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Financial Regulators Race To Get Reforms On The Books Before Inauguration Day

The race to Inauguration Day is on for financial regulators, who appear to be playing beat the clock trying to cement financial reforms before the presidency changes hands in January.

Congressional Republicans are not thrilled.

Leading the pack is the CFPB, which is looking to tie down a rule change that would make it harder for businesses to insert mandatory arbitration clauses into nearly all consumer contracts — thus shutting down the potential for future class action lawsuits.

The Federal Reserve and the Securities and Exchange Commission are both looking to complete postcrisis measures that force banks and swaps dealers to add to their books costly new buffers protecting against big losses during periods of market distress. The SEC is additionally looking to take on risky derivatives in mutual funds if those derivatives are being sold to the public.

Those reforms, it seems, will make it onto the books before the clock resets under President Trump — who has signaled a dimmer view of tight financial regulations than his Democratic predecessor.  Executive compensation and Wall Street’s risk culture have both been big issues for the sitting president — and most experts predict no major change to come in either of those arenas for the foreseeable future.
There has been significant pushback on the push.
“This type of ’midnight rulemaking’ is neither conducive to sound policy nor consistent with principles of democratic accountability,” Texas Rep. Jeb Hensarling, chairman of the House Financial Services Committee, told SEC Chairman Mary Jo White at a Nov. 15 hearing.

Regulators say they are not trying to push initiatives prior to the transfer of power and say they are merely working through their normal process.  They further noted that all of these measures were slated to be completed this year.

Bankers also agree that perhaps the status of the new rules is a bit confusing, given the forthcoming switchover in power.

A pause “would probably provide more stability, knowing Trump is going to come in and make changes,” said Alison Hawkins, spokeswoman for big-bank trade group the Financial Services Roundtable.

Once Mr. Trump is sworn in he could order agency heads to withdraw any Obama administration action that hadn’t yet been published in the Federal Register. Most rules can’t take effect until a certain time after their publication in the register, which generally occurs within a week after regulations are completed. Once rules are published, unraveling them can be complex.

But that does mean that some big name regulations likely won’t make it to the finish line — payday lending regs chief among them.

 

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