dodd-Frank rules and regulations. As a result Trump, who “far exceeded” retired General Electric CEO Jack Welch’s expectations, has given the financial markets another boost up although they already rallied 25 percent since Trump’s win.

From both financial and political viewpoints, Cyceon considers one still has to assess if less regulation could negatively impact financial market stability and how Americans will react to the end of regulation that was theoretically designed to protect them from too risky and/or inappropriate lending. Indeed, if financiers much welcomed Trump’s move, this could generate some significant political cost in the long term since large numbers of Americans who suffered from the 2008 crisis voted for Trump.