People constantly tell me that Trump is deregulating. What’s the proof? Well, the stock market is going up. Unemployment is going down. It is impossible to explain to them what they knew when Obama was president: a rising stock market and falling unemployment do not mean that the president’s policies are good. But now they’ve unlearnt it and no magic words from me will teach it to them. It will probably take a President Warren to push this knowledge back into their heads.
Anyways, the Obama-Trump boom continues. And people think that Trump is deregulating. Well I have a personal observation to share. In brief: there is no deregulation in banking.
As I was departing on my last trip to Canada and then the UK, the bank used by my company notified us that it was shutting down our accounts. The reason? Compliance. Both gold and hedge funds spell “risk”. They decided not to incur the risk of having us as a client. We banked with them for 5 years, never bouncing a check. We have a compliance officer, a third party fund administrator, an outside auditor, a securities law firm, a broker-dealer partner, and a series 24 supervisor. We have more people making sure we are compliant, than we do making sure we are profitable.
For all they were concerned, we were suddenly unbankable. No, they were not willing to extend the deadline. Everything was very hard-edged, the opposite of how most people expect employers to treat employees, landlords to treat tenants, etc. But we are not a consumer, but a business.
You would not believe how hard it was to find another bank who would say yes! I hardly believe it, and I went through it. We finally set up new accounts at a new bank. But even there, a simple transaction at a local branch was rejected. Why? The computer screen said we are a “high risk” client. I had to leave, stymied after 45 minutes. After discussion with the corporate accounts people, the local branch was given whatever they needed and we were back on.
So I returned to the branch, and spent 2.5 hours with the assistant manager. I did finally get the transaction done. But I had to jump through more hoops than a dolphin at Sea World. So having had the experience with bank 1, and banks 2, 3, 4, etc. and now this with the bank who accepted us, I had to ask a question of the assistant manager.
“Has there been a recent push in your bank for tighter compliance?”
“Yes, in the last two months they changed everything. We are closing accounts of many businesses.”
Because, terrorism and drug money laundering. Or something.
Regulation not only did not decrease in banking, it increased significantly.
P.S. Being a monetary economist, I have to point out something. My transaction should have taken 10 minutes with a teller. It ended up taking 3 hours of assistant manager time, plus several other manager level people at corporate. The bank hasn’t changed their price yet. But when they do, it will go up 2500%. It will have to, to cover the bank’s cost. People will call this inflation, but it has nothing to do with the Fed or the dollar. It is merely higher costs due to additional regulatory burden imposed on the bank.
© 2017 Monetary Metals