By Nils Pratley
Original Post date: 6 February 2017
The last thing we want at this point in time is a relaxation of regulation,” said Mario Draghi, president of the European Central Bank on Monday. He is right to worry. Relaxation of financial regulation is exactly what Donald Trump has in mind and the effects could be felt around the world.
The US president seems to have accepted the half-baked idea that US banks are somehow so tied down by international regulations that they are obliged to hoard capital that could be used for lending to the American economy. “I have so many people, friends of mine, who have nice businesses who can’t borrow money,” said Trump when he signed an executive order last week.
There is little evidence that banks are refusing to lend to creditworthy borrowers in the US. In fact, the reverse seems more likely: credit availability in the US is strong, which is exactly what you’d expect given the healthy returns being reported by US banks. But that hasn’t stopped the new administration from trying to blame the Dodd-Frank regulations, the country’s response to the financial crisis of 2008-09, for all manner of ills.