The first days of Trump—dismantling Dodd-Frank

The first days of Trump—dismantling Dodd-Frank

Less than a month into his presidency and Donald Trump has already started the process of dismantling the Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced as a response to the global financial crisis of 2008–09. DLA Piper partners Michael McKee (London) and Jeff Hare (Washington DC) consider the likely impact of the Trump Administration’s vision for the US financial system.

What is the Dodd-Frank Wall Street Reform and Consumer Protection Act and what are its major provisions?

Dodd-Frank is a major piece of US financial services legislation passed by Congress in 2010 to respond to many of the key issues arising from the global financial crisis (GFC) of 2008–09. It was initially targeted at reducing the size of banks that are too-big-to-fail and thereby require governmental support when they face insolvency. But, as enacted, Dodd-Frank is much more wide ranging and covers too many areas to summarise in a short interview. However, by way of example, among the major changes it introduced were:

  • the creation of several new federal financial regulatory agencies, committees, councils, bureaus, and offices, while simultaneously merging and eliminating others
  • the creation of an orderly liquidation authority for systemically important financial institutions (SIFIs)
  • the so-called ‘Volcker Rule’ prohibiting, with certain exceptions, proprietary trading by bank entities and ownership or sponsorship of hedge or private equity funds, and
  • substantial regulation of swap dealers and the over-the-counter derivatives market

Dodd-Frank also introduced a new regulatory body, the Consumer Financial Protection Bureau, tasked with enforcing existing consumer financial protection laws.

Why has Dodd-Frank been thrust back into the spotlight since President Trump’s inauguration?

It is fair to say that neither Presidential candidate positioned themselves as particularly ‘pro-bank’, but, unlike Clinton, Trump was quite critical of regulatory burdens imposed by Dodd-Frank which he believed were slowing economic growth. He referred to Dodd-Frank as a ‘disaster’. While specifics were lacking, Trump’s transition team announced before his inauguration the administration ‘will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation’.

How is Trump’s executive order for financial services likely to affect the post-crisis reforms introduced by Dodd-Frank in the US?

On Friday, 3 February 2017, President Trump signed an executive order asking key regulators to prepare a report of existing laws and regulations that promote or inhibit the ‘Core P

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About the author:
Prior to joining LexisNexis Michelle worked at Bingham McCutchen LLP as a financial services associate in Washington, DC and London. At Bingham, Michelle represented financial institutions in connection with regulatory investigations and enforcement actions and advised UK and foreign broker-dealers regarding doing business in the USA. Michelle spent 6 months on secondment at JP Morgan in New York.