Hensarling emerges as Wall Street’s best hope or a nightmare
WITH some in the finance industry salivating over the prospect of deregulation under Donald Trump, a key power broker is emerging who might bring headaches for Wall Street.
House Financial Services Committee Chairman Jeb Hensarling has already been rumored as a potential Treasury Secretary under Trump and he’s got a plan at his fingertips for ripping up and replacing the Dodd-Frank Act. The Texas congressman – who met with the president-elect at Trump Tower last Thursday – has said he’s been in constant discussion with Trump’s transition team about his proposed legislation, which many lobbyists expect to be the starting point for rewriting bank rules in a Republican-controlled government.
There are a lot of things Wall Street likes in Hensarling’s bill. It scraps the Volcker Rule ban on lenders making speculative market bets with their own capital. It reins in the Consumer Financial Protection Bureau, which has boosted oversight of everything from mortgage lending to credit cards. It eliminates a DoddFrank provision that set limits on how much banks can charge retailers when merchants accept debit cards. Asset managers and insurers in particular like his plans to overhaul the Financial Stability Oversight Council, a collection of regulators with authority to impose punitive rules on companies by labelling them systemically important financial institutions.
But passing Hensarling’s bill wouldn’t necessarily free large banks from the handcuffs Washington put on them after the financial crisis, unless lenders want to take the unappealing step of raising hundreds of billions of dollars in new capital. The Republican also has a strong populist streak, has been perceived by Wall Street as unyielding on policy positions and almost always colors his criticism of Dodd-Frank as a failed attempt to do away with too-big-to-fail banks. That mirrors the message that Trump himself championed during his campaign when he called for breaking up the biggest banks and reining in Wall Street’s influence in politics.
Such views can’t bring comfort to the likes of JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc.
“Wall Street has long believed Hensarling is their obstacle to getting reasonable compromise,” said Mark Calabria, a financial regulation expert at the conservative think tank Cato Institute. “There’s a perception that he’s an ideologue who won’t compromise. When bankers go into meet with him, they feel like they are getting a lecture.”
After meeting with Trump last Thursday, Hensarling told reporters in New York that he is very excited to help the incoming president “drain the swamp” in Washington and get the economy “working for Americans again.” While Hensarling has a great position leading the financial services panel, he said he would certainly consider a different role if Trump asks.
Lobbyists and their clients rely on the fact that when a bill is introduced, they will get ample opportunity to promote the aspects of it they like and attack the elements they don’t. But bankers can’t assume they will have an open dialogue with Hensarling or that he’s even that interested in hearing from them at all.
For instance, before unveiling the full text of his bill to replace Dodd-Frank in June, his office summoned more than two dozen lobbyists to a private gathering on Capitol Hill to lay out some rules of engagement, according to attendees. Hensarling’s staff scheduled the meeting after lobbyists complained they weren’t being consulted on legislation that would have huge implications for financial firms.
Hensarling quickly got to the point: He indicated he didn’t care whether the industry supported everything in his bill, because he was going to introduce it regardless. The law maker then left to catch a plane. Hensarling’s staff took over the discussion, explaining that they only planned to meet with trade groups to get feedback, rather than engaging with representatives from individual firms. specific companies were told, though, that they could send letters on the legislation to Hensarling’s office, said the attendees who asked not to be named because they weren’t authorised to speak publicly. — WP-Bloomberg