• President Trump obtained a radical overhaul of the US financial system, including watering down prudential standards and Dodd-Frank
  • US financial deregulation will push community banks to win back credit market shares, help US SMEs and foster growth — it will also boost the general level of risk through cycle positioning and increased complacency

President Trump’s policy represents a turning point in the US as well as global economic history. It is characterized by a strong contrast between a doctrine of laissez-faire on the internal side and a maximum of interventionism on the external side embodied by protectionist measures. We consider here the domestic aspect with the reform of financial regulation, a primary objective of Mister Trump since the Presidential campaign, which was signed into law after a bipartisan support in the Congress on May 24th 2018. We present here the different elements of this new legislation via a chronological approach, which mainly aims at undoing the so-called Dodd-Franck law signed in the aftermath of the subprime crisis to put the U.S. financial system on a stronger footing.

Actual legislation and orientation by the Trump administration

President Trump’s EOs and the House’s Financial Choice Act

Since his election, President Trump and his administration have been determined to consequently reduce the regulatory burden on the U.S. economy through the elimination of supposedly inefficient, useless or obsolete regulations.

Toward this end, President Trump issued four Executive Orders (EOs) in 2017 directing federal agencies to repeal two regulations for every new regulation; to review every existing regulation so as to highlight any case of excessive regulation as well as giving council on how both the financial and energy sectors should be deregulated. This first stance of the newly elected administration on regulatory issues was followed during the summer 2017 of the Financial Choice Act.

This bill aimed at rolling back most Dodd-Frank provisions, as well as improving consumer protection. It had for ambition to grant healthy banks significant regulatory relief and subject banks to stress tests every other year instead of every year as well as repealing a Dodd-Frank provision allowing the government to take over a failing financial firm, known as Orderly Liquidation Authority (OLA), and create new bankruptcy laws instead.

Figure 1  Published Economically Significant Final Rules within 1st year of a Presidential Term