If financial services regulation has, as one of its several essential raison d’êtres, the protection of small investors, then there is much to indicate that the new US President Donald Trump absolutely needs to reconsider some of his current policies and early actions.

On February 2, Trump took early steps which are a clear indication that – obsessed as he seems to be with dismantling as much as possible of his predecessor’s policies on practically everything – rules and protections created for the protection of consumers of investment advice he will probably be shooting out of the White House window.

For starters he plans to reverse the policy – known as the fiduciary rule – that requires brokers to always act in clients’ best interests rather than with seeking profits for themselves.

It is significant that Trump signed this new directive in a manner that portends where the bias of his future actions will be leaning towards. His was what is known as an executive order – signed after a White House meeting with Wall Street executives – that is both vague in wording but also having a potential reach over the US financial services sector that is indeed large and long.

Already in parts of the literature what is happening in this sector is being described as “the Goldman Sachs agenda for US financial services”, and students of regulation will quickly be recalling all that they were taught about regulatory capture and drawing comparisons with many occasions when in fact Wall Street – and not defenseless citizens’ interests – ruled the White House.

The vast bulk of retirees, both present and future, in the US are very worried. After the 2008 Lehman Brothers saga the Dodd-Frank Act had been structured by the Obama administration to, inter alia, ensure that banks and funds’ future liability positions be structured in a way that protect retirees’ interests. This came along with regulations that imposed on US pension advisors very serious fiduciary duties. Products for retirees which would fall into the general description of “excessively complex and generating high fees for limited values” were specifically targeted.

There is a sharp difference where it comes to financial services regulation between Donald Trump and Barack Obama

But now there is much to suggest that all effort is being directed at reversing the clock.  Craftily it is being alleged by some White House spokesmen that it will be only those parts of Dodd-Frank that hamper people with “good businesses” from being given loans by the banks.

Trump is presently coming over as dead set on attacking the 2010 Volcker Rule which reined in certain mortgage practices and derivatives trading, and controlled the extent to which banks could trade with their own money; and this at a time when in fact US banks are increasing consumer lending via the usual popular credit cards and automobile loans.

Most of the US media simply do not like Trump’s nestling up close to people like Stephen A. Schwarzman (CEO of private equity colossus Blackstone Group) and Jamie Dimon (boss of JPMorgan Chase).  Same goes for Stephen Bannon (ex-Goldman Sachs). They are all considered as definitely not being on the side of anything but the fat cat bankers of Wall Street, and all already engaged in plans to use the national budget process in some manner that kills off what defences for the working citizen lie in Dodd-Frank.

And this at a time when the latest of what is historically an endless story of US bank and finance crises, the Wells Fargo Bank scandal, is still oozing blood out on the US financial scenario.  Of course, in the history of finance in the US we have been here before. Colleagues of mine in the teaching of banking regulation have written extensively about how even the US Securities and Exchange Commission was actually born out of Wall Street’s womb, and not out of real public interest or necessity.

There is a sharp difference where it comes to financial services regulation between Donald Trump and Barack Obama. Obama had clearly stated that “I did not run for office to be helping a bunch of fat cat bankers on Wall Street”. Trump is now saying to Jamie Dimon, to Stephen Schwarzman, and to others, “Come along, you tell me about Dodd-Frank”(for which read “You tell me how you want it changed”) and never ever asking what the small savers, workers, and pensioners really need to have their savings and futures adequately protected.

Sensing the bit between its teeth Wall Street is already strongly lobbying Trump to modify many rules and enforce them only very lightly.  Democrat Senator Sherrod Brown, who sits on the Senate Banking Committee has expressed the view that “President Trump’s action will make it harder for American savers to keep more of what they earn”.

With the US economy presently riding a good wave it is easy to see that Trump is wrongly thinking that this is the only time when he can get away with much of what he wants to do in so many areas (medicare, immigration, education, defense, etc).  But working people’s finances are a different kettle of fish.

Hit the people, the savers, the workers, the pensioners hard there and one would be surprised at how quick and forceful the social and political backlash can be.

John Consiglio teaches banking regulation at the University of Malta.

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