Big banks cautiously greet Trump move to loosen rules

Wall Street bankers expressed quiet satisfaction Friday with signals that President Donald Trump intends to roll back some of the tough financial regulations enacted after the 2008 financial crisis.

A trader at one hedge fund described sentiment as "positive" upon news of the White House moves.

Trump signed two executive actions asking the Treasury and the Labor Department to study ways of reforming regulations that were designed to make markets safer and give consumers more protection. Trump and many in the banking industry say the rules are harming business.

"We expect to cut a lot out of Dodd-Frank," Trump said, referring to the 2010 law passed in response to the financial crisis that has sparked complaints from bankers.

"We are satisfied," said a banker, who, like others spoke to AFP on the condition of anonymity.

Banks have "faced tremendous headwinds that came with a sharp increase in highly prescriptive government regulation," said Rob Nichols, president of the American Bankers Association, in a statement.

"Reducing the strong regulatory headwinds banks face is critical to increasing lending that drives job creation across America."

- 'Betrayal' of populism? -

But Wall Street insiders, mindful that Big Finance remains broadly unpopular after the crisis, do not want to appear too euphoric about the easing of the rules.

Spokesmen from large banks, including Goldman Sachs and JPMorgan Case, declined comment Friday.

In January, liberal activists organized protests outside Goldman Sachs offices in several US cities to draw attention to the bank's role in the biggest financial crisis since the 1929 Great Depression.

Trump capitalized on this anger in the presidential election, running as a populist who promised to take a wrecking ball to the system that abandoned everyday people.

Critics accuse him of hypocrisy.

"It's a betrayal of his campaign promises, especially those savaged by the Wall Street crash who presumably were the core of his base," said Bartlett Naylor, financial policy advocate at consumer rights nonprofit Public Citizen.

"At his inauguration Donald Trump promised a government for the people, but today's announcements will only make life easier for Wall Street execs and the richest of the rich," said Brandon Wu, senior policy analyst at ActionAid USA.

"Trump is trying to roll back legislation designed to prevent another financial crisis, giving bankers free rein to once again put profit before people."

Investors are anticipating Trump's plans will force the banks to spend millions less on compliance staff and other costs for new regulations that had been expected in the coming years under Dodd-Frank.

Trump administration officials have also signaled they intend to target the Volcker rule, which limits the ability of big banks to make highly lucrative investments from their own funds, and the fiduciary rule, which requires financial advisors to prioritize the interests of their clients.

Some Wall Street insiders were cautious about the prospect for major rollbacks in Dodd-Frank, noting that Congress would also need to support the measures. Many in Congress, including Republicans, hail from regions that were devastated by the subprime loan crisis.

Gains in shares of large banks Friday suggested the market was preparing for fatter days ahead for the largest financiers. Bank of America and JPMorgan gained more than two percent and Goldman Sachs jumped 4.2 percent.

The bond market was more subdued, with the spread between interest rates on bank bonds and US treasuries stable, suggesting greater caution in the outlook for easing regulation.