Wednesday, 8 February 2017

Is Trump’s deregulation good for Wall Street?

Posted by Fort Financial Services at 12:01 Labels:


Simply said… Yes. But the executive order titled “Reducing Regulation and Controlling Regulatory Costs” opens a wide spectrum of issues that might backfire eventually, hurting markets, investors and no doubts, the current President too.
Donald Trump has been signing a series of executive actions since he took office two weeks ago. So, in case you were not following his latest steps, it’s important to make sure we’re talking about the same thing here. According to Investopedia...
“Deregulation is the reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry.”
And now that you know what it means, it’s easier to understand why deregulation is such an important matter for everybody, especially the financial sector. If companies have more flexibility to work, they can do more, earn more, grow more. However, there is a dark side here, less regulation also means some companies might want to use it fully into their favor and that some “collateral damage” could be done on the way.
The new President signed the executive order last Monday in company of small business owners, sending a message that this action is a great thing for them. And it is. The National Small Business Association estimated that small scale business spend on average about $12,000 a year to satisfy government regulations.

The Dodd-Frank Act
President Trump ordered a full review of the Dodd–Frank Wall Street Reform and Consumer Protection Act on Friday, sending US equity markets to new record highs. Why? Because he’s also intending to cut regulation for big players. The Dodd-Frank act was signed during Obama’s term in response to the Financial crisis of 2007-2008.

It is considered the most substantial regulatory reform since the 1930’s depression and it could be modified or eliminated if the Congress allows it. In such scenario, Wall Street gets more freedom to speculate and take bigger risks, that could lead into a new crisis. The critic here is that bailouts would have to come out again from taxpayers’ pockets.

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