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A Look at What Experts Are Saying About Regulation

TreasuryDeregulation is on the horizon according to the U.S. Department of the Treasury’s Monday report. The report is the first in a series to President Trump examining the U.S. financial regulatory system and reviewing ways to immediately provide relief, however some feel relief is the last thing the modifications will do.

Treasury Secretary Steven Mnuchin and other officials have been listening to hundreds of stakeholders over the last four months including banks of all sizes, regulators, FSOC members, consumer advocates, academic, analysts, and inventors. The sessions have given the Treasury a chance to paint a clear picture of redundancy, fragmentation, and inefficiency in the current regulatory system.

“Properly structuring regulation of the U.S. financial system is critical to achieve the administration’s goal of sustained economic growth and to create opportunities for all Americans to benefit from a stronger economy,” said U.S. Treasury Secretary Steven T. Mnuchin. “We are focused on encouraging a market environment where consumers have more choices, access to capital and safe loan products – while ensuring taxpayer-funded bailouts are truly a thing of the past.”

Conversely, congresswoman Maxine Waters (D-CA), ranking member of the Committee on Financial Services, feels the nation’s economic security is in grave danger.

“In some respects this plan is even more expansive in scope than the Wrong Choice Act, and hides harmful intentions behind generalities and platitudes,” Waters said. “For example, the report proposes to rewrite the Community Reinvestment Act in an ambiguous, undefined way that could lead to less investment in our communities, and also instructs Congress to “take action to reduce regulatory fragmentation, overlap and duplication” without any concrete recommendations on how to do so.”

Waters said the plan would destroy the Consumer Financial Protection Bureau and roll back critical rules in place to ensure stability of the U.S. financial system.

The passing of the Financial CHOICE Act is the first step in deregulation, however the report focuses on solutions the executive branch can execute through regulatory changes and executive actions, according to Mnuchin. The recommendations would remove restrictions that were put in place during the Obama administration.

"In the housing and housing finance markets you really only need to look at two data points to stiffen up over how onerous and problematic regulation has gotten,” says Financial Consulting Company The Collingwood Group Chairman Tim Rood. "First, the cost to originate a mortgage is at an all-time high at over $8,000, and second, the regulatory and compliance costs to build a home is over $80,000. Both of those numbers most directly and negatively impact households with small balance mortgages and entry level homes, which tend to be minority and low to moderate income households. The Treasury proposal is a step in the right direction."

The report, which detailed its findings, covered how critically important community financial institutions, banks, and credit unions are in serving Americans, how capital, liquidity, and leverage rules can be simplified to increase the flow of credit, reiterated how the U.S. must ensure its banks are globally competitive, the criticalness of improving market liquidity for the U.S. economy, the need of reform to the Consumer Financial Protection Bureau, described the need of better tailored, more efficient, and effective regulations, and how congress should review the organization and mandates of the independent banking regulators to improve accountability.

President and CEO of the Consumer Bankers Association, Richard Hunt, said the report is an important first step in recognizing how a duplicative and onerous regulatory environment harms banks, the economy, and consumers.

“It is imperative to right-size regulation to better promote the strengths of the banking industry, which contribute to economic growth, access to credit, and consumer choice,” Hunt said. “We especially applaud Secretary Mnuchin and the Department for suggesting reforms to the CFPB’s governing structure, as CBA believes a bipartisan commission at the Bureau is paramount to creating long-term stability and certainty for the industry. In addition, we are also encouraged by the Department’s recommendation to provide a process over federal regulators to streamline regulatory efforts. We appreciate the Department’s report, as it offers pragmatic solutions in line with today’s economic needs.”

The next step for the Treasury and Administration will be working with Congress, independent regulators, the financial industry, and trade groups to implement the recommendations the report defines, including changes to statutes, regulations, and supervisory guidance.

About Author: Brianna Gilpin

Brianna Gilpin, Online Editor for MReport and DS News, is a graduate of Texas A&M University where she received her B.A. in Telecommunication Media Studies. Gilpin previously worked at Hearst Media, one of the nation's leading diversified media and information services companies. To contact Gilpin, email brianna.gilpin@thefivestar.com.

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