Trump to order review of PE’s ‘risky institution’ tag

Two executive orders to review Dodd-Frank measures will be signed on Friday.

President Donald Trump will order a review of regulators’ authority to label private equity firms and other non-bank financial institutions as risky institutions at a meeting with the Treasury on Friday.

Treasury Secretary Steven Mnuchin will be tasked with the review and required to assess how regulators label firms as risky and the risks that might be created by designating a firm as such.

Trump will also sign a second executive order requesting an assessment of whether an improved bankruptcy authority is a better alternative for failing financial companies.
The treasury has 180 days in which to carry out the review and report back. It is already reviewing financial regulations to find ways to lessen the burdens on businesses. The outcome of this is due in June.

Mnuchin said the scope of the review will go beyond the rules tied to Dodd-Frank, and that his staff has already met with more than a dozen focus groups to find areas for improvement.

The purpose of the review is to ensure proper regulation, not to throw out all the rules to safeguard the financial system, he said.

Financial Choice Act

The request for a review comes a day after the US House of Representatives’ banking panel unveiled the Financial Choice Act, a bill drawn up to replace the Dodd-Frank Act.

“Republicans are eager to work with the president to end and replace the Dodd-Frank mistake with the Financial Choice act because it holds Wall Street and Washington accountable, ends taxpayer-funded bank bailouts, and unleashes America’s economic potential,” Jeb Hensarling, the Texas Republican that authored the bill, said in a statement.

The bill calls for a repeal of the Volcker rule, which restricts the amount of tier 1 capital banks can invest in private equity.

A hearing to discuss replacing the Dodd-Frank act is scheduled for April 26.