Jonathan Ernst/Reuters
Stanley Fischer
In an interview with the Financial Times' Sam Fleming, Vice Chairman of the Federal Reserve Stanley Fischer described moves to unwind the post-crisis system as "mind-boggling" and added that the US political system "may be taking us in a direction that is very dangerous."
"It took almost 80 years after 1930 to have another financial crisis that could have been of that magnitude. And now after 10 years everybody wants to go back to a status quo before the great financial crisis. And I find that really extremely dangerous and extremely short-sighted," he told the FT.
"One can understand the political dynamics of this thing, but one cannot understand why grown intelligent people reach the conclusion that [you should] get rid of all the things you have put in place in the last 10 years."
In June, the Treasury Department unveiled a 150-page plan to gut financial regulations. Proposals included easing restrictions on the trading operations of big banks, lightening the annual stress tests banks have to undergo, and reducing the powers of the Consumer Financial Protection Bureau (CFPB), which has gone after financial institutions.
Industry trade groups reacted positively to the proposal, while reform advocates and Democratic lawmakers, including frequent Wall Street critic Sen. Elizabeth Warren, criticized it.
"When considering the largest banks, adopting the Treasury's recommendations would make the financial system less safe. And it would do so with little prospect for boosting economic growth," Stephen Cecchetti, a professor at Brandeis University and former top adviser to the Bank for International Settlements, and Kim Schoenhotz, Citigroup's chief economist from 1997 to 2005, argued in a recent column.
The Trump administration's advisers have argued that banks have become too burdened by the rules imposed on them by the Obama administration in the aftermath of the great financial crisis. Bank stocks surged in the weeks after the 2016 election as investors buzzed about expectations for deregulation and tax cuts.
Gary Cohn, Trump's top economic adviser and director of the National Economic Council, questioned in an interview with the Wall Street Journal back in February whether post-crisis regulations on banks worked in preventing a repeat of 2008. "No one thinks we really solved too big to fail," he said.
Not everyone sees deregulation as positive, however. Others have argued that although 2010's Dodd-Frank legislation isn't perfect, it's helped keep the US out of another financial disaster.