Op-Ed: Dangerous Stability Threatens America’s Banks

From the Editorial Board at The Reformed Broker:

The US financial and banking system has gone almost seven full years without experiencing a major crisis. With today’s announcement from the administration that Dodd-Frank regulations are about to be dismantled, this nightmarish period of excessive stability will finally be coming to a close.

According to White House National Economic Council Director Gary Cohn, the former president of financial crisis experts Goldman Sachs, “We have the best, most highly capitalized banks in the world, and we should use that to our competitive advantage. But on the flip side, we also have the most highly regulated, overburdened banks in the world.”

Cohn deftly sidesteps the fact that our “most highly capitalized banks” have gotten that way thanks to the very regulations and increased capital requirements that are now on the menu to be carved up. To which we say, good riddance. It’s about time that America’s deposit-taking institutions got back to the business of leveraged speculation, empire building and unchecked expansion that made this country what it is today – a culturally divided paradise of extreme wealth disparity and populist rage.

The tens of millions of Americans who came out to vote for Donald Trump and the subsequent hundreds who attended his inauguration have grown sick and tired of the burdensome protections and safeguards that have been put in place for them. All across the nation, working class people yearn for a world in which Citigroup and Bank of America can borrow unlimited sums of money for concentrated bets, trade in exotic securities that are barely understood and sell whatever products they want to whomever they choose.

In eliminating toxic investment choices from the consumers’ grasp, the quasi-marxist Department of Labor has taken our freedom to not retire away from us. The idea that financial professionals should be forced to sit on the same side of the table as their less knowledgable customers is the biggest regulatory overreach since the outlawing of asbestos in building construction. These limitations on our liberty will not stand.

America’s banks must be globally competitive again. For too long, the banking giants of Europe of have outpaced their US counterparts in their ability to routinely sustain massive, unthinkable losses. Germany’s Deutsche Bank and Italy’s Banca Monte dei Paschi have been afforded the opportunity to lose tens of billions of dollars, year after year, while the JP Morgan Chases of the world have been effectively sidelined. With the loosening of reserve requirements and international capital rules, our great domestic financial institutions will finally be able to rejoin the fray.

We applaud the coming castration of The Dodd-Frank Wall Street Reform and Consumer Protection Act and the immediate freeze on The Department of Labor’s Fiduciary Rule. With US household net worth ending 2016 at $90 trillion, significantly above its peak from before the great recession, it is clear that these restrictions have been doing a great deal of harm to American families. As stocks race toward record highs and interest rates begin to rise, there has never been a better opportunity for systemically important financial institutions to begin taking additional risk.