President Donald Trump on Friday plans to order a review of key financial rules — less than three months after he directed an even broader examination of Wall Street regulations.
Trump will send a signal that two important regulatory powers adopted in the wake of the financial crisis are in the crosshairs, along with tax rules put out by the Obama administration last year.
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Yet none of the executive actions will have an immediate, tangible impact on any rules. They are the latest in a series of moves to assuage executives and lawmakers impatient over the slow pace of deregulation and tax relief. They also come as the administration is trying to rack up victories before the end of the president’s first 100 days in office.
Trump will sign two presidential memos, according to a White House offical. One will direct Treasury Secretary Steven Mnuchin to examine the government’s so-called orderly liquidation authority to wind down failing megabanks outside of bankruptcy court.
It’s a power that Republicans have pressed to eliminate because they say it enshrines taxpayer bailouts. Proponents, including banks themselves, argue that the authority has actually helped end the threat of taxpayer rescues.
Another memo will examine the risks of placing “systemically important" nonbank financial firms under the oversight of the Federal Reserve, which subjects them to stricter regulation, according to the official.
Both memos appear to be more specific extensions of the financial regulatory review that Trump on Feb. 3 ordered Treasury to conduct, to determine how rules governing banks, insurers and other financial firms can be improved.
The president will also sign an executive order directing Mnuchin to examine if any significant tax rules impose an undue burden on U.S. taxpayers, add unnecessary complexity or exceed statutory authority.
Treasury issued rules in 2016 that sought to make it harder for companies to pay less taxes by incorporating in a lower-tax country, and to take away options for businesses to slash their tax bill after doing so, in what is called an inversion.
The rules specifically targeted companies that had already taken part in several inversions and a practice known as earnings stripping. That’s when multinationals loan money from a foreign headquarters to a U.S. subsidiary to take advantage of a tax deduction for business debt.
The orderly liquidation authority memo will require Mnuchin to present a report within 180 days on whether “enhanced bankruptcy authority” would be a better alternative. The report will also examine the impact on financial stability if a financial firm were to fail, and the risk to taxpayers posed by temporary government-provided funds as part of the authority.
The secretary will be asked to consider whether the potential for the government to step in could lead to excessive risk-taking.
Bernie Becker contributed to this report.