United States: After The U.S. Presidential And Congressional Elections, What's Next For Financial Services Regulation?

Last Updated: November 30 2016
Article by Lisa M. Ledbetter

The presidential and congressional elections of 2016 have resulted in the election of Donald J. Trump as the 45th U.S. President and Republican majorities in both chambers of Congress. What do these elections mean for the future of financial services regulation?

As the new Trump Administration develops comprehensive policy positions and makes important personnel decisions, we offer early indications of the financial services regulatory agenda that is unfolding. At this time, prevailing themes and observations for the future of financial services regulation are:

  • President-elect Trump is most likely to pursue policies of deregulation, focusing early attention on reforming one of President Obama's signature domestic accomplishments, the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"), signed into law in July 2010.1
  • President-elect Trump has called for a temporary moratorium on new executive agency rules "that are not compelled by Congress or public safety,"2 although the scope of the specific agency proposals that would be covered is not yet clear.
  • The likely starting points for amendments to the Dodd-Frank Act are two similar bills drafted and sponsored by the Republican Chairmen of the relevant banking committees in the Senate and House of Representatives.3
  • Republican efforts to make substantial changes to the Dodd-Frank Act will likely be met with some opposition in the Senate, where Republicans hold a narrow majority, and this would likely necessitate compromise discussions.4
  • Several changes to the Dodd-Frank Act could be embraced on a bipartisan basis, aiding enactment into law relatively quickly if these changes do not become ensnared in compromise negotiations. Examples include raising the $50 billion asset threshold for application of enhanced prudential regulation to bank holding companies, weakening the authority of the Financial Stability Oversight Council ("FSOC") within the Department of the Treasury, and replacing the single Director structure of the Consumer Financial Protection Bureau ("CFPB"), and possibly that of other federal agencies, with a bipartisan multimember commission.
  • The heads and many subordinate officials of each cabinet department and agency will be nominated by President Trump following his inauguration. Leadership positions of many of the federal financial institutions regulatory agencies5 are likely to turn over as well. Vacant positions may be filled quickly. Senate confirmation of these political appointees should proceed apace as current Senate rules permit a simple majority vote on executive branch nominations, disallowing filibusters and facilitating confirmation.
  • As the federal financial services landscape develops, state financial services regulators and state attorneys general ("AGs") could choose to continue to apply state laws and rules that are aligned with parts of the Dodd-Frank Act or to pursue novel theories concerning consumer protection and corporate conduct.

Our White Paper discusses the financial services priorities of the new Trump Administration based upon positions that have been disclosed thus far. We discuss possible changes in the leadership of the federal financial institutions regulatory agencies and identify some of the congressional leaders who will have significant influence over financial services reform going forward. We conclude with an overview of the CHOICE Act, which is most likely to kick off the legislative process for financial regulatory reform. We will publish additional White Papers as the framework for financial services regulation continues to take shape.

The new regulatory environment is likely to significantly affect the competitive environment for financial services companies of all types and sizes, including foreign banks doing business in the United States. Financial services companies should stay abreast of regulatory and legislative developments to take full advantage of opportunities and make appropriate adjustments to their business plans and operations.

Download >> After The U.S. Presidential And Congressional Elections, What's Next For Financial Services Regulation?

Footnotes

1 Pub. L. 111-203 (Jul. 21, 2010).

2 Trump-Pence Campaign information.

3 The House bill is H.R. 5983, the Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act ("CHOICE Act"), sponsored by House Financial Services Committee Jeb Hensarling (R-TX), and the Senate bill is S. 1484, the Financial Regulatory Improvement Act, sponsored by Sen. Richard C. Shelby (R-AL), who has reached his term limit as Chairman of the Senate Committee on Banking, Housing, and Urban Affairs.

4 A vote to end a filibuster of legislation requires 60 favorable votes to limit debate and advance a bill to the Senate floor.

5 For purposes of this White Paper, the federal financial institutions regulatory agencies are the Board of Governors of the Federal Reserve System ("Federal Reserve"), the Commodity Futures Trading Commission ("CFTC"), the CFPB, the Federal Deposit Insurance Corporation ("FDIC"), the Federal Housing Finance Agency ("FHFA"), the Office of the Comptroller of the Currency ("OCC"), and the Securities and Exchange Commission ("SEC").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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