The gradual loosening of control over Wall Street
It is not in the interests of the greater good to go back to a lax oversight regime
Its first permanent director, the former Ohio attorney-general Richard Cordray, ran the agency aggressively, to the loud protest of the banking industry and its Republican allies in Congress. By the end of 2016, the bureau reported, it had recovered $12 billion for wronged consumers.
Most famously, it brought charges over some of the most egregious financial abuse in recent memory, fining Wells Fargo Bank $100 million after it was found to have created a high-pressure sales culture that drove employees to open up more than two million accounts that customers hadn’t asked for.
The bureau also, through civil lawsuits and new rules, went after the payday lending industry, with the aim of protecting low income borrowers from becoming trapped by ballooning debt. After Cordray’s departure in November, Trump replaced him with the White House budget director, Mick Mulvaney, who once described the agency as a “joke”.
Mulvaney immediately started cutting back its power. The agency must ask for new funding each quarter; its most recent request was for $0, which suggests that he intends to starve it of cash. There are other signs of Wall Street’s rising influence.
The new tax act passed by Trump’s party includes an array of benefits for the investor class. During the campaign, Trump promised to eliminate the “carried interest” loophole, which gives many hedge fund and private equity fund managers tax and other financial institutions. rates that are lower than those most people who pay income tax.
He declared that hedge fund managers were “getting away with murder” through their extra-low taxes. Yet somehow, the loophole remained untouched by the Republican tax overhaul, which stunned even some of Trump’s conservative advisers.
Similarly, the tax plan promises of its greatest tax cuts to corporations, with much of the benefit likely to flow to their shareholders. America’s largest banks, like JPMorgan Chase, Citigroup and Wells Fargo, are predicting billions of dollars of increased profits.
Regulators who police the financial markets have been told in ways that are subtle and not so subtle to pull back on aggressive enforcement. Republicans, with the help of some Democrats, are taking steps to weaken the Dodd-Frank Act, passed in 2010 with the intent of making the financial system safer and of discouraging certain kinds of risktaking by banks and other financial firms. There were flaws in the legislation, to be sure.
But Republicans have been pledging to get rid of it almost from the moment it was passed, arguing that it was discouraging banks from making loans and choking small banks with unnecessary rules.
Trump has said Dodd-Frank is a “disaster”, though he offered no evidence it was true.
Now the Senate appears to be on a path to passing a bill that would loosen the rules considerably and excuse most banks, aside from those with $250 billion or more in assets, from the restrictions. Into this environment comes Cohen, promising to generate dazzling profits for investors once again.
Trump has lowered his taxes and lessened the chances that pesky market rules will hamper his appetite for taking risk.
During his money-management hiatus, Cohen spent time at his estates in Greenwich, Connecticut, and East Hampton, New York, and made eye-popping art acquisitions, dropping $141.3 million, including fees, on a Giacometti sculpture. In this anything-goes-on-Wall-Street Trump era, why shouldn’t he manage your money as well?