…It’s my view that at least one of following Trump’s “bucket list” financial deregulation items will not materialize as planned:
- the repeal of Sarbanes-Oxley, passed in 2002 to protect investors from fraudulent accounting activities by corporations,
- and the 2010 Dodd-Frank Act (the Wall Street Reform and Consumer Protection Act) [that]Â places regulation of the financial industry in the hands of government.
[Here’s why.]
Written by Bryan Perry
Donald Trump has vowed to either eliminate Dodd-Frank or defang it greatly, including a major overhaul of its many components, saying it crimps business as usual and has been a large drag on economic growth. Unchecked, the banks and Wall Street sorely lack the Boy Scout character traits to operate freely, much less in a self-policing manner that can be trusted – or taken seriously at all.
In 2016, we saw leading Wall Street firms pay out $5 billion in a mortgage settlement, and $2.6 billion in connection with misleading investors regarding mortgage securities. We also saw two of Europe’s leading banks agree to pay $7.2 billion and $5.3 billion to settle similar charges in recent high-profile cases. The numbers related to banking corruption are simply staggering.
According to an in-depth report from The Wall Street Journal, bankers were fined roughly $110 billion for their misdeeds in the mortgage market during the run-up to the financial crisis. About $50 billion of those $110 billion in fines from 30 settlements ended up with the entity that levied it: the U.S. government. About $49 billion of fines ended up at the Treasury Department. Treasury, which manages the country’s budget and taxes, usually puts fines in its general fund (where federal taxes usually land as well), which can be used for any item in the budget, including employee salaries, Medicare and military costs. It’s not exactly clear, though, what Treasury is doing with its portion of the bank’s mortgage fines. A spokesman for the Treasury told The Wall Street Journal that it is being spent “as Congress authorizes.” (“Big Banks Paid $110 Billion in Mortgage-Related Fines. Where Did the Money Go?” Wall Street Journal, March 9, 2016)
