Bank stocks soar as Trump reveals plans to relax Dodd-Frank rules
Trump to review Act that is "hurting the economy"
by Abi Moses on 4th February, 2017 and updated 11th February, 2017 2:30pm
Bank stocks soared on Friday afternoon after the announcement that Donald Trump is set to revise the Dodd-Frank Act of 2010.
The reform act was implemented by Trump's predecessor Barrack Obama as a way of imposing greater regulatory oversight on financial institutions. The aim was to prevent another financial crisis like the one experienced in 2008, when the collapse of banking giants Lehman Brothers caused the largest recession since the Great Depression.
Trump however, believes the revising the Dodd-Frank is "necessary because the regulations were too onerous on business and hurting the economy."
The White House press secretary, Sean Spicer, was equally critical of the Act, claiming the Dodd-Frank was "a disastrous policy that was crippling the US economy."
"Trump caving in to Wall Street"
Senator Elizabeth Warren, one of Trump's fiercest critics has slammed the announcement, she claimed that "Donald Trump talked a big game about Wall Street during his campaign – but as President, we're finding out whose side he's really on. The Wall Street bankers and lobbyists whose greed and recklessness nearly destroyed this country may be toasting each other with champagne, but the American people have not forgotten the 2008 financial crisis – and they will not forget what happened today."
Lisa Donner, executive director of Americans for Financial Reform was equally critical, branding the move as a "stunning betrayal of what Trump promised on his campaign trail, and that was to protect us by standing up to Wall Street. That is what the people who voted for him supported."
Donner believes the reform is an attempt to "make it easier for the big banks to steal from people."
Since Dodd-Frank was introduced, the banks have spent a lot more capital on compliance, and have had to decrease leverage, both of which are a direct hit to profitability. A revision of Dodd-Frank could be a direct boost to the bottom line for banks.
Barclays and RBS were amongst the biggest benefactors on the FTSE 100 after the news broke, with the majority of financial services seeing a sharp rise in their share price.
Could now be the perfect time to invest in the big banks?
If you believe the revisions will go ahead as Trump intends then you can expect bank share prices to continue to rise. Visit our homepage for the latest offers from our extensive panel of brokers.
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