This morning, President Trump signed an executive order designed to radically slash federal regulations: for each new regulation put forward, the EO demands, federal agencies must propose two for elimination. Even more, the EO sets a yearly budget for regulatory costs. In 2017, the amount allowed for new regulations is zero dollars and zero cents.
The coming year, it seems, could see a major regulatory shift.
First up, Dodd-Frank
Trump's EO is just the start of what is likely to be a sustained attempt to defang the regulatory state. In addition to the administrative rules targeted by the executive order, the Trump administration is all but certain to move to change the 2010 Dodd-Frank Act soon, according to a special report on the state of regulatory reform issued by Thomson Reuters:
For observers across the political spectrum, there has been growing unease that the post-financial crisis objectives of a safer and more resilient financial system may have gone a step too far. By making it more costly for banks to perform their core functions, economic growth has been sacrificed to the overarching goal of financial stability. This is most observable for smaller and medium-sized firms struggling to obtain credit, many of which are no better off than they were eight years ago, and Trump's team has put their cause high on its economic agenda.
Thomson Reuters cites Trump's pick for Treasury secretary, former Goldman Sachs partner Steven Mnuchin, as a sign that the act is imperiled. Mnuchin has pledged, for example, that his "number one priority on the regulatory side" will be to "strip back parts of Dodd-Frank that prevent banks from lending."
The shifts in Dodd-Frank regulations could come from formal rule changes or relaxations on enforcement -- or a combination of both.
If Dodd-Frank is in the crossfire, other possible changes remain vague, as Trump has vowed to shake up the federal government but has yet to reveal specific details. "Compliance and legal teams say they expect a busy period sorting through mixed signals sent by Trump's team and his fellow Republicans in control of Congress," the report states.
Areas of uncertainty include how Trump will approach securities laws, how he'll deal with Wall Street regulation outside of Dodd-Frank, and how a Jeff Sessions-helmed DOJ will set enforcement priorities.
Some of the gaps created by the new administration could be filled by international regulatory bodies, individual states, the plaintiffs bar, and nonprofit organizations. And the coming regulatory uncertainty, the report notes, means a lot of work for lawyers and compliance professionals:
In the near term, however, compliance may well find its importance growing as banks and brokers call on their compliance professionals to stay on top of regulatory changes and to update programs. Furthermore, the rise of international enforcement bodies, particularly those with authority over bank money transfers and corruption, and a newfound assertiveness by legal authorities in U.S. states are likely to keep compliance on the front lines regardless of shifts in U.S. federal policy.