The Trump administration just permanently weakened one of President Obama’s landmark laws aimed at regulating the financial industry.
While all eyes were on President Trump and his nine-day international trip, his administration quietly took steps to dismantle former President Barack Obama’s Dodd-Frank Act, particularly the Act’s Volcker Rule aimed at stopping high-stakes derivatives trading. According to the Wall Street Journal, Acting Comptroller of the Currency Keith Noreika recently said the Trump administration will broadly re-interpret the Volcker Rule.
The new “interpretation” from the Trump administration appears to have been a green light to the big banks that they can continue the risky trading behaviors that preceded the financial crisis. HuffPost dug up a memo written last week by financial analyst Brian Gardner of the firm Keefe Bruyette & Woods, that read, “Examiners can start giving banks the benefit of the doubt regarding compliance with Volcker almost immediately.”
The Dodd-Frank Act, which was signed into law in 2010, put the big banks on notice, as it was aimed at stopping the high-risk investment gambling schemes that led up to the financial meltdown of 2008. However, the meat and potatoes of Dodd-Frank was in the Volcker Rule (named after former Federal Reserve Chairman Paul Volcker), which, as HuffPost’s Zach Carter explains, was meant to be a reinstating of the Glass-Steagall Act of 1933 that separated commercial banking from investment banking:
Instead of banning banks from the securities business outright, [the Volcker Rule] only barred proprietary trading. Banks were no longer allowed to make reckless bets for their own accounts, but other types of trading to help clients meet legitimate market needs would be permitted. Done right, the Volcker rule would have been a technocratic improvement on Glass-Steagall, providing all the benefits of its New Deal predecessor without its costs.
The Volcker Rule, which cited the populist Occupy Wall Street movement of 2011 nearly 300 times, was the one facet of the Dodd-Frank legislation that had the banks sweating bullets. However, Wall Street’s army of lobbyists (including the Podesta Group, led by Hillary Clinton’s former campaign chief) helped delay the implementation of the Volcker Rule all the way until July of this year, despite Dodd-Frank being passed nearly seven years ago. However, with the Trump administration’s newly announced intent to re-interpret the rule, the Dodd-Frank law’s most important section may now be completely toothless.
Tom Cahill is a senior editor for the Resistance Report based in the Pacific Northwest. He specializes in coverage of political, economic, and environmental news. You can contact him via email at [email protected], or follow him on Facebook by clicking here.