US Policy Changes Vol.4 (Deregulation Vol.1)

Here are articles on deregulation. Excerpts are on our own.

The Cost of New Banking Regulation: $70.2 Billion (7/30/2014) | @SaabiraC @WSJ
New regulation stemming from the financial crisis has cost the six largest U.S. banks $70.2 billion as of the end of last year, according to a new study.
Between the end of last year and the end of 2007, regulatory costs rose by more than 100% –or $35.5 billion– for ‏@BankofAmerica, @Citi, @GoldmanSachs, ‏@jpmorgan @Chase, ‏@MorganStanley and ‏@WellsFargo, according to data from policy-analysis firm Federal Financial Analytics Inc (@KarenPetrou).
The costs come from a mix of requirements that are specific to these banks, such particular capital surcharges, and those that apply to banks with assets over $50 billion…
…@FDICgov… @USOCC… and @federalreserve. Of the $35.5 billion in added costs… $29.07 billion came from capital costs, $2.06 billion from interchange fee restrictions, $3.95 billion from FDIC premiums and $407.1 million from supervisory assessments…
…data from @SPGlobal suggesting that pre-tax earnings would drop by between $22 billion and $34 billion at these eight banks each year due to regulations tied to the Dodd-Frank act…

How can Trump support deregulation and Glass-Steagall? (8/9/2016) | Peter J. Wallison @AEI ‏@AmerBanker
… The best interpretation is that it’s an awkward outreach to the disappointed “progressive” supporters of Elizabeth Warren and Bernie Sanders. The worst is that it calls into question whether Donald Trump really supports financial deregulation.
… Glass-Steagall was modified in 1999—permitting bank holding companies (but not banks themselves) to engage in the securities business…
… It was far less expensive for a firm in need of credit to sell bonds, notes or commercial paper to investors than negotiate complex financing arrangements with a bank.
… These competitive issues had become obvious by 1999, providing the foundation for the repeal of the Glass-Steagall language that prohibited affiliations between banks and securities firms. …
… One can’t believe in the reinstatement of Glass-Steagall and still believe in the repeal or significant modification of Dodd-Frank. It’s like saying free markets work, but price controls can help.

Trump Advisers Back Deregulation, Privatised Social Security (11/12/2016) | @JeffHorwitz (@marcygordon) @AP @nytimes
…Michael Korbey… acknowledged that some of the changes his group backed would hurt retirees… in 1996. A decade later… an advocate for…
… While there are some true Washington outsiders on the team — such as @DanRDimicco…
@BillWalton, one of the two people overseeing the economic transition effort, is the former chief executive for Allied Capital… both a trustee for the @Heritage and a senior fellow at…@DiscoveryCSC…
David Malpass… “Don’t Panic About the Credit Market.”
In…”Chris Dodd’s Big, Misguided Bill,” Malpass… should “streamline and concentrate” existing consumer protection regulators, a step that he said “would result in a reduction of government jobs.”
…Paul Atkins… We all know that overregulation can “kill the goose that laid the golden egg,”…

@IMF Working Paper: Assessing the Cost of Financial Regulation (PDF; Sep 2012) | Douglas Elliott, Suzanne Salloy and André Oliveira Santos
p15-18
– Higher capital requirements.
…once Basel III is implemented. The result is to increase costs substantially for U.S. banks across the board. On the other hand, non-banks…
– Higher liquidity requirements.
Basel III rules…would also force U.S. banks to shift their asset-liability management to favor shorter asset maturities and longer liability maturities. …
… This impact is likely to be somewhat less, however, for the commercial banking portion of the business, which can access a substantial amount of stable deposits that are favored by the liquidity rules. … Universal banks would fall in between, given their split of business between commercial and investment banking. …
– Tightening of derivatives regulations.
The Dodd-Frank Act requires regulators to take a series of actions to push business away from customized derivatives towards exchange-traded derivatives and away from bilateral counterparty arrangements and into central clearinghouses. … Customized derivatives will carry higher capital charges for banks and bank affiliates and collateral will often be required from counterparties where it was not needed before. … Banks are likely to recoup some of their losses from additional business conducted with these entities, however. Insurers and non-bank financials will suffer some of the same losses as the banks, to an extent sufficient to reduce their net benefit…
– Accounting changes.
Changes in the Generally Accepted Accounting Principles (GAAP) used for U.S. accounting will almost invariably make U.S. financial institutions look less attractive and require more capital. … The most painful changes are probably those that make it considerably harder to move transactions off-balance sheet, inspired in part by the problems created by Structured Investment Vehicles (SIVs)… …with somewhat less effect on insurers and somewhat more on other non-bank financials, which generally relied much more on wholesale funding from vehicles like SIVs. …
– Changes to securitization regulations.
…aimed at increasing transparency and trying to incentivize the firms that put together the securitizations to care about the quality of their securitizations. This meshes with reforms in other areas such as regulation of the rating agencies and increases in capital standards for securitizations under Basel III. …restoration of faith in the securitization market could ultimately reduce costs for banks by allowing them to resume the more active use of those markets. Non-bank financial institutions are shown as more affected, since some of them have made very heavy use of securitizations in the past.
– Enhanced consumer protection regulations.
Commercial banks in the United States are likely to be considerably affected over time by the newly established @CFPB. … The industry clearly views the CFPB as a major threat to profitability… Investment banks should be less affected since they sell fewer retail products, most of which would remain under @SEC_News supervision anyway. Many non-bank financial institutions…for the first time…the largest impact.
– Expansion of the regulatory perimeter.
…a question of which firms should be heavily regulated and which can be left outside the regulatory perimeter and subjected to a lesser degree of control. …banks and insurers need to be within the perimeter. Investment banks were not included, but largely now are, as a result of the crisis. The Dodd-Frank Act did not do much directly about bringing “shadow banking” within the perimeter, but the Financial Stability Oversight Council has considerable power in this area and the CFPB does as well in areas that touch on consumer protection…
– Higher taxes or fees facing financial institutions.
Deposit insurance fees…increased considerably in response to losses at ‏@FDICgov as a result of the financial crisis. … Finally, the U.S. Administration has proposed a Financial Crisis Responsibility Fee that was originally pegged at about US$10 billion a year and was subsequently reduced to about US$3 billion a year… The Dodd-Frank Act, complemented by international efforts coordinated through @FinStbBoard, is clearly intended to make it considerably easier to deal with large, troubled financial institutions and to reduce the chance that government support would be provided to aid bondholders and counterparties. …
– Tougher regulation of credit rating agencies.
The Dodd-Frank Act encourages greater SEC oversight of the rating agencies, requires more transparency, and raises their legal liabilities. …unbiased and accurate ratings.
– Structural changes to banks and activity limits.
Relatively little structural change is being required by Dodd-Frank, with the exception of the so-called Volcker Rule to eliminate proprietary trading and related activities and through some changes in where derivatives business can be housed within a banking group. …
– Changes in regulation of compensation and governance.
relatively minor… …the most effect, such as in forcing better management of compensation arrangements…approaches that discourage unreasonable risk-taking and by helping hold down overall employee compensation. …

Extending Deregulation: Make the U.S. Economy (PDF; 2008,2016) | Robert W. Crandall @BrookingsEcon