Asked about their wish list for financial reforms under the incoming Trump administration, bankers sounded both optimistic and a bit overcome by the new possibilities.
Speaking at an industry conference Tuesday, CEOs from several big banks — including Wells Fargo, JPMorgan Chase and PNC Financial Services Group — outlined a host of requests for President-elect Donald Trump and Republican leaders in Congress. Chief among them: focus on corporate tax reform, scale back the Volcker Rule and push the Federal Housing Administration to update its lending policies.
The comments provided a glimpse at how some of biggest names in banking are thinking about the prospect of lighter financial regulation in the coming years. Though bankers varied in their requests, they shared a common theme: Keep the system safe, but, beyond that, the industry is overdue for some relief.
"God, look," said JPMorgan Chase CEO Jamie Dimon, letting out a long and audible sigh after he was asked about the potential for amending Dodd-Frank. "We passed Dodd-Frank 100% partisan — there was no bipartisan support."
While scrapping Dodd-Frank is not a good idea, it makes sense to "calibrate it," Dimon said. He added that when Congress passed the financial overhaul in 2010, Democrats told him they expected to amend it down the road.
"When that happened way back then, we subjected our country to relitigating and relegislating the issue until its done bipartisan," Dimon said.
Wells Fargo CEO Tim Sloan did not hold back when asked to provide one or two recommendations to Steven Mnuchin, Trump's pick for Treasury secretary,
"One or two? There are probably more than that," Sloan said, before providing a laundry list of regulatory changes, including the softening of capital and liquidity rules.
The remarks coincide with the wave of optimism in financial markets about the prospect for future growth in the banking sector. Though Trump railed against Wall Street on the campaign trail, investors and analysts expect his administration to roll back post-crisis regulations in the months ahead.
Bank stocks have spiked in the month since the election. The KBW Bank Index has climbed 19% since Trump's surprise victory on Nov. 8.
Regions Financial in Birmingham, Ala., recently released earnings guidance for 2017 that was higher than some analysts expected. The company said at the conference — which was sponsored by Goldman Sachs — that optimism about the business environment has increased among its customers.
"We are already seeing a real change in tone as it relates to regulation," Regions Chairman and CEO Grayson Hall said.
Several executives provided specific recommendations for the incoming administration.
Sloan, for instance, provided suggestions for easing the compliance burden at Wells Fargo. His comments were notable, in part, because Wells has been under scrutiny from regulators over the past few months. The San Francisco bank agreed in September to pay $190 million to settle charges that roughly 5,300 employees created about 2 million unauthorized customer accounts.
But that didn't stop Sloan from outlining his requests for policymakers.
For instance, Sloan said he would like to see changes made to the Federal Reserve Board's total loss-absorbing capacity rule, or TLAC. The rule, which was proposed in October 2015, would require the U.S. globally systemic banks to hold unsecured debt as a protection against a possible failure.
The rule has not yet been finalized — and some analysts have questioned whether regulators will rush to complete it before Trump takes office in January.
"I think if you would change that, we'd be more than happy about that," Sloan said.
Sloan also said he would like to see changes made to FHA lending, noting that most commercial banks have exited the business because the agency has not "adapted to new terms and conditions" in the way that Fannie Mae and Freddie Mac have.
Additionally, the Wells CEO said that while post-crisis reforms such as the Volcker rule and higher capital standards have made the financial system safer, they have also imposed heavy compliance burdens on the banking sector. There is room to lighten the load, he said.
"I look at the amount of liquidity that we needed to get through [the crisis], and how much more diversified we are now from a deposit standpoint," Sloan said. "And say, gosh, there is nothing wrong with having capital and liquidity rules, but maybe we've gone a bit too far."
Executives from large regional banks — including PNC in Pittsburgh, SunTrust Banks in Atlanta and Comerica in Dallas — urged policymakers to consider rolling back the liquidity coverage ratio, and also increasing the asset threshold for being considered a systemically important financial institution.
"They ought to step back and look at the sum total of regulation that has come out in the last eight years, not just Dodd-Frank but also Basel and the intersection and conflicting parts of those regulations," PNC Chairman and CEO Bill Demchak said.
"As it relates to the things that are holding back the economy and banks' willingness to lend, a lot of that is driven by [the liquidity coverage ratio] and the way we're forced to manage liquidity and somewhat by the way we're forced to manage capital," Demchak continued. "I think the trigger to that has to do with the arbitrary asset threshold levels that are invented in Dodd-Frank and Basel, so the $50 billion for SIFI and the $250 billion … under Basel. We're 100% LCR category because we're over $250 billion [of assets], yet our systemic-risk score looks much like the rest of the regional banks as opposed to Goldman Sachs, for example."
By contrast, Dimon declined to make specific predictions or requests. He noted that the legislative process is slow and often complicated. "I don't want to dream quite at this point, OK?"
He did, however, emphasize the importance of focusing on corporate tax reform. Republican leaders have suggested the issue will be a top priority in the new Congress. Trump has promised to slash corporate rates to about 15%, while a plan put forth by House Republicans this summer called for a 20% tax rate.
"We've needed corporate tax reform for a long time," Dimon said. He noted that lower corporate rates could help drive wage growth.
"Boy, I'm begging that gets done," Dimon said.
The JPMorgan CEO also advised policymakers to take a more prescriptive approach to writing legislation, if they move forward with amending Dodd-Frank. The original law delegated too much authority to administrative agencies, he said.
"It gave a lot of room for regulators to do what they want to do," Dimon said. "I think that should be cut back a bit."