05:50 GMT23 February 2020
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    US President Donald Trump recently signed an executive order that seriously weakens bank regulations and could possibly set the country up for a future financial crisis. Radio Sputnik’s Loud & Clear speaks with financial policy analyst Daniel Sankey about the executive order and how it could serve as a $100-billion gift to bankers.

    On Monday the Wall Street Journal reported that, "The six biggest US banks could potentially return more than $100 billion in capital to investors over time through dividends and share buybacks if the Trump administration succeeds in a push to loosen bank regulations."

    ​Sankey said, "It’s a big payday, a huge one. Essentially what it is, is the Trump administration would start rolling back a lot of the regulations that currently require banks to have pretty strict minimum-capital requirements. So, the banks have to have cash on hand, in the event of some kind of catastrophic financial meltdown, like in 2008."

    The financial analyst detailed, "Since then [2008] banks have to undergo financial ‘fitness’ tests and keep this cash on hand, and banks hate doing that. They don’t want to keep this money on hand, they don’t want to keep it in a bank account, and if these financial regulations are rolled back, what it means is, that the shareholders will get a huge payout at the expense of the overall health of the financial system."

    Loud & Clear Host Brian Becker highlighted an article written for The Intercept by David Dayen claiming that Trump’s deregulation could have a devastating impact on the future of American workers.

    The Intercept article reads, in part, "To break into the 401(k) market — especially with financial products that are high-risk, high-cost, and often make their money from ripping established companies apart and selling the pieces — private equity funds would need a lot of help from the advisers who guide ordinary investors in the process. And that would require the ability to offer those advisers considerable perks and kickbacks." 

    Becker described this activity as "looting on a grand scale."

    "Absolutely," Sankey responded,  "Especially in regards to pensions and retirement funds, these things were created so that workers would have something to retire on…so they didn’t invest in particularly complex or risky investments, they invested in stable investments that gave a guaranteed margin of growth. It wasn’t huge, but it was enough to keep growing, and it was enough that the funds themselves wouldn’t suddenly be wiped out because of some sort of economic swing."

    Becker noted the irony of Trump’s claim to clean up the influence of banking on politics through the use of his “Drain the Swamp” sentiment, when so many members of his administration have direct ties to Goldman Sachs and many other financial institutions.

    "You notice the name Goldman Sachs keep popping up and that’s absolutely the case," Sankey said, "The Secretary of the Treasury during the Obama administration, who bailed out the banks was, at one point, the CEO of Goldman Sachs. And so they have tremendous access to presidential administrations, whether it’s Democrat or Republican, and they absolutely will continue to, as this administration seems to really have no significant change in that way, whatsoever."

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    Tags:
    Executive Order, deregulation, economic collapse, White House, Goldman Sachs, Donald Trump, United States
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