Obama Holdovers

The Fed and FDIC are still led by officials appointed by former President Barack Obama. Though Mnuchin leads FSOC as Treasury secretary, Obama holdovers represent half of its 10 voting members on the council, which Dodd-Frank created to spot threats to the financial system.

The Trump administration is making progress in filling agencies with its nominees. Former Wall Street lawyer Jay Clayton was sworn in as SEC chairman last week. On May 5, Keith Noreika took over as acting head of the OCC. Noreika, an attorney who had represented banks in private practice, told the Wall Street Journal this week that regulators need to do a better job explaining what’s allowed under Volcker.

Mnuchin wants the various agencies to work together, and potentially issue new guidance that will give banks more clarity, the people said. Doing so would be among the fastest and easiest ways to soften Volcker’s impact.  

A wholesale re-writing of the rule would probably take years, as multiple regulators would have to agree on any changes after seeking public comment. While Congress could try to repeal Volcker, and a bill is moving through the House, Republicans are unlikely to get the support they need from Senate Democrats to pass legislation.

Making Billions

In January, Mnuchin said he backs the aim of Volcker, because “proprietary trading does not belong” in banks with a government backstop. But he said he’s concerned the rule has constrained liquidity and that lenders might benefit from a better explanation of what constitutes proprietary trading as opposed to making markets for clients.

Blankfein offered a similar critique in a Tuesday interview with CNBC. He said restrictions on what banks can do for their customers prevent companies and investors from engaging in transactions that are “beneficial to the financial markets.”

Marcus Stanley, policy director at Americans for Financial Reform, said he’s dubious that Volcker is handcuffing lenders.

“You’re talking about banks that are making tens of billions a year on trading activity,” said Stanley, whose group supports aggressive oversight of Wall Street. “It doesn’t seem to me that they’ve exited the markets.”