Less than two weeks into his presidency, Donald Trump took his first major step toward dismantling parts of the regulatory system created in response to the 2008 financial crisis.
On February 3, Trump signed Executive Order 13772, directing the Treasury Department to conduct a sweeping review of federal financial regulations and identify rules that conflicted with the administration's newly announced principles for regulating the financial system.
The order did not repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act. A president could not simply erase the law with an executive order. But it opened the door to an administration-wide effort to weaken, rewrite or eliminate regulations adopted after the financial crisis.
For American consumers, the stakes were substantial.
Why Dodd-Frank Existed
Dodd-Frank was enacted in 2010 following the worst financial crisis since the Great Depression.
The collapse of the housing market and failures or near-failures of major financial institutions had helped trigger a severe recession. Millions of Americans lost jobs, homes and retirement savings.
Congress responded by imposing new oversight on banks and other financial institutions. The law strengthened regulation of institutions considered capable of threatening the broader financial system, established new rules for complex financial products and created the Consumer Financial Protection Bureau.
The basic idea was straightforward: financial institutions could take risks with their own money, but the government would have stronger safeguards designed to prevent those risks from once again threatening the entire economy.
Seven years later, the Trump administration began reconsidering that framework.
Trump Orders a Regulatory Review
Trump's executive order established a series of "Core Principles" for financial regulation.
Among them were promoting economic growth, making American financial companies more competitive, preventing taxpayer-funded bailouts and making regulation "efficient, effective, and appropriately tailored."
The Treasury secretary was instructed to examine existing financial laws, regulations and reporting requirements and identify those that interfered with those principles.
That review eventually produced recommendations for significant changes to the regulatory system.
The administration argued that post-crisis regulations had become unnecessarily burdensome, particularly for smaller banks, and that reducing regulatory requirements could make credit more readily available and encourage economic growth.
Critics saw a different danger.
The Risk of Forgetting 2008
Financial regulations are often invisible when they are working.
Capital requirements, stress tests, disclosure rules and oversight of systemically important institutions rarely attract public attention. But they exist because failures in the financial system can spread far beyond Wall Street.
When a major financial institution collapses, the consequences can reach ordinary Americans who never owned a complicated financial product or worked for an investment bank.
They can appear in lost jobs, disappearing retirement savings, foreclosures, tighter credit and taxpayer-supported emergency interventions.
That was precisely the lesson policymakers said they had learned from 2008.
Even Federal Reserve Bank of New York President William Dudley, while acknowledging that some regulations could be improved, warned in 2017 against abandoning the structural reforms that had made the financial system more resilient.
Consumer Protections Also Enter the Crosshairs
The administration's subsequent Treasury review went beyond technical banking regulations.
It recommended changes affecting the Consumer Financial Protection Bureau, the agency created after the financial crisis to police consumer financial products and enforce federal consumer-protection laws.
Treasury argued that the CFPB needed reform and greater accountability.
That created a fundamental policy dispute that would continue throughout Trump's presidency: whether post-crisis regulations were unnecessarily constraining banks and economic growth, or whether weakening them transferred too much financial risk back onto consumers and the broader economy.
A Turning Point in Financial Policy
Trump's February 3 order was only the beginning.
It did not immediately erase the protections enacted after the financial crisis. Instead, it established the framework through which his administration would examine those protections and determine which should be reduced, rewritten or eliminated.
The administration described that effort as regulatory relief.
Its critics viewed it as dismantling safeguards created after an economic catastrophe.
Either way, the direction of federal financial policy had changed dramatically.
Less than seven years after Congress responded to the financial crisis by imposing stronger oversight on Wall Street, the federal government had begun asking which of those protections should be rolled back.