Donald Trump's Wall Street deregulation slammed as 'the last thing we need' by ECB head Mario Draghi

"The idea of repeating the conditions of before the [financial] crisis is very worrisome,” the European Central Bank President told MEPs

Ben Chu
Monday 06 February 2017 16:36 GMT
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Draghi: Trump's deregulation is 'very worrisome'
Draghi: Trump's deregulation is 'very worrisome'

Donald Trump’s roll-back of Wall Street regulation is “very worrisome” and “the last thing we need” the President of the European Central Bank, Mario Draghi, has warned.

Giving evidence to the European Parliament’s Committee on Economic and Monetary Affairs on Monday, Mr Draghi was asked about the American President’s assault on the US post-crisis Dodd-Frank legislation, which had curbed the risk-taking of US banks, raised their capital requirements and introduced more safeguards for consumers.

“The last thing we need is a relaxation of regulation,” Mr Draghi said.

“The fact that we are not seeing....significant financial stability risk is the reward of the action of supervisors.... Nowadays financial intermediaries are strong. The idea of repeating the conditions of before the crisis is very worrisome.”

Mr Draghi added: “If we were to look at historical experience and ask what are the main reasons for the financial crisis starting in 2007 onwards, well, one can disagree [over] whether it was too expansive monetary policy or the dismantling of financial regulation in previous years – but surely we can agree it was a combination”.

Last week President Trump signed an executive order to relax Dodd-Frank, prompting warnings that he is preparing the ground for another financial crisis.

Phil Angelides, who served as chair of the Financial Crisis Inquiry Commission, branded President Trump’s decision “insane”.

“In the wake of the financial crisis, millions of families lost their homes. Millions of people lost their jobs. The economy was wrecked and communities across the country were devastated. Big Wall Street banks admitted wrongdoing and paid tens of billions of dollars in fines. And now, with bankers at his side, President Trump begins to rip apart protections put in place to protect America’s families and our economy,” he said.

Dennis Kelleher of the Better Markets group said: “The American people trusted candidate Trump when he said he was going to protect them from Wall Street’s recklessness, but President Trump has betrayed that trust. He is unleashing Wall Street on Main Street, which is exactly what the financial protections of Dodd Frank were put in place to prevent.”

The US financial deregulation effort is being led by Gary Cohn, the former number two at Goldman Sachs, who is now President Trump’s chief economic advisor.

At the Parliament hearing Mr Draghi also denied the charge, levelled by the head of President Trump’s top trade adviser, Peter Navarro, that Germany has been undercutting the US in global trade through a “grossly undervalued” currency.

"We are not currency manipulators first and foremost. Our monetary policies reflect the diverse positions in the economic cycle of the eurozone and the United States," he said.

He pointed to the recent verdict of the US Treasury which itself said: “The ECB has not intervened in the foreign currency markets since 2011 and did so then…in co-operation with other central banks.”

Mr Draghi also said the time had not come for the ECB to withdraw its monetary stimulus programme, despite signs of a strengthening of the eurozone economy and a pick-up in inflation to 1.8 per cent.

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