Mr. M and I attended an investment seminar yesterday sponsored by a local bank. One of the guest speakers was Nathan Dean from Bloomberg Intelligence and he spoke on the impact of the election on financial regulation. I will attempt to summarize his talk.
1) The election and Dodd-Frank: 70.3 percent of the rules under Dodd-Frank have been finalized. 20.5 percent of the rules are still waiting to be proposed. Various agencies are involved in this, including the SEC, bank regulators, CFTC and others. What impact would a President HRC or DJT have on this process and other regulation?
2) HRC: Her website has info on her positions in this area. She supports “too big to fail.” She says we need new regulations to break up big banks and calls for a risk fee tied to a bank’s debt, which no one else has proposed. The “big banks” she claims she’d go after include Wells Fargo, Morgan Stanley, State Street, Goldman Sachs. (He didn't say anything about how HRC really is in the bag for these entities and has received zillions of dollars from them).
She would bring back the Volcker Rule. (defined as a federal regulation that prohibits banks from conducting certain investment activities with their own accounts, and limits their ownership of and relationship with hedge funds and private equity funds, also called covered funds. The Volcker Rule’s purpose is to prevent banks from making certain types of speculative investments that contributed to the 2008 financial crisis. Investopedia
She wants to bring back the “swaps push out provision.” She supports a high frequency trading (HFT) tax; wants a tax on excessive cancellations. Not sure what all this means, but he said most of this stuff would have a slim chance of coming to fruition, as there’s no congressional support for most of it. Her plan to get tough on shadow banking wouldn’t require Congress, he said, so it’s more likely to be implemented if she’s elected. She would give the Financial Stability Oversight Council more regulatory reporting power.
HRC will “move to the left,” he said, with enforcement. She would require investment firms to admit guilt as a condition of any settlement agreements they entered into with the SEC. She would increase prosecutions and penalties for individual and firm misconduct.
3) DJT: No published plan, so this fellow based his comments on Trump’s past comments. He wants to repeal Dodd-Frank as a job-killer. DJT has said he supports the return of Glass Steagall. The GOP put a line in its platform to this effect, but just as a sop to the left.
DJT would support a regulatory moratorium on new legislation. While HRC wants new rules right out of the gate, DJT would stop them on day one. He supports small bank relief. Those would have a decent chance of implementation.
If Trump is elected, congressional Republicans are more likely to favor high capital requirements or tweaks of Dodd-Frank rather than a return of Glass-Steagall. A recent G-S bill, co-sponsored by McCain and Warren, attracted the support only of progressive lawmakers.
4) Congress: Regarding help for small banks, Dean discussed the CHOICE Act, currently pending in Congress. It would require a 10 percent leverage rate to buy out of Dodd-Frank. It would have a decent chance of implementation under DJT. It will come up in 2017. Won’t pass the Senate as written but there is bipartisan support for the 10 percent leverage ratio. Dean says Senate currently held by GOP at 54-46; he predicts 52-48 after election. Others predict 50-50, which means nothing would get done about financial regulation.
He expects Speaker Ryan to push for comprehensive tax reform in 2017.
5) Regulatory Agencies: Election has big implications, as new president replaces many people, e.g., Treasury Secretary. Other bigwigs’ terms are due to expire in 2017- 2018 anyway, so new president appoints replacements, e.g., Janet Yellin 2018.
Looking at the polls, especially the Real Clear Politics data, he says it looks like HRC has enough electoral votes to win.
I hope this is of some interest to you, especially those with more knowledge and understanding than I of the financial markets.
Mr. Dean invited people to follow him on Twitter @NathanDeanDC to see what other analysis he provides.