By Justin Sink, Elizabeth Dexheimer, and Katherine Chiglinsky

President Donald Trump will order a sweeping review of the Dodd-Frank Act rules enacted in response to the 2008 financial crisis, a White House official said, signing an executive action Friday designed to significantly scale back the regulatory system put in place in 2010.

Trump also will halt another of former President Barack Obama’s regulations, hated by the financial industry, that requires advisers on retirement accounts to work in the best interests of their clients. Trump’s order will give the new administration time to review the change, known as the fiduciary rule.

Taken together, the actions are designed to lay down the Trump administration’s approach to financial markets, with an emphasis on removing regulatory burdens and opening up investor options, said the White House official, who briefed reporters on condition of anonymity.

The orders are the most aggressive steps yet by Trump to loosen regulations in the financial services industry and come after he has sought to stock his administration with veterans of the industry in key positions. His plans are sure to face fierce criticism by Democrats who charge that Trump is intent on undoing changes designed to protect everything from average investors to the global banking system.
Barack Obama signs the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21, 2010. Photographer: Win McNamee/Pool via Bloomberg

Barack Obama signs the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21, 2010.
Photographer: Win McNamee/Pool via Bloomberg

He also could face a backlash from some of his own supporters, whose distrust of big banks and the financial industry helped fuel the populist anger that propelled Trump to the White House.
Banks ‘Shackled’

Trump is scheduled to issue the directives at a signing ceremony around noon following a meeting of more than a dozen top corporate executives led by Blackstone Group LPChief Executive Officer Steve Schwarzman. Gary Cohn, director of Trump’s National Economic Council, is meeting with House Financial Services Committee members Friday morning, said two people familiar with his schedule.

Cohn said Friday on Fox Business that the executive orders are intended to relieve restrictions and scrutiny that post-crisis regulations have put on banks, and that firms have been forced to “hoard capital” rather than lend it out to their clients.

“All banks have been shackled,” Cohn said. “We need to get banks back in the lending business.”

On Monday, Trump promised to do “a big number” on the Dodd-Frank Act during a meeting with small business owners. He said the law had damaged the country’s “entrepreneurial spirit” and limited access to needed credit.

“Regulation has actually been horrible for big business, but it’s been worse for small business,” the president said. “Dodd-Frank is a disaster.”

What’s the problem with Dodd-Frank? — a Q&A explains

Trump’s Treasury secretary nominee, Steven Mnuchin, will meet with members of the Financial Stability Oversight Council and report back on what changes the administration should take to alter Dodd-Frank, the official said. Particular attention will be paid to the Volcker Rule limits on banks making speculative bets with their own funds, a restriction promoted by former Federal Reserve Chairman Paul Volcker.
Immediate Impact

The official wouldn’t say how long the Treasury Department would have to complete its review, but did say that the administration would be looking for ways to make an immediate impact, including through administrative changes and personnel decisions.

Trump’s directive also starts the process of stalling the so-called fiduciary rule — set to take effect in April — that the Obama administration said would protect millions of retirees from being steered into inappropriate high-cost or high-risk investments that generate bigger profits for brokers.

The review will include examining making personnel changes at financial regulators as a way of accomplishing the administration’s objectives, the official said. They declined to answer a question on whether Trump would try to fire Richard Cordray, the director of the Consumer Financial Protection Bureau. The official did say the administration believed that some of the rules created under Dodd-Frank may have been unconstitutional, including the creation of new agencies, an apparent reference to the bureau.
Richard Cordray
Photographer: Andrew Harrer/Bloomberg

Asked Monday about whether Trump would retain Cordray in his position, White House press secretary Sean Spicer declined to answer. Mnuchin said during his congressional testimony that he believed the CFPB as a whole should be preserved but that Congress should take more direct control of its budget.

The Trump administration doesn’t believe Dodd-Frank measures, including the Volcker Rule, addressed real issues in the financial system, the official said. The president’s team also believes the Labor Department fiduciary rule was unnecessarily restricting investor choice without providing necessary consumer protection, the official said.

Read more: A QuickTake explainer on the Volcker rule

Republican lawmakers and some financial firms say the fiduciary rule is deeply flawed, arguing that it will restrict options for consumers and result in some savers being denied advice on their retirements. Trump will call for the Labor Department to stop and review the regulation in its entirety.

While the review will be undertaken independently by the Labor Department, the White House aide signaled that the president was expecting significant change.
Broader Overhaul

Delaying implementation of the Labor Department rule is the first step Republicans and the finance industry are eyeing as part of a broader overhaul of the measure. GOP Lawmakers have argued that the Securities and Exchange Commission, not the Labor Department, should oversee and regulate any changes related to financial firms.

Banks, asset managers and insurers have been fighting the fiduciary rule ever since the Labor Department approved it last year, saying the regulation could raise the costs of providing advice and make it harder to serve lower-income clients. Business groups including the U.S. Chamber of Commerce and American Council of Life Insurers have sued to try to block it.

Still, representatives of some financial services companies said they planned to change practices to meet the regulation’s standard even if it is halted.

“We plan to go forward with the majority of the work we’ve done,” Bill Morrissey, managing director of business development at LPL Financial Holdings Inc., said in an interview before Trump’s order was disclosed. “What investors want is more transparency and lower fees.”
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Morgan Stanley, one of the biggest U.S. brokerages, said on Jan. 26 it plans to move ahead with changes designed to comply with the rule, despite uncertainty over whether the regulation will be implemented. Insurers including American International Group Inc. and Principal Financial Group Inc.stressed after Trump’s victory that they would continue to forge ahead as though the rules would be carried out.

“My expectation is that a lot of firms are going to continue installing a best-interest standard, regardless,” said Brian Graff, chief executive officer of the American Retirement Association, a group that represents pension administrators and plan advisers.

It’s been a busy first week in office for President Donald Trump, with executive orders on immigration, energy, trade, health care, and more being handed down daily.

But executive orders are just the preamble to the big initiatives that Trump and the Republican majority in Congress are expected to push for shortly.

Chief among those is the “dismantling” of the Dodd-Frank Wall Street Reform Act.

During the presidential transition, Trump’s transition team stated that dismantling Dodd-Frank would be one of the president’s main priorities.

And on Thursday, the American public got a reminder that the president and his party plan to keep that promise.

Speaking before the Congressional Republican Retreat, Vice President Mike Pence said that dismantling Dodd-Frank and its “overbearing mandates” remains a top priority for the Trump administration, a statement that was greeted by applause from the collected Republicans.

(To see Pence’s speech in full, click here. To see the Dodd-Frank section of the speech, fast-forward to the 18:01 mark.)

After Trump and Pence spoke to the GOP retreat, House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, issued a statement saying that he intends to continue pushing for the replacement of Dodd-Frank with a new financial reform package.

Last year, Hensarling introduced the Financial Choice Act, a Republican-crafted Dodd-Frank replacement that would “end taxpayer-funded bailouts of large financial institutions; relieve banks that elect to be strongly capitalized from ‘growth-strangling regulation’ that slows the economy and harms consumers; and impose tougher penalties on those who commit fraud as well as greater accountability on Washington regulators.”

On Thursday, Hensarling said that he will advance the Financial CHOICE Act in the new Congress.

“No bureaucrat in Washington should be able to tell hardworking Americans what kind of credit card, bank account, mortgage or retirement advice they can have, but that’s exactly what Dodd-Frank does,” Hensarling said.

“As the president and vice president have said, Dodd-Frank makes it harder for people to get loans to buy a home or start a small business. Consumers are paying more in fees and are losing benefits and access to services they want and need,” Hensarling continued.

“Instead of ending ‘too big to fail,’ Dodd-Frank institutionalizes bailouts for big banks. Dodd-Frank’s regulations give Wall Street a competitive advantage over community banks and credit unions,” Hensarling added.

Hensarling said that he plans to “dismantle” Dodd-Frank this year.

“Fulfilling the Trump Administration’s pledge to dismantle Dodd-Frank this year is essential to leveling the playing field, building a healthy economy and offering every American greater opportunities to achieve financial independence,” Hensarling said.

“Republicans on the Financial Services Committee are eager to work with the president and his administration to unclog the arteries of our financial system so the lifeblood of capital can flow more freely and create jobs,” Hensarling continued.

“The Financial CHOICE Act, our bold and forward-looking plan, replaces Dodd-Frank with new policies to protect consumers by holding Wall Street and Washington accountable, end bailouts and unleash America’s economic potential,” he concluded. “Replacing the Dodd-Frank mistake is necessary if we ever hope to enjoy a healthy economy and make America great again.”