Trump’s ‘Core’ Regulatory Principles Warrant more Scrutiny
In American Banker, Director of BU’s Center for Finance, Law & Policy Cornelius Hurley examines President Trump’s approach to regulating the financial industry.
Unlike the response to his executive order on immigration, thousands of citizens did not hit the streets to protest President Trump’s executive order on “core principles” for regulating the financial system. No clever signs, no calls to “Dump Trump” — just resignation to the fact that a new attitude toward regulation is upon us.
There will be no do-over of the Core Principles as with the immigration executive order. These regulatory principles are set in stone as the position of the administration. It’s a safe bet that every candidate for a senior regulatory position has committed each of the seven principles to memory and has an explanation ready for how he or she will carry them forward if nominated and confirmed.
The principles have been labeled as “fairly noncontroversial” by a bipartisan think tank. I respectfully disagree. The Core Principles, read in conjunction with the president’s executive order released just four days earlier entitled Reducing Regulation and Controlling Regulatory Costs, will serve as the touchstone for financial regulators in the years ahead.
The principles, however, are somewhat open to interpretation, and they leave much to the imagination in terms of how the government will enact regulatory policy over the coming years. It is well to consider them seriously.
“Empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth”
It is hard to argue with this principle, except that “empowering” consumers suggests that the the government will be stepping away from protecting them.
This does not bode well for the future of the Consumer Financial Protection Bureau, which specializes in protection. Nor does it bode well for financial institutions assuming a fiduciary role for their customers; speaking of which, an executive order issued the same day as the principles appeared to support doing away with the Department of Labor’s fiduciary rule.
Financial institutions should be wary of policy that backtracks from consumer protection as a basis in consumer law. This is particularly true for new financial services entrants such as fintechs. Few participants in this nascent industry would go so far as to write protection out of the consumer laws.