A pedestrian walks past the Wall Street subway station near New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

Wall Street Super Watchdog Now a Forum to Cut Rules Under Trump

(Bloomberg) -- A high-powered panel that’s meant to spot dangers to financial stability is now urging regulators to review how rules are holding banks back, the latest sign of how much Wall Street oversight has changed under President Donald Trump.

In its annual report released Thursday, the Financial Stability Oversight Council for the first time advised agencies to address outdated and overlapping rules that could subject the industry to “increased compliance costs and regulatory burdens.” The language is a notable inclusion in a document that’s known for flagging risks such as cyberattacks and the financial sector’s reliance on short-term funding.

FSOC, which is made up of more than a dozen regulators and led by Treasury Secretary Steven Mnuchin, was formed after the 2008 financial crisis to monitor threats that could lead to another crash. It’s gotten a makeover in recent months as agency heads installed by Trump increasingly make up its members. 

The annual report shows the panel has evolved into a forum for pushing Trump’s goal of rolling back rules. In fact, in the same afternoon as its release, the president held an event at the White House to highlight what he called “the most far-reaching regulatory reform in history.”

Volcker Rule

Thursday’s FSOC report included some discussion of the Volcker Rule, the controversial Dodd-Frank Act provision that limited banks from investing with their own money. The council, whose members include the heads of the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, recommended an overhaul of such rules for “efficiency and effectiveness.”

The council’s reports -- written in an arduous process that requires agreement among all the FSOC members -- haven’t made a lot of waves in the past. Aside from flagging burdensome rules, this year’s report largely resembled previous versions.

As in the 2016 report, cyberattacks were listed as one of the most prominent threats, and FSOC now recommends starting a council of private-sector executives to work with regulators to address vulnerabilities to hackers. The report again noted the emergence of cryptocurrency technologies, putting a little more emphasis on a market that has become mainstream due to bitcoin’s meteoric rise in value this year. Still, FSOC declined to spotlight the digital currency as a major risk.

FSOC has already been changing. Last month, the Treasury Department indicated that it wanted to bury the council’s power to flag individual companies as potential risks to the financial system. And in September, the council released American International Group Inc. -- an insurer infamous for its role in the 2008 crisis -- from such a label.

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