Donald Trump’s campaign began, officially speaking, with an awkward descent down a Trump tower escalator, the scattered applause of paid actors, and a rambling speech remembered mostly for calling Mexicans “rapists.” But symbolically, you could pin the start of his campaign back to the 2008 financial crisis, whose economic effects sowed the populist sentiment needed to propel the most outsider presidential candidate in U.S. history to victory.
So it’s only appropriate that as he prepares to take office, Trump is laying the groundwork for a regulatory return to the pre-crisis days. Consumer Financial Protection Bureau? Deuces. Dodd-Frank? Sayonara. Revolving door? Let’s give it another spin. “I am going to cut regulations massively,” Trump has promised.
Unsurprisingly, some finance watchdogs are beginning to blow their gaskets over the proposed bonfire of regulations. For a particularly poetic expression of anxiety, take Felix Hufeld, head of Germany’s top bank regulator.
“Barely 10 years after the start of the financial crisis I once more hear the bugle calls of deregulation,” he said Friday, reports Reuters. “I have the impression that these sounds are becoming louder.”
“That is not without risk,” he continued.
Clearly, Wall Street isn’t going to revert back to the drunken orgy of the mid-2000s the minute Trump enters the Oval Office. That might take a few months. But if recent experience tells us anything – anything at all – it’s that wholesale financial deregulation leads eventually to crisis.
That said, it’s too early to presume that the Trump administration and a Republican Congress will make good his recent pledge to “dismantle” Dodd-Frank. Some see mere tweaks in store.
Among them is Lloyd Blankfein. To paraphrase his comments at the DealBook Conference Thursday, Dodd-Frank took a three-condom approach to prudential regulation, throwing every conceivable prophylactic at the banking sector to prevent another outbreak of crisis. He’d be happy to see a few of the safeguards he considered redundant peeled back.
“I wouldn’t want regulation to be repealed in total,” the Goldman Sachs chief said. “There could be some modifications.”
So Lloyd isn’t too worried. But whether Dodd-Frank gets Trump’s promised dismantlement or merely a “modification,” it’s clear from the names being tossed aroud for administration positions – Hensarling especially – that the incoming Trump regime will prefer a light touch with Wall Street.
So let’s hope banks can show some restraint and police themselves once the regulatory framework gets put out to pasture. Failing that, have a good time on the way back to the brink.