Trump's Comments on Regulation Might Be His Most Ridiculous Yet ... Seriously

Did you hear what Donald Trump just said?

Normally, I'd provide a couple of hyperlinks here to show some of the most recent incidents of Trump's lunacy, but by the time you read this column those examples will have likely been old news. The only thing that's more shocking than Trump's statements is the speed at which he is able to produce them.

I typically try to steer clear of politics because that's not what you folks come here for, and there are already several people far more intelligent and well-connected than I am that do a good job of covering them. However, the two worlds are constantly colliding, and sometimes the impact one has on another is too great to ignore.  

That's what happened on Monday during a speech Trump made in Detroit regarding his economic policy. The Republican US presidential nominee said if elected he would call for a moratorium on federal economic regulations.

As someone who loves to debate about all that is right and wrong when it comes to compliance requirements in the markets, I deemed this the appropriate time to finally throw my hat into the ring.

Not the Answer

In classic Trump fashion, details were sparse on how long the moratorium would last and where it would be focused. However, for the sake of this column, let's imagine he wanted a complete standstill on financial regulation for the first two years of his term.

Financial regulations are already notoriously slow. We're six years into the implementation of the Dodd–Frank Act, another potential fatality under Trump's reign, and yet it's still not completely in place. The government doesn't exactly move quickly when it comes to implementing new rules.

So now imagine a world where we stop adding or tweaking any regulators around our markets for two whole years. Think about the kind of head start that gives bad actors to figure out ways to exploit the industry.

It's summertime, so hopefully you've had the chance to get out of the office for an extended period of time. Everyone loves going on vacation, but the absolute worst part is the Monday you get back to work and have to sort through all the emails you missed from the past week or so.

Now imagine being a regulatory body and being forced to "not answer your emails," so to speak, for two years. Regulators are already having a tough enough time keeping pace with the speed of the industry as it is; they don't need any more handicaps.

Back in May at Sifma Ops 2016, I listened to Stephen Luparello, director of division of trading and markets at the Securities and Exchange Commission (SEC), talk about how his regulatory body still had an enormous mandate to get through and would continue to push out regulations despite some in the space complaining about regulatory fatigue. What's going to happen when the next leader of the free world tells Luparello and his colleagues to go kick rocks for a while?

Too Extreme

Before you leave with the wrong idea, I'm not necessarily a staunch proponent of the current system. I talked about it at the time on the Waters Wavelength podcast, but I felt Luparello was tone-deaf to talk about how the SEC would keep pushing out regulations despite the industry continuing to raise concerns. There needs to be more of a give and take between regulators and market participants.

That doesn't mean I think we should shut the whole thing down, though. I think the term "Don't throw the baby out with the bathwater," applies here.

At the end of the day, this conversation is likely a moot point. If you put any stock in FiveThirtyEight.com's projection of the 2016 US presidential election, then it seems Hillary Clinton will cruise to the White House, which provides its own set of problems for Wall Street.

But that's a story for another day. Besides, did you hear what Trump just said [insert link here]?