The Deregulation of the Banks
It was in June 2007, 10 years ago. Two hedge funds managed by the firm Bear Stearns were experiencing serious difficulties as a result of investments based on subprime mortgages. A few weeks later, at the beginning of August, BNP Paribas sounded the alarm when it froze three monetary funds which were affected by subprimes. The great financial crisis had officially begun.
Ten years later almost to the day, part of the system which was put in place to avoid repeating the excesses of the past is being unraveled. It is as if the lessons of history are being forgotten. Which would hardly be surprising with Donald Trump as president.
The White House intends to review the regulations which were introduced by the Dodd-Frank Act in 2010. Admittedly, the act will not be repealed in its entirety, but there is a risk of it being seriously diluted.
Even if the White House does not intend to abolish the famous Volcker Rule, which prevents banks from speculating on their own accounts, it nevertheless wants to stop it from applying to medium sized banks. However, it is also known that this Volcker Rule already contains quite a few exemptions. Therefore, there is a real risk of repeating the mistakes of the past.
The Consumer Financial Protection Bureau, which is responsible for dealing with abuses of the system by banks, as it did during the recent Wells Fargo scandal, will see its powers strictly limited. In addition, Trump will be able to place someone loyal to him at its head, as he will do at the Federal Reserve. This will enable him to implement his policies more easily.
The president of the United States says that he wants a “more efficient” system of regulation in order to support lending by banks, and consequently, growth. However, the White House is obviously only acting according to the will of the banking lobby, without really taking into account the wider public interest. Ten years after the beginning of the great financial crisis, this is a missed opportunity for Trump. And it’s one of many.