Positive Big Bankers See Regulations Abating Under President Donald Trump

Positive Big Bankers See Regulations Abating Under President Donald Trump

Positive Big Bankers See Regulations Abating Under President Donald Trump

$DIA, $SPY, $QQQ, $VXX

Ignore the left wing mockery that is coming.

Wall Street’s big bankers attending the WEF in Davos said Thursday, that they are confident Donald Trump’s incoming administration will loosen regulatory constraints on financiers, even if it leaves Barack Hussein Obama’s signature Dodd-Frank Act largely intact.

Bank executives at events around the Swiss ski resort, said they’re not counting on Trump to overturn Dodd-Frank. Instead, they expect the federal agencies that enforce the rules to ease up on them and support bankers’ efforts to limit how much capital and liquidity their companies need to pay bills or absorb losses in a crisis.

The bankers said they recognize that changing or overturning the 2010 Dodd-Frank Act would require support in the US Senate that Republicans may lack.

Instead they’re counting on Trump’s team to dial back how supervisory agencies enforce and interpret rules.

Federal Reserve Governor Daniel Tarullo has led US regulators have adopted an extra-strict version of the global standards on capital and liquidity set by the Basel Committee on Banking Supervision in the aftermath of the Y 2008 financial crisis.

“Legislation, obviously that’s harder to do than just changing regulations,” JPMorgan (NYSE:JPM) CEO Jamie Dimon said in a TV interview Wednesday. “Regulators can change a lot of things easily about compliance, about costs, certain rules about lending, how you use your liquidity, how you use your capital. I would like to see some of those looked at and maybe modified a bit, and I think it would be good for the economy.”

At a panel discussion on the global banking outlook in Davos Thursday morning, JPMorgan asset-management CEO Mary Callahan Erdoes echoed that view.

“It’s going to be a great several years,” Ms. Erdoes said. “It’s going to be very positive for businesses in the U.S., which should cascade to businesses around the world.”

Goldman Sachs Group (NYSE:GS) CEO Lloyd Blankfein offered a similarly optimistic view in an interview on Television in Davos Thursday.

“If you look at the policies that Trump has committed himself to, they are quite stimulative and quite market-supportive,” Blankfein said. “If you look at spending on infrastructure, lower tax rate and overlapping regulation, they are quite stimulative, far more stimulative than what people were expecting had the Democrats won the election.”

The Goldman Sachs CEO also said there’s “an opportunity to re-legislate” financial regulations as the US did with the Securities Exchange Act after the Great Depression.

“I think we’re going to open it up,” Mr. Blankfein said. “You can call it Dodd-Frank, as amended.”

Wall Street bank shares, including JPMorgan’s and Goldman Sachs’s, have rallied since the election on speculation that Donald Trump’s policies will accelerate economic growth and drive higher interest rates.

Donald Trump’s Transition Team said after the election that it would work to “dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation,” but, few bankers see Dodd-Frank as a priority.

Billionaire investor Carl Icahn, who Donald Trump appointed as a special adviser last month to overhaul regulations, said in a TV interview that he might not support killing Dodd-Frank.

Several bankers in Davos said they are optimistic that regulators under Donald Trump could do away with the Gold-plating by the US of the latest Basel benchmarks and ease the process by which banks are stress-tested annually to ensure they have adequate capital to absorb losses in a hypothetical crisis.

In Europe, where bankers argue the region’s economic woes are exacerbated by the constraints on lenders, regulators have already helped delay agreement on a new set of global requirements.

The Fed has led US rule-making efforts, including Basel implementation.

President Trump can appoint a Vice Chairman for Regulation, effectively replacing Mr. Tarullo, who has filled the role unofficially and antagonized bankers with his strict approach to regulation. That, along with other appointments, could help tip the Fed toward a bank-friendlier approach.

New regulators could also change the way Dodd-Frank is implemented.

One part bankers hate the most, the Volcker Rule, bans the largest firms from making speculative bets with their own money. President Trump’s Treasury Secretary nominee Steven Mnuchin and Gary Cohn, the Goldman Sachs co-president named to serve as President Trump’s chief economic policy adviser, are expected to be more sympathetic to banks’ arguments that limiting their trading hurts investors by making fixed-income securities less liquid.

JPMorgan’s Dimon and other executives also have pushed against international liquidity standards that were part of the post-crisis Basel regime and designed to ensure that firms have enough easy-to-sell assets to meet claims coming due in a month and over a year.

“There’s $2.5-T sitting at the central bank called excess reserves,” Mr. Dimon said in Davos. “And we’re not free to lend it because of all these new requirements.”

Asked whether laws will change or just how they’re enforced, Bank of America Corp (NYSE:BAC). CEO Brian Moynihan said in Davos that “I think it will be the implementation of regulation,” adding later that he expects a “regulatory debate about what the right regulation is and how it will be mitigated over time.”

Again, ignore the left wing mockery that is coming.

Thursday, the US major stock market indexes finished at: DJIA -72.32 at 19732.53, Nasdaq -15.57 at 5540.08, S&P-8.20 at 2263.69

Volume: Trade was below average with 980.0-M/shares exchanged on the NYSE

  • Russell 2000 -0.8% YTD
  • DJIA -0.2% YTD
  • S&P 500 +1.1% YTD
  • NAS Comp +3.0% YTD
Analysis Overall Short Intermediate Long
Bullish (0.31) Neutral (0.03) Bullish (0.33) Very Bullish (0.58)
Analysis Overall Short Intermediate Long
Neutral (0.23) Neutral (-0.05) Bullish (0.42) Bullish (0.33)
Analysis Overall Short Intermediate Long
Very Bullish (0.52) Bullish (0.43) Very Bullish (0.59) Very Bullish (0.53)
Analysis Overall Short Intermediate Long
Bearish (-0.46) Bearish (-0.32) Very Bearish (-0.71) Bearish (-0.36)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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