June 6th, 2017 8:43 AM by Troy Ford, Jr
In the news lately is Dodd-Frank, the law passed in 2010 in an attempt to stabilize the financial system after the crisis of 2008. The main focus of the law was to end the problem of having gigantic financial institutions that were “too big to fail” in order to limit the taxpayers’ liability for bailing out those huge banks. There are as many viewpoints on whether the law has accomplished what was intended or did not as there are financial institutions. Regardless, the new administration has made dismantling of the law a centerpiece of its first 100 days.
According to the Wall Street Journal, White House National Economic Council Director Gary Cohn announced last week that President Trump will sign an executive action that establishes a framework for ultimately removing much of the regulatory system put into place after the financial crisis.
This is an important issue for the big banks (JP Morgan, Citigroup, Bank of America etc.) because one of the main goals of the Trump administration is to reduce the amount of capital the large banks have to hold. The theory is that if they have more money to lend, because of lower capital requirements, then they will be more likely to expand their lending and consequently boost the overall economy. Critics say that lowering capital requirements puts us in danger of another financial meltdown.
It remains to be seen if the Trump administration can successfully dismantle the huge bureaucracy that was created by Dodd-Frank. If they do, it is my opinion that interest rates will fall a bit.
Have a great week!
Kindly,Steven Hofberg Operations Manager Residential Mortgage Center Inc.