Soon after President Trump enacted two Presidential Memoranda on April 21, 2017, members of Congress and industry associations have responded, discussing the effect these orders may have on the banking industry. The memoranda affect the ability of the Financial Stability Oversight Council to designate nonbanks as systemically important financial institutions, and the bank regulators to exercise the orderly liquidation authority found in Title II of the Dodd-Frank Act (see Banking and Finance Law Daily, April 21, 2017).
The FSOC has the authority to subject a nonbank financial company to supervision if it determines that either the "material financial distress, or the nature, scope, size, scale, concentration, interconnectedness, or mix of its activities could pose a threat to the financial stability of the United States."
End for "too big to fail"? Senior member of the House Financial Services Committee, Blaine Luetkemeyer, responded to the orders, stating that he "applaud[s] President Trump for his leadership on these critical matters." Luetkemeyer stated that he has advocated for eliminating the OLA "because it puts taxpayers on the hook for bailouts, instead of putting private companies on the hook for bankruptcy." Representative David Kustoff (R-Tenn) called the presidential memoranda "an important step in ending taxpayer-funded government bailouts and rolling back devastating Dodd-Frank regulations that are hurting the American people." According to Rep. French Hill (R-Ark), Financial Services Committee member, "The great misconception of the Dodd-Frank Act was that it would end the harmful reign of ‘too big to fail.’ Seven years later, we know that it only enshrined ‘too big to fail’ by allowing the government to decide through a nontransparent process what constitutes ‘systemically important,’ and by establishing a convoluted resolution process, potentially leaving taxpayers on the hook."
Industry associations. Kenneth E. Bentsen Jr., SIFMA president and CEO, released a statement in support of the order calling for review of the SIFI designation process. Additionally, the organization stated that it has "long supported a regulatory authority to wind down a failing financial institution and eliminate taxpayer bailouts" as well as believed that the current OLA "largely accomplishes" this goal. With regard to the executive order on tax regulation, SIFMA also "commended" the administration for prioritizing a review of tax rules.
The Competitive Enterprise Institute also released a statement, authored by CEI Senior Fellow and financial reform expert John Berlau, calling the memorandum "a good start" but adding that more needs to be done. The CEI stated that the Trump administration "should curtail—not just review" the nonbank SIFI designations.
Public Citizen released a statement by Lisa Gilbert, its vice president of legislative affairs, asserting that the orders "are nothing more than special favors for the same Wall Street banks that crashed our economy in 2008 and put millions of Americans out of work." Bartlett Naylor, financial policy advocate of Public Citizen’s Congress Watch division, also stated that "rolling back what’s called the ‘Orderly Liquidation Authority’ in the Wall Street reform law invites the fallout the nation suffered from the Lehman bankruptcy in September 2008."
Companies: Competitive Enterprise Institute; Public Citizen; SIFMA
MainStory: TopStory BankingFinance DoddFrankAct FedTracker FinancialStability PrudentialRegulation Receiverships TrumpAdministrationNews
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