In this interview, financial regulation expert Desiree Sainthrope shares her insights into the impacts of financial regulations on U.S. businesses over recent years, the Trump administration’s approach to deregulatory actions, and the implications of changes targeting the activities of the Consumer Financial Protection Bureau (CFPB) and the Securities and Exchange Commission (SEC). Additionally, she explores how technological advancements and modifications in banking regulations are fostering innovation and economic growth.
Can you describe the overall impact of financial regulations on U.S. businesses over the last four years?
Financial regulations have had a significant impact on U.S. businesses, often leading to increased costs and operational burdens. According to a survey by the U.S. Chamber of Commerce, 87 percent of businesses reported negative effects from these regulatory-related cost increases. These regulations can impede growth by making it harder for businesses to access the capital they need to expand and create jobs.
What specific findings did the U.S. Chamber’s survey of financial decision-makers reveal about regulatory-related cost increases?
The survey highlighted that a vast majority of financial decision-makers, 87 percent to be precise, felt that regulatory-related costs had adversely impacted their businesses. These findings point to how pervasive and burdensome these regulations have been, affecting everything from day-to-day operations to long-term financial planning and investment.
How has the Trump administration approached the task of rightsizing financial regulations?
The Trump administration has been proactive in addressing the burden of financial regulations. It has focused on eliminating or revising those seen as stifling economic growth and innovation. By rolling back these regulations, the administration aims to create an environment that encourages businesses to flourish, thereby boosting job creation and economic competitiveness.
What benefits have consumers seen from the recent deregulatory actions taken by the administration?
Consumers have benefited from deregulatory actions through improved access to financial products and services. For instance, the deregulation of banks’ and credit unions’ overdraft products ensures that such services remain available to those who depend on them. Additionally, fostering innovation in digital payment systems can lead to more efficient and user-friendly financial technologies.
Could you explain the significance of the two Congressional Review Act (CRA) Resolutions passed by the House on April 9?
The two CRA Resolutions were pivotal in repealing last-minute rules from the previous administration. The first resolution overturned a rule that would have limited banks’ and credit unions’ ability to offer overdraft products, ensuring that these services remain accessible. The second resolution reversed a decision to impose stricter oversight on digital payments companies, promoting innovation in this burgeoning sector.
How did the first CRA Resolution affect banks and credit unions regarding overdraft products?
By overturning the previous administration’s rule, the first CRA Resolution allowed banks and credit unions to continue offering overdraft products without facing restrictive price caps. This decision is essential for maintaining consumer access to these financial tools, especially for those who rely on them for managing unexpected expenses.
What are the implications of the second CRA Resolution for digital payments companies?
The second resolution prevents excessive regulatory oversight that could hinder digital payments companies from innovating and expanding their services. By easing these constraints, the resolution encourages the development of more advanced and efficient digital payment solutions, ultimately benefiting consumers and businesses alike.
Can you elaborate on the CFPB rules targeted for modification or rescission by Chairman Hill and the House Financial Services Committee?
Chairman Hill and the committee have identified various CFPB rules for modification or rescission, including those related to the reporting of medical debt on credit reports. The goal is to reduce regulatory burdens that are seen as unnecessary or overly restrictive, thereby facilitating more straightforward and fair access to credit for consumers.
How is the administration fostering innovation in the capital markets?
The administration is encouraging innovation by supporting the adoption of new technologies such as artificial intelligence and distributed ledgers in capital markets. They recognize the importance of these technologies in maintaining the competitiveness and efficiency of 21st-century markets and have been convening forums to discuss and promote these advancements.
What role does new technology, like artificial intelligence and distributed ledgers, play in modernizing capital markets?
New technologies such as artificial intelligence and distributed ledgers are crucial for the modernization of capital markets. They enhance operational efficiencies, provide better risk management tools, and facilitate the development of new financial products. These technologies also help in maintaining the integrity and transparency of financial transactions.
What key points were highlighted in the Chamber’s report “Investors and the Markets First: Reforms to Restore Confidence in the SEC”?
The Chamber’s report criticized the SEC’s previous approach to rulemaking, which was seen as overly prescriptive and burdensome. It called for reforms to restore investor confidence, including repealing unnecessary regulations and providing a more supportive framework for capital formation and market innovation.
How has new SEC leadership shifted its approach to rulemaking?
The new SEC leadership has shifted towards a more market-friendly approach by removing guidance that micromanages capital markets and focusing on eliminating harmful regulations. This pivot aims to foster a regulatory environment that supports innovation and growth while ensuring investor protection and market integrity.
What was the impact of repealing Staff Accounting Bulletin 121 on the use of digital assets in the financial system?
Repealing Staff Accounting Bulletin 121 has been a significant move for the digital assets sector. It removed constraints that were hampering U.S. banking organizations’ ability to support digital asset deployment, thus fostering greater involvement and innovation in the use of digital currencies and related technologies.
Could you explain the rationale behind repealing Staff Legal Bulletin 14L and its effects on shareholder proposals?
The repeal aimed to reduce the number of costly and frivolous shareholder proposals unrelated to a company’s long-term performance. By limiting proposals based on broad societal impacts, the SEC ensures that shareholder initiatives remain focused on issues pertinent to the company’s business and financial success.
How has the SEC altered its stance regarding disclosure of climate-related risks and greenhouse gas emissions?
The SEC has moved to end its defense of rules mandating climate-related risk and greenhouse gas emissions disclosures. These rules were seen as potentially harmful to public companies and capital markets by imposing additional compliance costs and diverting focus from core business activities.
What changes have banking regulators like the OCC and FDIC made to supervisory requirements related to “reputation risk”?
The OCC and FDIC have removed references to “reputation risk” from supervisory requirements. This change addresses concerns that such ambiguous interpretations had been used to pressure banks into closing accounts of politically controversial, yet lawful businesses, thereby ensuring fair treatment across the banking industry.
How were reputation risk references used by banking regulators, and why were they problematic?
Reputation risk references were often vaguely interpreted, leading to inconsistent enforcement and undue pressure on banks to disassociate from lawful businesses viewed as politically sensitive. This practice was problematic because it could unjustly impact legitimate businesses and limit access to essential banking services.
What guidance related to crypto-related activities have the OCC and FDIC repealed?
The OCC and FDIC have repealed guidance that previously restricted banks from engaging in crypto-related activities without prior approval. This regulatory shift allows banks more freedom to explore and integrate cryptocurrency services, promoting innovation and customer choice in financial services.
How did FIL-7-2025 and Interpretive Letter 1183 affect banks’ involvement in crypto-related activities?
These regulatory instruments required banks to seek permission for crypto-related activities, often resulting in delays or denials without clear guidelines. By repealing them, banks can more freely participate in the burgeoning cryptocurrency market, driving technological advancement and offering new financial products.
What was the Fed, OCC, and FDIC’s reasoning behind their intention to repeal the rule under the Community Reinvestment Act?
The intention to repeal the rule was driven by the belief that the rule excessively micromanaged bank lending decisions, hindering their flexibility to address community needs effectively. The repeal aims to provide banks with more autonomy to support local economic growth and development.
What specific proposals has the FDIC withdrawn regarding brokered deposits, executive compensation, corporate governance, and banking competition?
The FDIC has withdrawn several proposals that were seen as limiting industry competitiveness and imposing unnecessary compliance burdens. These include restrictions on brokered deposits, stringent guidelines on executive compensation, rigid corporate governance requirements, and rules that limited banking competition.
How do these regulatory changes potentially benefit Main Street lending and overall economic growth?
By reducing regulatory burdens, these changes can make lending more accessible and affordable for small businesses and consumers. This fosters a more dynamic and competitive financial environment, ultimately driving economic growth and creating more opportunities for job creation and entrepreneurship.
Do you have any advice for our readers?
Stay informed about regulatory changes and their potential impacts on your financial decisions and business operations. Understanding the evolving landscape can help you adapt and seize new opportunities that may arise from a more streamlined and supportive regulatory environment.
