Financial deregulation already in progress

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One of the reasons cited to roll back Dodd-Frank is that it prevents banks to make loans. This is nonsense:

As he prepared to sign orders designed to roll back bank regulations enacted to stop the next financial crisis, President Donald Trump said that the rules are stifling lending. “We expect to be cutting a lot out of Dodd-Frank, because frankly I have so many people, friends of mine, that have nice businesses and they can’t borrow money,” Trump said on Friday. “They just can’t get any money because the banks just won’t let them borrow because of the rules and regulations in Dodd-Frank."

Lending declined initially after 2008, when the entire banking industry was almost wiped out by the collapse of the U.S. housing market. But it’s grown steadily since then, expanding by 6 percent a year since 2013, far faster than the economy. Banks now have a record $9.1 trillion of loans outstanding.

“Loan growth remains robust,” JPMorgan Chase & Co. Chief Financial Officer Marianne Lake said last month on a conference call with analysts. At JPMorgan, the biggest U.S. bank, core loans increased 10 percent to $806.2 billion last year, with gains in every category including credit cards and wholesale debt. Bank of America Corp.’s total loans climbed 1.1 percent to $906.8 billion, while Wells Fargo & Co.’s grew 5.6 percent to $968 billion..

Trump Cites Friends to Say Banks Aren’t Making Loans. They Are. - Bloomberg

And financial deregulation now already allows big financial institutions to bet with your money. If the bets go right, they win. If they go wrong, you loose. 

One hated provision of Dodd-Frank -- the Volcker rule -- bans the largest firms from making speculative bets with their own money. Goldman Sachs Group Inc.’s return on equity, a measure of profitability, has dropped from as high as 34 percent before the crisis to 8 percent last quarter. That means less money for bonuses and shareholder dividends.

Former Goldman Sachs President Gary Cohn, now Trump’s top economic adviser, looked on Friday as Trump signed two directives aimed at loosening financial regulations. Among the targets are the Volcker rule, the Consumer Financial Protection Bureau and a requirement that advisers on retirement accounts work in the best interests of their clients. Cohn said in a Bloomberg Television interview that the administration can make many changes without the involvement of Congress, where Trump’s deregulatory agenda will face Democratic opposition.

Trump Cites Friends to Say Banks Aren’t Making Loans. They Are. - Bloomberg

And deregulation, apart from making the financial system more prone to crisis also unleashes the predatory side of capitalism:

Last week Mr. Trump released a memorandum calling on the Department of Labor to reconsider its new “fiduciary rule,” which requires financial advisers to act in their clients’ best interests — as opposed to, say, steering them into investments on which the advisers get big commissions. He also issued an executive order designed to weaken the Dodd-Frank financial reform...

Why ...was the fiduciary rule created? The main issue here is retirement savings..., “conflicted investment advice” has been ... costing ordinary Americans around $17 billion each year. Where has that $17 billion been going? Largely into the pockets of various financial-industry players. And now we have a White House trying to ensure that this game goes on. 

On Dodd-Frank: Republicans would like to repeal the whole law, but probably don’t have the votes. What they can do is try to cripple enforcement, especially by undermining the Consumer Financial Protection Bureau, whose goal is to protect ordinary families from financial scams. Remember the Wells Fargo scandal...? This scandal only came to light thanks to the bureau.

Economist's View: Paul Krugman: Springtime for Scammers

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President Donald Trump is set to sign two executive orders on Friday that would roll back two major Wall Street regulations, according to the Wall Street Journal. Trump will target the Dodd-Frank Act, which was written in the aftermath of the financial crisis to scale back risk taking at the country's largest financial institutions, as well as the fiduciary rule, which requires investment advisers to put client interests above their own when it comes to investment choices for retirement accounts, according to the Journal's Michael Bender and Damian Paletta.

Trump executive order repeal Dodd-Frank, fiduciary rule - Business Insider

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Friday afternoon, Donald Trump traveled to the US Treasury Department where he’s expected to sign a new executive order. The order aims at making life easier for American companies that want to avoid corporate income taxes, relax regulation on some large financial institutions, and make it harder for federal regulators to wind down big banks that fail during a financial crisis. It’s all part of the Trump administration’s frenetic sprint to put some points on the board ahead of the symbolically significant 100 days mark, though it also certainly seems like a betrayal of the populist themes of his campaign. The good or bad news, depending on how you feel, is that, based on briefings provided in advance by the White House, it does not appear that today’s order actually does anything per se.

Today’s executive orders are the nail in the coffin of Trump’s economic populism - Vox

But now, at Trump's behest, the DOL has postponed implementing the fiduciary rule, which was slated to go into effect this April, and is reviewing it. It's possible the rule will be revoked completely, or changed so the impartial conduct standard is significantly weakened. Yet money is still flowing in the wrong direction. In the first two months of 2017, active U.S. equity funds lost $30 billion, while passive gained $60 billion. Although the rule may be reversed, that won't change the ongoing shift in the advisory model. "For some time financial advisers have been shifting from a commission-based structure to a fee-base structure," says Todd Rosenbluth, director of ETF and mutual fund research at CFRA. "Lower-cost index products fit nicely into that model."

A seismic shift is happening, and billions are pouring into these funds

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CEOs like JP Morgan’s (JPM) Jamie Dimon and Goldman Sachs’ (GS) Lloyd Blankfein say regulation has gone too far, Senator Elizabeth Warren (D-Mass.) said she wholeheartedly disagrees. “Right now, I guarantee you, we don’t have too much regulation,” Warren said. “Bank profitability, bank lending is at an all-time high. The banks are doing just great. And internationally they’re cleaning the clocks of the guys overseas.” “So don’t tell me that regulation is a problem,” she added.

“What the giant banks want is what they had back in the late 1990s and into the 2000s They want the chance to run wild, to write their own rules, to take the cop off the beat.” She added she’s not surprised that’s what they’re after. “They learned a big lesson in 2008,” Warren said. “They get all the profits on the upside, and if the whole thing crashes, the American taxpayer bails them out. And here’s the best part, the bank CEOs don’t even lose their jobs. That was the lesson of 2008.” “Every time Jamie Dimon or Lloyd Blankfein or anyone else stands up and says, ‘Oh, too much regulation,’ I’m reminded that those are people whose banks were bailed out by the American taxpayers and they held onto their jobs; they still rake in a bazillion dollars,” Warren said. “And what do they want? They want to go back to the world where they crashed the economy the last time. They want a chance to do it again cause it worked out really well for them. It just didn’t work out so well for everyone else in this country.”

Elizabeth Warren finds it ironic that Jamie Dimon and Lloyd Blankfein complain about regulation [Video]

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And of course, it's about time we deregulated the financial markets, timing couldn't be better..

Regulators have warned US banks over “aggressive” financial projections that are being used to justify loading companies up with more debt. The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation on Wednesday joined others who have voiced concerns about bank lending to already highly leveraged companies.

US regulators issue warning over ‘aggressive’ lending

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A growing number of tech companies are raising funds by issuing their own digital currencies for investors to buy. But the practice is completely unregulated. Is another financial scandal just around the corner? 

The US Securities and Exchange Commission recently warned investors against fake ICOs and "pump and dump" scams, whereby fraudsters spread rumours and false information about potential ICOs in the hope of boosting a company's share price. Once the share price rises, the fraudsters sell, or dump, the shares at a profit.

Is this the next financial scandal waiting to happen? - BBC News

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Here we go again.. from Vox:

• Late last night, Senate Republicans narrowly voted to kill a sweeping new rule that blocked mandatory arbitration clauses when people signed up for credit cards and banks. The rule would have allowed consumers to sue banks and other financial institutions like Equifax in class-action lawsuits. [CNN / Donna Borak and Ted Barrett]
  
• Vice President Mike Pence had to be brought in to cast the deciding vote and break the tie, after Republican Sens. Lindsey Graham of South Carolina and John Kennedy of Louisiana defected from their colleagues and voted to keep the rule (Graham has fought against some arbitration measures in the past). The House has already voted in favor of the measure. [Politico / Zachary Warmbrodt]
  
• It’s a big win for Wall Street, and a big blow to the Consumer Financial Protection Bureau, the federal watchdog established by Congress after the 2008 mortgage crisis and resulting recession. [NYT / Jessica Silver-Greenberg]
  
• Getting rid of the rule means consumers can no longer take part in class-action lawsuits like the ones Wells Fargo customers filed against the company after it was caught signing people up for fake accounts. [LA Times / James Rufus Koren]
  
• In lieu of that, consumers will go through arbitration, which congressional Republicans argued can result in more money for consumers. [American Banker / Ian McKendry]
  
• The big difference between arbitration and class-action lawsuits is that class action is when a bunch of consumers band together to sue, making it easier for them to afford a lawyer (this is especially important in big cases like the Wells Fargo one). In contrast, it’s difficult for a single consumer to afford to sue. [WSJ / Anna Prior]
  
• Many credit card companies and banks now put mandatory arbitration clauses in the small print of agreements consumers have to complete when they sign up for a new credit card or open an account. The latest move from Republicans makes it even harder for consumers to get recourse. [NPR / Chris Arnold]
  

Remember all that astroturf of the Tea Party after the financial crisis, railing against the bailouts? Hahaha.
If you get fucked over by a big bank, and there is every likelihood you will, given the history of the past couple of decades, you will have no recourse, thanks to the Republican Tea Partiers..

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Gutting the Consumer Financial Protection Bureau

White House Office of Management and Budget Director Mick Mulvaney will serve as the acting head of the Consumer Financial Protection after former director Richard Cordray stepped down Friday. It’s not clear if Mulvaney, who once called the CFPB a “sick, sad” joke will perform the duties of the new office on a day-to-day basis while continuing to act as budget director for the White House or if he will do both jobs simultaneously.

Trump names Mick Mulvaney as interim leader of CFPB - Business Insider

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The acting head of the Consumer Financial Protection Bureau (CFPB) is reportedly mulling whether to go ahead with a multimillion-dollar penalty for alleged mortgage fraud by Wells Fargo. Reuters reported that the CFPB and Wells Fargo had been hashing out a settlement over the bank charging potentially more than 100,000 mortgage borrowers unnecessary fees to lock in low mortgage rates.

Acting CFPB Director Mick Mulvaney, the White House budget director, said last week he’d review each of the 14 pending enforcement actions left to him by former Director Richard Cordray. Mulvaney, a staunch conservative, had routinely spoken out against the CFPB as a congressman, sponsoring bills to eliminate the agency. He and fellow Republicans have accused Cordray and the CFPB of abusing its unique independence and broad power to harm the financial markets. “The structure of the CFPB is just fundamentally flawed. Authority that I have now as the acting director really should frighten people,” Mulvaney said last week on Fox Business.

“We’re going to try and limit as much as we can what the CFPB does to sort of interfere with capitalism and with the financial services market," he said..

Consumer bureau reconsidering fine against Wells Fargo for mortgage fees: report | TheHill

• Yea, give these financial institutions free reign to scam customers and blow up the financial system. When they do that, they can always be bailed out by your money, whilst scamming people with robo foreclosures.
  

Since Roosevelt introduced decent financial regulation we haven't had a major financial crash until we began to deregulate financial markets, which are especially prone to information asymmetries (a well known market failure were one party to a transaction can scam another party simply by having an information advantage). Some of these financial crisis:

• The housing and loan crisis
  
• The junk bond crash
  
• The financial crisis
  
• The foreclosure crisis
  
• Scamming LIBOR
  
• Wells Fargo Roboaccounts
  
• Wells Fargo 
  

And this is just from memory, we're sure there have been quite a few more. In case you think banks and other financial institutions don't need regulation, see here a list with bank scams.

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Bankers paradise, deregulation + permanent bailout fund. Nobody is going to hold them responsible..

But in some ways, the clearest example of the difference between a regime of corporate looting and one of free market ideology came on the lower-profile topic of financial regulatory policy, where the Trump administration quietly signaled a major shift last month. Back in 2009-’10, of course, the Obama administration responded to the financial crisis and the chaotic Bush-era bailouts by passing the Dodd-Frank law to overhaul America’s financial regulations. The goals of the law were twofold, on the one hand hoping to tighten the regulatory screws to make future bailouts less likely and on the other hand trying to bring some order to the question of what to do with large banks that do go bust in a way that risks a crisis.

Republicans opposed this approach, arguing that heavy-handed regulation was stifling the economy. But they said that they, too, deplored bailouts and that the real solution to the problem of banking crises was a need to tie the government’s hands to prevent any possibility of future bailouts.

The Trump administration has taken up the deregulatory baton with gusto, appointing Wall Street lawyers to run key agencies and turning what was intended to be an interagency working group on identifying financial risk into a forum for advancing deregulation. But the free market fix for financial crisis has gone missing in action. In late November, the Trump Treasury Department quietly announced that it wants to keep the Dodd-Frank Orderly Liquidation Authority fund around after all. That’s an obscure little corner of the government, but it’s conceptually crucial — that’s the thing Republicans used to call a “permanent bailout fund.” They used to argue that eliminating it was the key to establishing a sound financial regulatory framework in which no bailouts would happen, and bankers would be disciplined by markets rather than bureaucrats. Under Trump, the reality is that neither markets nor bureaucrats are going to be doing any disciplining.

We’re witnessing the wholesale looting of America - Vox