On February 3, 2017, President Trump signed Executive Order 13772 that states his Administration's policy is "to regulate the United States financial system in a manner consistent with the following principles of regulation, which shall be known as the Core Principles."

The seven Core Principles are:

a. empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;

b. prevent taxpayer-funded bailouts;

c. foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;

d. enable American companies to be competitive with foreign firms in domestic and foreign markets;

e. advance American interests in international financial regulatory negotiations and meetings;

f. make regulation efficient, effective, and appropriately tailored; and

g. restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.

How will this new Administration policy be implemented? 

The Executive Order requires the Secretary of the Treasury to consult with the heads of the other member agencies of the Financial Stability Oversight Council ("FSOC") (which voting members include nine federal financial regulators plus an expert from the insurance industry). After such consultation, the Treasury Secretary "shall report to the President within 120 days of the date of this order (and periodically thereafter) on the extent to which existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies promote the Core Principles and what actions have been taken, and are currently being taken, to promote and support the Core Principles." 

The Executive Order does not mention any provision of Dodd-Frank that needs to be repealed or amended. Nor does it mention any policy or regulation proposed or issued by the Consumer Financial Protection Bureau or any other financial regulator that needs to be withdrawn, rescinded, or amended. But, it does create the framework to influence such changes. The Executive Order directs the Treasury Secretary in making the report to identify the actions that the financial regulators have taken and currently are taking to promote the identified Core Principles.

More importantly, the Executive Order requires that the report "identify any laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies that inhibit Federal regulation of the United States financial system in a manner consistent with the Core Principles." (Emphasis added.) This provision of the Executive Order presents an historic opportunity for stakeholders to have direct input in identifying the adverse impact of government regulations and policies on consumers, businesses and financial entities. 

Once laws are enacted at the state or federal level, it is too late to have any influence on the outcome of the legislation, and much time and effort must be used to change the laws, usually unsuccessfully. Intended and unintended consequences of such statutes must be dealt with regardless of their impact on those affected. The Executive Order provides the framework for stakeholders to have an effect on what kind of financial system we will have for the next several years.

If evidence is submitted by the FSOC members that identifies specific regulations, policies or guidance that inhibit the implementation of the Core Principles, these examples should be included in the Treasury report mandated by the Executive Order. The challenge is that prudential regulators are reluctant to admit that any of the regulations they issue or policies they implement inhibit the functioning of the financial system in a manner that is consistent with the stated Core Principles. Regulators are heavily invested in the regulatory process. In most cases, they have spent thousands of hours doing what the law requires, implementing statutes passed by Congress - and in some cases, issuing regulations that exceed statutory requirements.

Now is the time to make a case to regulators and policy makers for changing those regulations and policies that do not work and which inhibit the positive development of a financial system that is in sync with the Core Principles identified in the Executive Order. Having the opportunity to impact the development of regulations or policies before they are written is a rare and exceptional tool to be used in influencing policy makers and prudential regulators.