A key financial regulator advising Donald Trump on the presidential transition could see the US roll back its rules to the freewheeling, fraud-ridden days of the Second Bush Administration.
Paul Atkins, a proponent of allowing the financial sector to run rampant, if it so wishes, is advising Trump on financial framework. He met with the President-elect this week, as key banking regulatory positions remain unfilled, including top positions at the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
“Mr Atkins, who was an SEC commissioner from 2002 until August 2008, could be named SEC chairman or given another key positionm” The Financial Times reported on Thursday. It noted that those close to him in Washington, however, “say he has expressed interest in the vice-chairman of supervision at the Federal Reserve, which would give him oversight of banking and systemic risk.”
Either way, Atkins involvement in the transition darkens the outlook for meaningful prudential rules, in the finance sector, for the next four years, at least.
Atkins already has massive, deregulatory failure on his resume, as an SEC commissioner under George W. Bush, from 2002 until 2008. While there, he fought rules that eventually forced hedge funds and private equity firms to subject themselves to SEC examination.
Atkins also expressed a disinterest in fining corporations, claiming that the monetary penalties punished shareholders.
“After Mr Atkins began voicing his opposition it led to the establishment of a penalty framework that slowed some enforcement actions,” FT noted. “The framework took power from the staff by bringing commissioners into settlement negotiations earlier and said penalties should turn on whether a company had directly benefited from the fraud.”
The paper added that: “Since the financial crisis it has rarely been followed.”
Atkins has been vocally critical of rules designed to clean up the mess that transpired under Bush. “Most recently…he has been critical of Dodd Frank,” FT noted, “especially the creation of the Financial Stability Oversight Council.”
The council, known as FSOC, has been imbued with the power to designate certain banks “Systemically Important Financial Institutions” or SIFIs. Such considerations subjects the largest financial institutions to a set of more stringent rules.
Atkins, FT also said, has called into disrepute the merits of the Volcker rule, a financial reform provision that seeks to segregate federally-insured consumer deposits from money used for investment banking.
Major revisions to Dodd-Frank would require Congressional approval, the paper noted. But some changes to key rules could be forthcoming under the Trump administration–including revisions to guidelines on the use of conflict minerals, and an SEC policy forcing companies to admit wrongdoing in settlements.
Ironically, a focus on Dodd-Frank executive branch rules might not yield much of a status quo change for the Trump administration.
The SEC, under President Obama, came under heavy fire from many Democrats, for its perceived inaction on enforcement and rule-making.
One month before the election in November, Sen. Elizabeth Warren (D-Mass.) asked President Obama to fire his SEC Chair, Mary Jo White. Warren cited White’s push for rule-making that would have pared back disclosure requirements, noting that White’s attack on “information overload” doesn’t appear grounded in any real problem facing investors.
“Chair White’s comprehensive anti-disclosure agenda runs directly contrary to the SEC’s purpose,” Warren said to Obama. “The only way to return the SEC to its intended purpose is to change its leadership.”
Dodd-Frank, the Senator added, “required the SEC to develop several rules” to help investors understand how publicly-traded corporations operate.
“Chair White, however, appears to view these congressional mandates as mere suggestions that the agency is free to ignore,” Warren noted.