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Orders Overview: Understanding Two Recent Financial Executive Orders
02/06/2017 Donald Trump Andrew S
keywords: Dodd Frank Wall St Reform Executive Orders

As the Republican presidential candidate, Donald Trump promised to loosen Federal regulations. Now that he is President, he has taken the first steps toward doing just that. Two recent executive orders set the stage for a reform of the Dodd-Frank Wall Street Reform And Consumer Protection Act, allowing him to alter a key piece of Obama-era legislation: 

Order Observations

In the first of the orders, the President instructed the Treasury Department to begin a review of current financial regulations and laws. In concert with the Financial Stability Oversight Council, the treasury secretary will determine whether the US financial system meets four key principles that Trump has delineated, namely:

  • Spurring growth of the economy
  • Helping American businesses compete with foreign firms both at home and abroad
  • Defending US interests in negotiations over international financial standards
  • Preventing situations that would require the government to bail out banks or other financial institutions

The Treasury Department has 120 days to study these laws and compile a report. It must then inform the President on how well the present system meets his stated principles.

The second order delays a rule that required financial advisers to prioritize their customers’ interests over their own earnings. Set to be implemented on April 10th, this rule is now indefinitely delayed. It is unclear when, if ever, it will be implemented.

Estimating The Effects

By themselves, neither of these orders is likely to change the current state of the market, though they did prompt a temporary increase in bank stock values. The first rule will only produce a report, and while the second will prevent a change from happening, it will not actively alter the market. Ultimately, Congress will need to act in order to fully reverse Dodd-Frank.

What these executive orders do accomplish is to set the agenda for changes in the financial system. By compiling a report on the benefits and limitations of current laws, Trump is signaling to Congress both that he expects them to pass a reform bill as well as what provisions that bill should have.

Trump’s actions could also create public pressure for Congress to act. Voters who support simplifying financial regulations will see the orders as evidence that the President has done his part for this effort; if a reform bill fails to pass, the Senate and the House are to blame. The orders could backfire, however, to the extent that the public sees them as pandering to financial institutions, a view that Democrats in Congress have sought to cultivate.

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