Trump to urge finance curbs

Industries Dow Jones Newswires

The Trump administration will recommend limits on the U.S. consumer-finance regulator and a reassessment of a broad range of banking rules in a report to be released as early as Monday, according to people familiar with the matter. 

Continue Reading Below

The report from the Treasury Department, drafted in response to a February executive order from President Donald Trump, is less sweeping than financial legislation approved by the House of Representatives last week, these people said. 

That suggests the administration is taking a more pragmatic path than some Republicans who want to throw out Obama-era financial rules wholesale, although administration officials are still seeking to loosen regulatory restrictions on banks in significant ways. 

The Treasury Department didn't immediately respond to a request for comment late Sunday. 

The report is around 150 pages and makes recommendations on policy goals, without laying out a specific process for achieving them, these people said. It is harshly critical of the Consumer Financial Protection Bureau and recommends that the bureau be stripped of its authority to examine financial institutions, people familiar with the matter said. By law, the bureau has the authority to enforce consumer laws as well as to examine individual firms on a continuing basis. 

One person familiar with the report's contents said it is likely to recommend that the CFPB continue to be led by a single director, but that the president be able to remove the director at will. Currently, the president's authority to do that is the subject of a continuing legal battle. 

Continue Reading Below

The report also contains a substantial section on the Volcker rule, which bans banks from most trading or speculating unless they are doing so on customers' behalf. 

And it will likely recommend that small banks -- those with less than $10 billion in assets -- be exempt from it, these people said. It isn't expected to recommend repealing the Volcker rule, they said, a change that was included in House Republicans' bill. 

Changes to the CFPB's authority or structure, or the applicability of the Volcker rule, would require congressional action. 

The report also explores bank-rule changes that regulators could pursue on their own, once Mr. Trump's team completes the slow-moving process of appointing new regulators. Regulators are already reviewing the Volcker rule, for instance, and people familiar with the matter said the report examines how the current enforcement regime for the rule is affecting financial markets. 

The report is expected to set in motion a re-evaluation of the Community Reinvestment Act, a law intended to make sure banks meet local credit needs, people familiar with the matter said. It will also likely suggest that big banks be asked to file " living wills" every two years, instead of annually, these people said. The wills outline how banks could go through bankruptcy without needing a taxpayer bailout. 

The report also is likely to examine bank regulators' position on so-called leveraged loans, a form of risky lending to already-indebted companies, one of the people said. 

It will likely raise broad concerns about the use of arbitrary asset-size thresholds to apply bank regulations, such as the 2010 Dodd-Frank law's provisions requiring tougher supervision of banks with more than $50 billion in assets, this person said. 

Write to Ryan Tracy at ryan.tracy@wsj.com