House Fin Democrats Target Trump Agenda

House of Democrats appear like they are using the House Financial Services Committee to fight proxy wars with President Donald Trump. That may not be such a bad thing for traders.

Steve Mnuchin, the US Treasury Secretary, was on Capitol Hill testifying in front of the House Financial Services Committee for his annual report on the state of international financial system on April 9.

Maxine Waters, the California Democrat who chairs the committee, used much of her opening remarks to harangue against Trump’s Russia policy.

“The Secretary also must provide this committee with complete answers today regarding the treasury department’s actions to delist companies associated with Russian oligarch Oleg Deripaska. Deripaska is a criminal and Vladimir Putin’s confidante, who should not be let off the from sanctions that were put in place to punish bad actors. I’m very concerned that the delisting agreement that treasury implemented sends exactly the wrong message to Deripaska, other Russian oligarchs and Putin himself.” Waters said later, “Trump has shown a deference to and fondness of Vladimir Putin, including at the Helsinki Summit.”

While Mnuchin testifying presents an especially rich environment for such a proxy war, it continues a trend since the election.

Waters has made it clear for months that at least one goal was to use her power to begin as many investigations of Trump’s businesses as she could.

A story in Fortune shortly after the election noted, “As head of the financial services committee, which oversees the American banking system and its regulators, Waters would have the power to subpoena Trump’s personal tax returns and bring in bank executives for investigations.

“Trump has bucked presidential tradition in not releasing his personal tax returns, claiming that he has to wait for an IRS audit on his returns to be completed first. Yet that still hasn’t happened.”

A February 2019 story from American Banker talks about Waters burgeoning investigation of Trump’s ties to Deutsche Bank.

“The House Financial Services Committee, chaired by California Democrat Maxine Waters, is reportedly planning to investigate allegations that Deutsche Bank helped launder money on behalf of Russian customers, in addition to looking into the bank’s business dealings with the president and his family. Trump is said to have borrowed hundreds of millions of dollars from the German lender.” The story noted.

Alexandria Ocasio-Cortez
Alexandria Ocasio-Cortez

Alexandria Ocasio-Cortez (AOC) is also a member of the committee and according to a tweet her priorities were. “Personally, I’m looking forward to digging into the student loan crisis, examining for-profit prisons/ICE detention, and exploring the development of public & postal banking. To start.” AOC is a socialist but also a rising star in the Democratic party. She asked questions during a recent hearing on holding executives accountable. The substance of her questions was regarded arbitration agreements but mentioned climate change, her pet issue, more than once as well. “If we do nothing about forced arbitration and allow this practice to continue, could this mean that information about how companies are deceiving the public about issues like climate change or any other could remain hidden from the public?” she asked at the hearing.

With the election still a year and a half away- November 2020 is the next US Presidential election- the rhetoric will sharpen as the stakes get higher. This may all be good news for traders.

The same Fortune article also noted, “Waters opposes the Trump administration’s deregulation of banks and financial institutions, and wants more power for the Consumer Financial Protection Bureau. While it’s unlikely her regulation proposals for the banking industry would make it through a Republican-controlled Senate, it’s also unlikely any further deregulation would make it past her committee.”

Waters can use the committee to hold hearings where her colleagues can lambast Trump’s economic policy; she can start all sorts of new investigations.

She’s also likely to use the committee to try and protect the Consumer Financial Protection Bureau (CFPB), a brainchild of Elizabeth Warren.

The CFPB provides protection for consumers in the financial sector, by investigating and putting rules in place for credit cards, loans, debt collectors, and others.

It has a very limited role in securities, which already has a regulator. It was created as part of Dodd/Frank, championed by Democrats and loathed by Republicans.

If Waters is using her time to fight these battles, it will leave little time for any sort of sweeping reform of securities; that theoretical reform, as Fortune noted, has little hope of passing the Senate anyway.