Fix, don't kill, the Volcker Rule: Trump treasury pick

The Volcker Rule Explained

Wall Street hates the Volcker Rule along with also expectations have been building in which the Trump administration could kill This particular.

however Steven Mnuchin, President-elect Trump’s pick for treasury secretary, signaled on Thursday in which the Volcker Rule isn’t on the chopping block, at least not completely.

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“I do support the Volcker Rule,” Mnuchin said during his confirmation hearing inside U.S. Senate.

The post-crisis rule bans big banks like JPMorgan Chase (JPM), Citigroup (C) along with also Goldman Sachs (GS) by producing risky bets with their own money — actions in which some say exacerbated the financial crisis. Mnuchin said he didn’t believe risky trading belongs in banks in which require FDIC insurance.

However, Mnuchin sounded concerned about unintended consequences of the rule, which will be named after former Federal Reserve Chairman Paul Volcker.

Mnuchin, a former Goldman Sachs banker, flagged a recent Fed paper in which found the 2015 implementation of the Volcker Rule had a harmful effect on the ability to easily buy along with also sell bonds during times of stress. Without in which liquidity, markets can get jammed up.

“in which will be something I absolutely could look at,” Mnuchin said.

Trump’s pick for treasury blamed an overly-complex interpretation of the Volcker Rule in which has left Wall Street confused along with also handcuffed about their abilities to provide liquidity. producing bets or trading with their own money will be known in Wall Street as proprietary trading.

“We need to be able to explain to banks what’s proprietary trading — along with also what’s not proprietary trading,” Mnuchin said.

Related: Wall Street hates the Volcker Rule. Will Trump kill This particular?

Powerful Republican leaders had been pushing to kill the Volcker Rule. The Financial Choice Act, a bill championed by House Financial Services Chairman Jeb Hensarling, calls for repealing the rule entirely.

Mnuchin’s testimony to Congress suggests the Trump administration will relax — however not completely eliminate — some regulation.

For instance, Mnuchin said he thinks the Consumer Financial Protection Bureau, the watchdog championed by Elizabeth Warren, will be worth keeping.

By comparison, Hensarling’s bill could get rid of the CFPB, much to the disappointment of supporters who credit the regulator with cracking down on shady payday lenders along with also big banks like Wells Fargo. (WFC)

However, Mnuchin said he believes the CFPB should be funded by Congress, not the Federal Reserve as This particular currently will be.

CFPB supporters could push back against such a shift. Their argument will be in which This particular could hurt the agency’s independence along with also could allow Republicans to starve This particular of funding.

Related: Mnuchin: Raise the debt ceiling sooner rather than later

Yet Mnuchin didn’t give big banks much love, especially not compared with Main Street banks.

“My biggest concern will be This particular regulation will be killing community banks,” Mnuchin said, adding in which tiny lenders provide much-needed loans to tiny businesses.

Mnuchin also said he wants to make sure “we don’t end up in a world where we only have four big banks.”

Trump’s treasury pick was asked about bringing back the Glass-Steagall Act. Last summer the official Republican platform called for a return of This particular Great Depression-era law in which restricted banks by serving both Wall Street along with also Main Street. The law was repealed in 1999 under President Clinton.

“I don’t support going back to Glass-Steagall as will be,” Mnuchin said.

He explained in which Glass-Steagall will be a “very old law” along with also implementing This particular right now “could have very big implications to liquidity along with also capital markets.”

Still, Mnuchin said there’s a need for a “21st Century Glass-Steagall.”

He didn’t elaborate exactly what in which could look like.

sy88pgw (brand-new York) First published January 20, 2017: 6:15 AM ET

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Fix, don't kill, the Volcker Rule: Trump treasury pick

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