One of the foremost architects of the American banking system, Federal Reserve Bank Governor Daniel Tarullo will be resigning in the next two months. This paves the way for President Trump to appoint his own officials to speed up the deregulatory plan for Wall Street companies. Tarullo inked a letter to President Trump indicating he would be resigning around April 5, 2017. Tarullo was not expected to retire until 2022, but there is significant pressure being brought to bear on him by White House policies. This move is especially important as Tarullo was regarded as the bulwark against banks acting with carte blanche. He ensured that safeguards were in place for the prevention of another Lehman Brothers meltdown that precipitated the global financial crisis. There are 2 distinct schools of thought with regards to regulation: those in the Trump camp who believe in deregulating the financial sector to accelerate economic growth, and those who believe the safeguards are necessary for the prevention of unchecked profits, bubbles, and another financial crisis.
President Trump is pursuing a policy of deregulation, decreased taxation, and massive fiscal stimulus. For binary options traders, the imminent resignation of Daniel Tarullo presents an opportunity for big profits with financial stocks. For example, Citigroup Inc. and Bank of America Corporation stock rose 1% within an hour after Tarullo announced his resignation. With the departure of Tarullo, the Federal Reserve Banks board of governors (BoG) will now have 3 vacant seats. This is especially important given that the Fed is responsible for shaping economic growth in the US. As the central reserve bank of the world’s #1 economy, any changes to the construction of the Fed’s board has far-reaching implications for the global economy. Janet Yellen is expected to retire in 2018, and this will give Trump significantly more leeway when it comes to appointing key people to the world’s most powerful central bank. The GOP is determined to rewrite the Dodd-Frank law, and given that Congress is at loggerheads over the issue, the only other way Trump has to enact change is with governors at the Fed.
Tarullo’s Departure Sends the Hawks and Doves Fluttering
However, Tarullo is of the opinion that it is hard to argue with the regulatory principles that Mr. Trump has laid out in his election campaign. He remains hopeful that the core accomplishments of the Fed – improved risk management, capital, liquidity, and workable resolution strategies – will remain in place. One of the potential replacements for Tarullo is a former executive of General Electric Company, David Nason. Other candidates include Gary Cohn of Goldman Sachs Group Inc., and John Allison of BB&T Corporation. Under Tarullo’s watch, big banks were taxed heavily on size, but they were not forced to break up. Congress currently supports stringent rules against banks vis-à -vis capital, and undoing such regulation would likely take many years and require approval across multiple regulatory agencies. Binary options traders will want to watch potential replacements for Tarullo and the other vacant seats, to determine whether they are hawks (in favour of raising rates) or doves (in favor of monetary easing).
