After meeting with small business leaders Monday, President Donald Trump signed an executive order to require federal agencies to propose deleting two regulations for each new one they issue, and also said his administration plans to do a “big number” on the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“So if there’s a new regulation they have to knock out two. But it goes far beyond that. We’re cutting regulations massively for small business, and for large business, but they’re different. … There will be regulation, there will be control, but it will be a normalized control where you can open your business and expand your business very easily.”
Said Trump: “Dodd-Frank is a disaster; we’re going to be doing a big number on Dodd-Frank.”
The order issued Monday states that: “It is important that for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”
Further, the order states, “unless prohibited by law, whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”
Brian Knight, a senior research fellow on the Financial Markets Working Group at the Mercatus Center at George Mason University in Washington, noted in a Monday blog post that Trump’s order requires that for fiscal 2017, “covered agencies are required to keep the net cost of regulation to no greater than zero,” which means “that any costs of new regulation must be offset by repealing old ones.”
Starting in fiscal 2018, agencies “will be granted a ‘regulatory budget,’” Knight says. “If Agency X is given a budget of $100 for regulations the new net cost of regulations (cost of new regulations minus savings from repealing old ones) needs to be at or under $100. The agencies will still need to identify two regulations to repeal for every new one.”
The order does not include independent agencies like the Securities and Exchange Commission and the Consumer Financial Protection Bureau.
When asked what he thought about Trump’s order, former SEC Chairman Harvey Pitt told ThinkAdvisor at an event in Washington that “the spirit of getting rid of dead wood is very positive and sensible. But trying to reduce it to a formulaic approach misses the boat” because “in some cases, agencies should eliminate three regulations for every new one they add and maybe just improving a regulation doesn’t by itself require eliminating a regulation.”
Pitt, who’s now the CEO and managing director of Kalorama Partners in Washington, continued that “there’s a perception that’s being catered to with this approach saying ‘We are going to reduce the amount of federal regulation,’ which is critical. But this isn’t the way that I think you’ll get the best result. Time will tell.”
David Bellaire, general counsel for the Financial Services Institute, said in reaction to the order that FSI “supports the efforts of securities regulators to protect investors. At times, however, these regulatory efforts go beyond what is necessary to protect investors and instead burden firms and financial advisors with needless paperwork or complex requirements.”
Added Bellaire: “We look forward to working with the new administration and Congress in forming a healthier, more business-friendly regulatory environment, that helps investors and allows our members to thrive.”
Trump told business leaders on Jan. 23 that his administration is committed to rolling back regulations by 75%, “maybe more,” as well as cutting taxes for the middle class and for businesses — to a 15% to 20% business tax rate from 35%.
On Monday, Trump reiterated the 75% figure in his meeting with small business leaders, stating that it “could be even slightly more than that.” He added: “We want to end the unfairness between small and big business caused by regulation. Regulation has been horrible for big business, but it’s been worse for small business.”
Big business, he said, “so often can afford compliance with the costly new regulations, but I don’t want them to, I want them to build new plants and more cars.”
As to whether Trump’s regulatory order announced Monday could impact the Department of Labor’s fiduciary rule, Barbara Roper, director of investor protection at the Consumer Federation of America, said that while she wasn’t clear on Trump’s strategy, any change to the rule “would still need to go through notice and comment to repeal the DOL rule through the regulatory process. This executive order doesn’t affect the Administrative Procedures Act requirements that apply.”
Pitt told ThinkAdvisor at the event Washington that he believes the administration will either “gut or modify” Labor’s fiduciary rule, and that the rule’s April 10 compliance will be “suspended,” likely via a Labor Department or executive order.
— Check out Why Donald Trump Has David Kotok Worried About the Global Economy on ThinkAdvisor.