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FT: With Alumni in White House, Goldman Pushes to Kill Pesky Law

Image: FT: With Alumni in White House, Goldman Pushes to Kill Pesky Law
Graeme Abraham /Dreamstime

By    |   Wednesday, 23 August 2017 02:25 PM

Goldman Sachs reportedly is now pushing to kill pesky investment-banking legislation created in Obama-era battering after President Donald Trump has made two company alumni his point men on financial regulation.

Trump, who has vowed to destroy "job-killing regulations," he has named Gary Cohn, Goldman CEO Lloyd Blankfein’s former deputy, as head of the national economic council. Steven Mnuchin, once Goldman’s chief information officer, is Treasury secretary.

“The new team in Washington could not have come at a more important time for Goldman. The bank that received a $10 billion bailout from U.S. taxpayers in 2008 is looking to the Trump administration for another helping hand, this time from what Goldman sees as overbearing regulation exacerbating its current trading funk,” the Financial Times explained.

Goldman’s securities-trading division has fallen on hard financial times.

“Post-crisis regulation has curtailed the operation. In 2007 the bank's net trading revenue from bonds, currencies and commodities peaked at $16.2 billion. Last year, notwithstanding some reorganization, the rough equivalent was $7.6 billion,” the FT reported,

“The main culprit in Goldman's eyes is the Volcker rule, a ban on banks placing market bets with their own money. The idea of banning so-called proprietary trading — conceived by former Federal Reserve chairman Paul Volcker — was a centerpiece of former president Barack Obama's efforts to build a bulwark against future crises requiring public bailouts,” the FT has reported.

To be sure, earlier this month, a federal banking regulator officially opened the Volcker rule up for review by soliciting public comment on revising and easing the regulations that aim to bar risky profit-seeking trading by banks with federally insured deposits, Reuters reported.

Keith Noreika, the acting U.S. comptroller of the currency, announced he was soliciting public comment, specifically input on how to better define what activities are prohibited by the Volcker Rule.

The Office of the Comptroller of the Currency is one of five regulators charged with writing and enforcing the rule, a major component of the 2010 Dodd-Frank financial reform law. It is accepting comments until mid-September.

Officials in both parties have said the existing rule, which bans risky proprietary trading by banks, is too complicated and may benefit from a second look. Noreika’s move is the first formal step by any regulator to begin the process of rewriting the regulations.

Since its creation, large banks have lamented the Volcker rule, arguing that it is practically impossible for regulators to discern what type of trading is barred while other activity, such as market-making, remains acceptable.

"In practice it has been very cumbersome, very hard to do," Blankfein said in an interview with Bloomberg TV earlier this month. "It makes people sitting on trading desks very, very nervous."

But advocates for a tougher rule argue curbing risky trading by banks is critical to preventing crises.

Noreika is only filling in at the top of the Office of the Comptroller of the Currency until President Donald Trump’s full-time nominee, Joseph Otting, is confirmed by the Senate, potentially this fall.

The OCC said it is seeking input on ways to better implement the existing rule, without going through the lengthy and complicated process of rewriting the regulation.

Mnuchin has identified the Volcker Rule as one of his top targets in the administration’s efforts to ease private sector regulation. As head of the Financial Stability Oversight Council, Mnuchin has pushed other financial regulators to reconsider the current rule, which was finalized in 2013.

In its June report reviewing financial rules, the Treasury recommended changes to the current rule, including exempting banks with less than $10 billion in assets and easing compliance requirements.

The OCC’s request is aimed primarily at federal banks the agency directly monitors. The Federal Reserve, Federal Deposit Insurance Corporation, Commodity Futures Trading Commission, and Securities and Exchange Commission are equal stakeholders with the OCC in administering the Volcker rule.

"So far not a single significant regulation has been changed. White House turmoil has slowed the confirmation of Trump appointees at the main US watchdogs. Goldman is straining relations with its rivals and its critics are ultra-vigilant for any sign of a 'Government Sachs' plot," the FT said.

(Newsmax wires services contributed to this report).

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Goldman Sachs reportedly is now pushing to kill pesky investment-banking legislation created in Obama-era battering after President Donald Trump has made two company alumni his point men on financial regulation.
goldman, trump, volcker, law, rule, banking
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2017-25-23
Wednesday, 23 August 2017 02:25 PM
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