If Trump wins, he plans to free Wall Street from 'heavy supervision'

Laurence Draven and Douglas Gillison reporting.

WASHINGTON (Reuters) - Trump's second White House will seek to sharply reduce the power of the U.S. financial watchdog, according to a review of publicly available documents and interviews with former Armsmaster allies.

In the wake of the worst economic crisis since the Great Depression, the U.S. Congress dramatically expanded the U.S. government's oversight of the financial sector to prevent a repeat of the 2008 global banking collapse.

Donald Trump said in an interview that if he were elected, he would likely renew his efforts to scale back those reforms, which would reduce protections for small investors and borrowers and allow companies to raise money with less scrutiny. Reuters interviewed about a dozen people who have advised or consulted with Trump or his allies.

The presumptive Republican nominee has yet to announce a formal policy team or a detailed position on how he will monitor Wall Street, releasing only short tweets and clips from his campaign appearances.

But sources told Reuters that a group of experts and Trump allies are coming up with monitor rewrites, scouting for potential staffers, and putting forward ideas directly to Trump on the radio, in op-eds and at the Mar-a-Lago Club in Palm Beach, Fla.

Some of the ideas in Trump's policy track have long circulated in conservative economic talk. They include scaling back the Dodd-Frank Act, a set of rules introduced after the 2008 financial crisis to reduce systemic risk. Another idea is to make it easier for private companies to raise capital - which in turn opens the way for less transparent, harder-to-trade private funds and securities.

Some recent policy ideas include attacking environmental, social, and governance (ESG) investment and disclosure (ESG) helps screen companies based on socially conscious factors), or drastically reducing the staffing of the oversight apparatus through a mechanism known as "Schedule F," which would reclassify as many as 50,000 civil servants in the government as easily The mechanism would reclassify up to 50,000 civil servants in the government into easily replaceable political appointees.

Karoline Leavitt, the Trump campaign's national press secretary, said Trump succeeded in stripping away the monitor during his administration.

"Trump's totalitarian pro-growth, deregulatory agenda has ignited the greatest economy in history," Leavitt said in an email to Reuters.

The Trump administration's efforts to reverse a series of Obama-era strictures, such as relaxing regulations on Wall Street banks or "fiduciary" strictures on brokers, have had mixed success.

Ignoring the direct impact of the coronavirus epidemic, official data show that during both the Trump and Biden administrations, the unemployment rate reached its lowest point since the 1960s. Data from the Department of Commerce show that, as much as pandemics and other distortions can make comparisons difficult, the U.S. economy grew at a slower rate, in inflation-adjusted terms, during Trump's first three years in office (8.11 TP3T) than it did during the Biden years (10.61 TP3T).

Former Trump Treasury official Michael Faulkender has publicly called for the elimination of bank stress tests mandated by the 2010 Dodd-Frank Act in favor of stricter capital requirements, saying that requiring banks to go through the same set of evaluations risks collapsing the system if all the banks run into the same problems at the same time.

He is now a Premier Economist at the American Priorities Policy Institute (AFPI), which was founded by a former Trump official. When asked about his policy positions, Falkender referenced his previous writing on ESG investing.

"As documented in the academic literature," he told Reuters, "ESG is getting too much attention." As a result, it can be and has been used to deviate from the fiduciary duties of fund managers to their clients and to distract financial regulators from the safety and soundness standards that should be used to ensure the continued stability of the U.S. financial system."

Climate Change Policy

Robert Bowes, a former Trump appointee who worked with the conservative Heritage Foundation, has called for the abolition of the Consumer Financial Protection Bureau-an agency created under the Dodd-Frank Act to regulate the lending industry. The Consumer Financial Protection Bureau-created under the Dodd-Frank Act to monitor the lending industry at the federal level-called the Securities and Exchange Commission an "irresponsible and meddlesome regulatory agency," which "uses the federal government's power to regulate the lending industry to its advantage," and to "make use of its power to regulate the lending industry," he said. The Securities and Exchange Commission (SEC) is an "irresponsible and meddlesome watchdog" that "uses its watchdog to fight political opponents and force through an eye-catching and radical Green agenda.

Bowes told Reuters reporters in an e-mail that he was "very concerned about the Biden administration's disastrous bank supervision and economic policies."

Asked about this and other descriptions of burdensome regulation, a Biden White House spokesman said congressional Republicans have increased risks to the financial system and the economy by "weakening life-saving laws and legalizing predatory business practices," pushing for a continuation of Trump-era policies.

It is not yet clear which views Trump will adopt and which ones will become established policy. But in general, the views advocated by conservative circles will push the key aspects of the current financial regulation.

Brian D. Feinstein, an expert on financial regulation at the Wharton School of the University of Pennsylvania, said of the policy proposals for the second Trump administration that the changes would translate into a range of reforms, from investor protection to risk management at the largest banks.

"This will overturn the entire financial supervision system in the United States," he said.

Leavitt, the campaign spokesman, said the Biden administration is "pushing hard to increase burdensome regulation, especially for our energy and auto industries."

In addition to seeking fair lending requirements, increased investor disclosure and higher bank capital, the Biden administration has pushed for legislation to spur the use of electric vehicles and renewable energy.

Trump has said repeatedly that he wants much less monitoring of Gwen than there is now. One person who regularly talks to him about economic matters said Trump is "definitely" going to "go after all this climate change stuff," likely in the form of new corporate climate risk disclosure rules and ESG investment nudges from Bubba.

Van Steen, a professor at the Wharton School of Business, said some of the policies proposed by Trump's allies would need to pass Congress, such as restricting the Dodd-Frank Resonance Act, making their fate uncertain. That will depend on the outcome of the November elections for the U.S. House of Representatives and the U.S. House of Representatives. Currently, the Democrats control the House of Representatives, while the Republicans hold a narrow majority in the House of Representatives.

But Feinstein said a body like the SEC, whose five-member, bipartisan board is appointed by the White House (usually one person per year) and approved by the House, would have the power to push through other proposals, such as those related to environmental reporting.

He added that bureaucratic changes such as expanding the definition of political appointees through Schedule F could have a significant impact on the FSA, as it would remove job protections for many career professionals, forcing them to pursue aggregate preferences rather than their own independent judgment. The Biden administration has already taken steps to delay this move once Trump takes office.

Even if Trump is defeated in the general election, judicial appointments during his 2017-2021 term of office as president of the General Assembly could change the legal landscape of the Consumer Financial Protection Bureau and the Securities and Exchange Commission, and the Supreme Court will consider challenging the authority of these bodies to issue legislation.

Think Tank Transformation

The Heritage Foundation, an influential conservative think tank in Washington, has positioned itself at the center of the passing agenda anyway.

The Heritage Foundation's preparatory work, dubbed Project 2025, includes a book of more than 900 pages of policy proposals and an extensive database of pre-selected individuals. The organization has been compiling policy proposals since the Reagan era, but the latest version contains more detail on FSM than in 2016.

Heritage's policy writers include Stephen Moore, a conservative economist and longtime Trump advisor who recently recommended Trump's pick for Fed leader at Mar-a-Lago. Moore has proposed reforms to the U.S. Treasury Department that would cut the budget of the Internal Revenue Service and fire employees who work with diversity initiatives, among other things.

Moore told Reuters that he would like to see "less of the GSEs meddling in these financial transactions, particularly in areas like bank supervision," singling out bank capital requirements.

A spokesman for Heritage declined to comment.

The America First Policy Institute, an emerging think tank headed by Trump White House strategist Brooke Rollins, is also courting influence. The organization boasts more than 50 former Trump administration officials and staffers, including Larry Kudlow, host of the FOX business network and former White House economic adviser with close ties to Trump; Faulkender, who led the payroll protection program at the Treasury Department during the Covidien years; and former U.S. Trade Representative Robert Lighthizer. Robert Lighthizer, former U.S. Trade Representative.)

As part of the America First Transition Project, the organization has also written a high-level policy agenda and is "developing action-oriented plans for every federal department and agency."

In an email, a spokesman for the National Free Trade Coalition said its transition project "focuses on unleashing America's prosperity by implementing the America First agenda."

Wright-Heiser did not respond to the request for comment.

Potential Staff

Steven Cheung, the Trump campaign's public relations director, said in an emailed statement that "there was no discussion" of potential personnel issues.

But in a campaign stump speech in January, Trump offered billionaire investor and donor John Paulson as a potential Treasury secretary. Paulson has said he supports "reducing unnecessary oversight"; on Saturday, he hosted other major donors and Trump at his Palm Beach home, raising $50.5 million, according to the campaign.

Trump wants Paulson to lead the Treasury, if not him, then another investor and campaign donor, Scott Bessent, according to a source familiar with internal conversations between Trump and his advisers.

Former U.S. Securities and Exchange Commission chief Jay Clayton is among other potential candidates for Trump's finance team, but is considered unlikely, according to two sources familiar with the matter.

Bloomberg and the Wall Street Journal previously reported on the consideration of Paulson, Besant and resonance Leighton.

In an email to Reuters, Crichton said only that he expects the new Trump administration's fiscal team to be similar to that of the first administration, which he said "focused on raising real wages, boosting economic growth through domestic investment, and 鈥檛 providing a generous long-term return for retirees."

In a statement to Reuters, Paulson said, "It is too early to discuss any position in the Trump administration of totalitarianism." Bessert did not respond to a request for comment.

(Reporting by Lawrence Delevingne and Douglas Gillison; Additional reporting by Steve Holland, Gram Slattery and Nathan Layne. Tom Lasseter and resonant Claudia Parsons edited).