Wall Street May Get $40 billion Reprieve From Trump Regulators

September 17, 2019by Jesse Hamilton

WASHINGTON — Wall Street could soon get one of its most consequential wins of the Trump era as regulators are considering ripping up a rule that’s forced banks to set aside billions of dollars for swaps trades, according to people familiar with the matter.

At issue is a requirement approved during the Obama administration that’s made lenders post tens of billions in margin when engaging in derivatives transactions with their own affiliates. Industry lobbyists have long argued that the demand, which came out of the 2010 Dodd-Frank Act, is redundant and puts U.S. banks at a competitive disadvantage to overseas rivals.

Banks now appear poised to get their way. The Federal Deposit Insurance Corp. will hold a public meeting Tuesday to propose eliminating the margin requirement, said two people briefed on the plan. Other agencies, including the Federal Reserve and the Office of the Comptroller of the Currency, are also expected to recommend scrapping the rule, said the people who asked not to be identified because the proposal hasn’t been publicly disclosed.

The FDIC announced last week that its board would meet Sept. 17 to vote on a swap margin proposal without providing any further details.

The move is the latest sign of how, bit by bit, watchdogs appointed by President Donald Trump are loosening the leash put on banks after the 2008 financial crisis. Regulators have already made headway softening stress-testing requirements and overhauling the Volcker Rule, a landmark constraint that restricted banks from making dangerous market bets with their own capital.

Spokesmen for the Fed and OCC declined to comment, and the FDIC didn’t immediately respond to a request for comment.

Swaps trading — when it was largely unregulated — amplified the financial crisis. Watchdogs responded by implementing dozens of new rules. The posting of margin is meant to minimize a firm’s losses if a counterparty defaults.

Under President Barack Obama, regulators saw requiring margin for inter-affiliate trades as important in protecting bank subsidiaries that handle customers’ deposits. But current watchdogs argue that the demand is unnecessary, stating that other rules already address any risks posed by such transactions.

The margin demand, implemented in 2015, has tied up $39.4 billion, according to industry estimates. That’s prompted major swap dealers, such as Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc., to make the rule’s elimination a lobbying priority.

It would likely be months before regulators scrap the margin requirement. That’s because once the FDIC and other agencies issue their proposals, the public will have an opportunity to submit comments before a final rule could be put in place.

Republican lawmakers have supported banks on the issue. Some House Democrats have also backed the change, telling regulators in a June letter that they should allow lenders to free up the “large and increasing amount of unusable, locked-up collateral.”

That potentially puts them at odds with House Financial Services Committee Chairwoman Maxine Waters, who has vocally argued that it would be a mistake to drop post-crisis rules that made banks safer.

———

Ben Bain contributed to this report.

———

©2019 Bloomberg News

Visit Bloomberg News at www.bloomberg.com

Distributed by Tribune Content Agency, LLC.

Economy

Bipartisan, Bicameral Bill Aims to Provide Unemployed With Access to Skills Training
Employment
Bipartisan, Bicameral Bill Aims to Provide Unemployed With Access to Skills Training
May 22, 2020
by Dan McCue

WASHINGTON - A bipartisan bill introduced in both the House and Senate this week would create a flexible, $4,000 skills training credit for workers who have lost their job due to the coronavirus outbreak. The Skills Renewal Act affords these workers the opportunity to access their... Read More

Senate Leaves for Memorial Day Break Without Deal On New Relief Bill
Congress
Senate Leaves for Memorial Day Break Without Deal On New Relief Bill
May 22, 2020
by Dan McCue

WASHINGTON - The Senate has left town for its annual Memorial Day recess with no agreement in sight on a fourth coronavirus economic relief bill and a schedule that suggests a new stimulus won't be done until July. Last week, the House passed the $3 trillion... Read More

Mnuchin Says ‘Strong Likelihood’ US Will Need More Stimulus
Economy
Mnuchin Says ‘Strong Likelihood’ US Will Need More Stimulus

WASHINGTON — Treasury Secretary Steven Mnuchin said Congress will very likely need to pass more stimulus legislation for the U.S. economy, as the nation struggles to recover from the coronavirus outbreak. “I think there is a strong likelihood we will need another bill,” he said Thursday... Read More

Pandemic-Related Job Losses Top 38 Million as Pace Continues to Slacken
Economy
Pandemic-Related Job Losses Top 38 Million as Pace Continues to Slacken
May 21, 2020
by Dan McCue

WASHINGTON - The number of Americans applying for unemployment benefits in the nine weeks since the onset of the coronavirus pandemic reached 38.6 million last week, just as states across the nation began to take decisive steps to reopen their economies and reverse the trend. The... Read More

As All 50 States Start Reopening, Questions on Virus Tracking Data Fuel Concerns
State News
As All 50 States Start Reopening, Questions on Virus Tracking Data Fuel Concerns

Florida Gov. Ron DeSantis is defending his administration’s reporting of coronavirus data, after a state Department of Health manager said she was fired for refusing to manipulate COVID-19 tracking data as officials moved to reopen the state. Rebekah Jones, who was in charge of Florida’s online... Read More

House to Vote on Stand-Alone Small-Business Loan Program Fixes
Congress
House to Vote on Stand-Alone Small-Business Loan Program Fixes

WASHINGTON — The House will vote next week on legislation changing terms of the Paycheck Protection Program that have served as obstacles to some small businesses seeking relief under the forgivable loan program. “We saw a quick fix on how we could make this work better,”... Read More

Straight From The Well
scroll top