Mnuchin looks to loosen regulation - but ‘too big to fail’ is here to say
Treasury Secretary Steven Mnuchin ­laid out on Friday guidelines to loosen Wall Street regulation — but kept in place one of the most powerful and controversial regulators from the Obama era.
Loosening regulation will encourage growth in the capital markets — including pushing more companies to go public, Mnuchin said in a 232-page report.
“By streamlining the regulatory system, we can make the US capital markets a true source of economic growth which will harness American ingenuity and allow small businesses to grow,” Mnuchin said in a statement.
While the guidelines touch on everything from stock exchanges to derivatives and securities, some Wall Street watchers were surprised that they did little to scale back the regulatory body that designates “too big to fail” companies.
That body, ­known as the Financial Stability Oversight Council, was created under ­ the 2010 Dodd-Frank financial law to oversee banks and other institutions with ­more than $500 billion in assets.
FSOC’s aim was to keep the large financial institutions from failing and needing additional ­government-funded bailouts.
But FSOC has also been a lightning rod for criticism.
Neel Kashkari, president of the Minneapolis Federal Reserve, has doubted whether the council would end “too big to fail.”
Among FSOC’s biggest weapons was slapping a company with the “systemically important financial institution,” or SIFI, designation.
Such a label would require the company to hold larger cash margins.
FSOC put the SIFI label on MetLife, which sued the government claiming the designation was placed erroneously. The ­case is pending.
In April, President Trump signed an executive order directing Mnuchin to review FSOC, its designation process and whether it’s fair — an order that critics hoped would gut the regulator.
But that hasn’t happened.
“The subtext of the Treasury report is that they’re generally going to leave FSOC alone,” Norm Champ, a partner at Kirkland & Ellis who was previously the director of the SEC’s investment management decision, told The Post.
The report does go on to recommend that the US should ease up on registration rules for companies looking to go public, noting that the number of public companies in the US has dropped by almost 50 percent in the past ­20 years.
“Improperly tailored regulatory burden can benefit the largest companies, which are better positioned to absorb the costs, and discourage competition from new entrants,” Treasury said in the report.
Even with few dramatic right turns in the report, opponents of Trump’s business-friendly agenda warned the report would harm savers and benefit big investors.
“Its new report is a jambalaya of recommendations that cooks Main Street as it feeds Wall Street,” Bart Naylor, a financial policy advocate at Public Citizen, said in a statement.