'Make things easier for banks': Trump may gut key regulation put in place after 2008 crash

11 January

Big Wall Street banks are hoping that President-elect Donald Trump will kill several major regulations imposed on the financial industry — including one set of rules aimed at preventing another 2008-style financial crash.

That's according to a Saturday article in the Guardian, which reported that banks are optimistic about the incoming administration's regulatory agenda. Some bankers are particularly eager about the possibility of Trump taking an axe to the Basel III rules, which were put in place in response to the global banking crisis that preceded the Great Recession of the late aughts.

In a 2024 article, Investopedia described Basel III as an international set of guidelines developed by 28 countries that established "minimum capital, leverage and liquidity requirements to ensure major banks could survive another upheaval." This was a response to the forced bailouts of banks deemed "too big to fail," requiring an infusion of hundreds of billions of taxpayer dollars to keep financial institutions afloat.

In addition to Basel III, Trump could undo some of the anti-too-big-to-fail provisions in the 2010 Dodd-Frank financial reform act. This includes a mandatory "stress test" from the Federal Reserve imposed on all financial institutions with more than $50 billion in assets. Dodd-Frank also requires banks to put forth a "living will" that serves as a plan in the event a bank should fail.

A.J. Bell investment analyst Dan Coatsworth told the Guardian that big banks are optimistic about their treatment under Trump's second term given his promises to roll back corporate regulations. He said banks' surging stock prices in the wake of the election symbolizes Wall Street's bullish attitude toward the incoming administration, but emphasized that the industry didn't want so much deregulation that it would risk future instability.

“Trump wants to make things easier for banks, but he won’t want to risk any damage to the financial system,” Coatsworth told the Guardian. “That means being more lenient with rules but not having them too loose."

Financial institutions are also excited about Trump's stated opposition to the environmental, social and governance (ESG) movement in which investors are encouraged to hold their wealth in industries deemed to be more sustainable. JPMorgan Chase CEO Jamie Dimon has already suggested he would roll back the company's previous commitments to address climate change, and "use the word ‘commitment’ much more reservedly in the future" in regard to pro-environment pledges.

Click here to read the Guardian's full report.

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