The financial sector in America is set to undergo changes with President Trump keen on neutering many sections of Dodd-Frank Act. The Act came into existence the moment the 2008 financial crisis came to an end.
The Treasury’s Interest
The Treasury is agitating for the stripping of the powers of the Consumer Financial Protection Bureau because it has failed in its responsibility. The Treasury is also looking for ways through which Volcker Rule can stop operating in America. The rule does not allow banks to do business with an aim of making exploitative profits. This is beneficial to the members of the public who are exempted from exploitation but disadvantaging the banks. This is the reason as to why the Treasury wants the rule declared irrelevant.
Small Banks – Will Benefit?
Small banks will benefit if the rule is done away with as they will no longer be subjected to regulatory scrutiny like stress tests. Making changes to the laws governing the financial sector in the USA is one way of structuring the financial system so that Trump’s administration is better placed to achieve the goal of sustained growth of American economy. This will create several opportunities for the Americans who will enjoy a stabilized economy. The recommendations by the Treasury to Trump’s administration were developed with the aim of easing many regulations disadvantaging community banks.
Credit unions were also badly affected by the financial crisis and so putting in place good laws will help in developing the American financial sector and stabilizing its economy. This has not only happened in America but also other countries that are keen in expanding their economies and bettering the terms and conditions of doing business.
Everything Possible to Adopt the Plan
President Trump authorized the Treasury to do everything possible to improve the American financial sector and this is how the Treasury recommended the restricting of the Dodd –Frank Act that was enacted in the year 2010. This would ensure that rule is in line with the goals of Trump’s administration. Trump’s administration is keen on implementing the recommendations so that in the long run it can revamp the American financial sector.
The administration is optimistic that the Congress will back it in its quest to make changes to its financial sector. In so doing, banks will not be exempted from operating because of strict liquidity issues.
An Obstacle in the Person of Democrats
The only problem that may arise is the objection to the changes by Democrats who passed the rule during Obama administration. Republicans alone may not be enough to make changes to the law because of quorum hitches. Elizabeth Warren who is the senator from Massachusetts will not easily allow the removal of the Consumer Financial Protection Bureau which is her idea. The Treasury wants its funding structure to be changed so that it gets its initial powers back and take charge of annual appropriations processes. The loopholes present in the Consumer Financial Protection Bureau have rendered it unaccountable. It is also seen as having unnecessary regulatory powers that have often been abused excessively. The approach used by the Bureau has limited the ability of consumers to get credit with ease.
Furthermore, the consumers have limited their innovation and have been compelled to adhere to unnecessary compliance burdens. However, the recommendation by the Treasury to change the Act has not touched on other important financial areas like mortgages controlled by the government, which have been conserved by the government for almost a decade. Mortgage firms have found it very hard to spend a lot of resources on providing better mortgage services, and this is a big blow to the USA economy.
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Big Blow to USA Regarding Mortgage Sector
Reforming the financial sector can never be complete without the mortgage sector being reformed. The treasury’s position was to slow down any reforms in the mortgage sector and this is a big blow to the development of America as a country. However, the Treasury revealed that in future, there is need to spur mortgage origination by transforming mortgage credit. This would allow many individuals to benefit from mortgage lending so as to develop their property and, in the long run, improve America’s economy.
Pros and Cons
The financial sector stakeholders were happy with the proposals by the Treasury. This is because they would make it possible to modernize the financial sector in America. Furthermore, it would be possible to advance the interests of consumers and improve economic growth.
However, even with the possible benefits of the reforms, the progressives have objected the recommendations. They believe that they would jeopardize economic growth and development. This can result in a recession that had negative consequences not only to the American economy but also global ramifications.
Families, as well as communities, were negatively affected by the financial crisis. Billions of dollars were lost during the crisis. With the reforms, the administration is safe because the public would benefit from it as they would no longer be affected by financial bureaucratic processes. President Trump believes that the reforms are vital in reducing taxes and improving negotiation on trade deals thereby promoting economic growth and development.