The House voted 233 to 186 today for a sweeping rewrite of the rules governing Wall Street, an opening Republican bid to encourage economic growth by loosening regulation of the financial sector.
The House bill would unwind major parts of Dodd-Frank by relieving healthy banks of some regulatory requirements and forcing failing firms through bankruptcy rather than a liquidation process spearheaded by the regulators. It would subject new financial rules to cost-benefit analysis, boost penalties for financial wrongdoers, and repeal the Volcker rule restricting banks from speculative trading. Supporters of the plan say scrapping what they view as onerous regulatory requirements will ultimately help smaller businesses, allowing them to grow and create jobs.
Good news for finance careers? Bad for the US?
Ok what you're actually missing from this repeal is the effect Dodd-Frank had on despositories. Dodd-Frank requires strict capital requirements for any bank that falls even remotely under the category of a depository in the FDIC's eyes. And because of this, smaller bank's have suffered for the past 8-9 years. So now all of the smaller banks (small banks are probably the biggest contributor to community and metropolitan growth and development) will actually be able to run like a normal organization without having to worry about the costs of strict compliance. This is probably one of the greatest regulatory overhauls in recent history, and it's going to spur major economic growth. And also, Dodd-Frank was very poorly written and all inclusive. It literally borderline infringed upon the rights of U.S. banks, so thank god reform is happening.
Trump vs Dodd-Frank Act (Volcker Rule) (Originally Posted: 11/20/2016)
Been surfing the web recently and came across many articles that suggest Trump could facilitate regulations on the banking sector & many suggesting that he might in fact remove the Volcker rule.
For those of you who don't know:
"The Volcker Rule refers to § 6191 (12 U.S.C. § 1851) part of the Dodd–Frank Wall Street Reform and Consumer Protection Act, originally proposed by American economist and former United States Federal Reserve Chairman Paul Volcker to restrict United States banks from making certain kinds of speculative investments that do not benefit their customers." Wikipedia.
In other words, it is was forbids banks from Prop Trading (at least direct risk taking/speculation)
What do you guys think? Will the legendary Prop Desks make a comeback?
One other point I want to add. Even though Volcker is going to be trashed, banks won't prop trade. Shareholders as well as management in any respectable bank are too risk averse to even consider allocating capital to a prop segment. No one actually knows why The Volcker Rule restricted prop trading, because speculative trading was in no way shape or form the cause of the financial collapse (This was such an ignorant piece of legislation honestly).
The Volcker Rule existed because there was an obvious conflict of interest between certain firms (mainly Lehman) prop trading in certain asset classes (MBSs) and the interests of their shareholders. Banks with deep B/Ss could also do serious damage to certain asset class (again, Lehman). Most banks still won't touch it but look for places like GS/BAML/Citi to take part.
I can't speak for what banks will do, but it's possible Volcker rule goes away. The Financial CHOICE Act has passed committee in the house and it includes removing the Volcker Rule. Trump has had "positive" meetings with Jeb Hensarling (chair of the Finacial Services Committee and sponsor of the bill) and has stated he wants to drastically change Dodd Frank.
The problem is senate filibustering rules. The Republicans would need to pick up 8 votes to overcome a filibuster. This is where it gets interesting. Senate Minority Leader Chuck Schumer from NY has tended to be friendly to Wall Street but stated the dems would easily stop a Dodd Frank repeal. My guess, however, is that Schumer is pandering to the Bernie-Warren faction of the democratic party to cement his leadership. Yet Schumer is a deft political tactician and decided centrist. I think the senate will probably amend the bill and send it back to the house. Chances are those amendments will include nixing the part about completely undoing Volcker and add something Glass-Steagalish.
I think changes to Volcker are needed though for the sake of clarity and economic growth. So if a financial bill passes I would expect at least some modification, which would probably be positive for the financial industry.
Problem is that Trump has said that he's a fan of the Volcker rule... Go figure.
True, actually when you google the subject, you will find 2 articles from Bloomberg, one last year that suggests he's with Volcker, one recently that suggests he's against it.
He's unpredictable.
I don't think he'll do anything about it. Wall Street reform is probably the least of his priorities. And even if the Vlcker rule goes, banks aren't just going to resume prop trading immediately.
Trump's vow to repeal Dodd-Frank (Originally Posted: 11/11/2016)
Hey guys, so obviously one of the main items of discussion on Donald Trump's agenda as president is to repeal Dodd-Frank. Many executives have acknowledged that one of the reasons for low productivity growth in this low interest rate environment has been the pile of restrictions, the increased capital requirements, and businesses reluctance to borrow money in fear of accumulating debt.
If the new president is successful in curtailing these restrictions, making it possible to lower reserve requirements, in theory this should allow banks to lend out those funds, making borrowing easier, and more attractive, and in general more activity in the middle market space, which has had a void in lending for the last decade.
How do you feel repealing dodd-frank would effect the economy, and would it cause interest rates to rise faster than anticipated?
Exactly what's needed, but I don't know how it passes the Senate. Need some Democrats to actually reasonably consider the unintended consequences of Dodd-Frank. Getting the liberal Democrats to rationally consider anything in the era of Trump is unlikely. They are stewing in their own hatred for Trump in such a powerful way that it makes my utter contempt for Obama look friendly.
Yah they are idiots, and I don't think they'd pass it. Plus, most of them don't know how the banking system works and all have the same self righteous "Lets fuck things up for Wall Street" mentality. It's stupid that legislation can be passed or destroyed by a group of people that don't know shit about an industry.
a couple of guys talked about MM lending in my thread here: http://www.wallstreetoasis.com/forums/alternative-lenders-the-end-of-ri…
in general, relaxed credit leads to economic growth, all else being equal, but the issue is if banks go back to some of the risky lending practices that got us into the crisis in the first place, then we're no better off. I would like to believe they're not that stupid, but I don't know.
before I give a really educated opinion, I'd have to see what he specifically wants to get rid of.
Small banks can't afford/deal with the DF capital requirements and regulations. This has propelled consolidation in the industry in favor of the 'systemically important' institutions (i.e., zombie banks). The zombie banks are too risk averse to put the capital to use and large firms don't see too many attractive investments (low NPV). The result is that we've had Japanese style growth throughout Obama's presidency. The government has tried to prop up the economy via fiscal policy but, as in the case of Japan, with no success (as the debt continues to grow to unprecedented levels).
Our best option is to pull back on financial regulation and to allow interest rates to float. This will have a dramatic, adverse affect in the near term, but longer term, it would 'drain the swamp,' so to speak.
Increases systemic risk long term but great for short term earnings and bonuses.
The case against Dodd Frank. Your thoughts? (Originally Posted: 12/13/2016)
It appears that Dodd Frank is on its way out the door at some point in 2017. What are specific provisions within DF that are/were holding back banks and lenders?
Lots of consequential changes in the bill that passed. The one I'm most focused on is gutting Rule 14a-8 regulating shareholder proposals. Currently a shareholder needs 1% of stock or $2K minimum stock held for a year to get proposal on ballot. CHOICE would remove $2K minimum, meaning only activist hedge funds or huge asset owners (e.g., BlackRock, Vanguard) could ever challenge management. If you wanted to poke AAPL with a shareholder reso, you'd need to own $8 billion of the stock. A far-reaching change to corp. governance, to be sure. However, analyst consensus is that the whole bill dies in the Senate. There will never be any Dem votes for this.
Great insight/analysis, appreciate it
I would count the gutting of this proposal as a win. The last thing we need need are social crusaders or self-centered individuals putting forth a multiplicity of shareholder proposals that have little, if any, value to the running of a company. The only people who should be proposing anything are those that are sophisticated enough to understand fully the repercussions of their proposals.
https://lmgtfy.com/?q=how+is+dodd+frank+restricting+banks+and+lenders%3F
LOL
Very cute. I was looking for deal specifics.
Restrictions on equity investing (Volcker Rule) has hurt my group at least. The ability to come in with an equity slug for top tier clients got a lot of deals done that haven't been getting done post DF.
If there is overhaul, it will be bad for Consultants as their lifeblood is off regulation.
If there is overhaul, you'll see some more headcount I think in ECM/DCM and maybe M&A. I say maybe M&A as companies will probably benefit from organic growth more than inorganic in a lower reg environment (just speculating here).
I think smaller shops will add headcount. Larger firms? They'll just plug and play. They will bring on a few high performing MDs and maybe VPs, but junior? Same shit different market. Just IMO.
Trump Signs Actions to Begin Scaling Back Dodd-Frank (Originally Posted: 02/03/2017)
https://www.wsj.com/articles/trump-signs-executive-actions-toward-scali…
WASHINGTON—President Donald Trump ushered in a friendlier era for Wall Street’s relationship with Washington, calling for an end to eight years of rising regulations and publicly embracing some of the industry’s top leaders.
At a White House meeting, Mr. Trump promised Friday to undo a bevy of restrictions on financial firms put in place after the 2008 financial crisis, while praising the CEOs of BlackRock Inc. and J.P. Morgan Chase & Co.
It all depends on what pieces of legislation/regulation the consultants are focusing on. I work in regulatory consulting for alternative asset management firms and the scaling back of Dodd-Frank likely will not have an effect on us. The same might not be true in other areas though...
Is anyone under the impression this is a good thing?
Should be great for bulge brackets. They can lever up again.
we opened a bottle of champagne haha
Everything I've read is that this is a limited repeal that will benefit mm and smaller banks which have been overly burdened with regulation best suited for much bigger banks.
Here's the text of the executive order: https://www.whitehouse.gov/the-press-office/2017/02/03/presidential-exe…. If you read it it doesn't explicitly mention Dodd Frank, but I'm guessing big banks can already start building out infrastructure and activity that the Volcker rule limited.
Elimination of Dodd-Frank (Originally Posted: 05/18/2016)
Hey guys,
As I'm sure many of you have heard, Trump wants to get rid of Dodd-Frank completely. What are the implications of this? Donald also mentions he wants to "do something" about Silicon Valley and the "bubble" that is emerging as a result of tech start ups being overvalued without making any revenue. What sort of things do his policies mean for the street? Wanted to start an interesting discussion - kindly comment!
And somewhere, off in the distance... the sound of thousands of WSO monkeys, BSDs and junior mistmakers alike, simultaneously ejaculating.
Junior mistmakers, lmao.
This likely won't pass the Senate so its not going to do anything for finance careers
Dodd Frank Act (Originally Posted: 05/06/2014)
What has changed in the world of trading due to these regulations.. How has trading life been effected by this bill ?
I'm not in IBD or S&T, so I don't have a lot of info. what I do know is that because of Dodd Frank many firms (mine included) are spinning off or shutting down divisions of the company that are no longer as profitable (for some, this is commodities related) or are no longer legal for banks to have (prop trading).
check this out as well: http://www.mofo.com/files/uploads/images/summarydoddfrankact.pdf
Make Prop Trading Great Again!
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