BREAKINGVIEWS-White House sends new mixed message to Wall Street


(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.  Updates link.)
    By Gina ChonWASHINGTON, April 21 (Reuters Breakingviews) - Donald Trump
is delivering another mixed message to Wall Street. The White
House will order Treasury Department reviews of rules that
discourage so-called inversion deals and set out how to resolve
a crisis-related financial failure. The directives themselves
are innocuous for now, but the cues might encourage lax
enforcement and fresh changes to the liquidation framework.
    President Barack Obama's administration issued regulations
last year that put a chill on mergers designed to help companies
lower their tax bills by moving overseas. One rule limiting
foreign enterprises from bulking up on U.S. assets torpedoed
Pfizer's <PFE.N> $160 billion acquisition of Botox maker
Allergan <AGN.N>. Another controversial measure restricts the
use of interest deductions by a U.S. subsidiary on debt to its
foreign parent company or affiliate.
    The reviews being requested on Friday could induce Treasury
Secretary Steven Mnuchin to pause enforcement. Agencies have a
lot of discretion on how forcefully they want to back
regulations. A sign that officials may turn a blind eye for the
time being could very well prompt dealmakers to recalculate the
odds for their M&A-inclined clients.
    Trump also wants Mnuchin to revisit the so-called Orderly
Liquidation Authority laid out in Dodd-Frank. It allows the
Federal Deposit Insurance Corp to wind down big banks and other
systemically important non-banks. Some Republican lawmakers have
been trying to scrap such authority, arguing that it enshrines
the idea of too-big-to-fail.
    In an effort to influence the U.S. budget reconciliation
debate, Senator Pat Toomey says OLA will cost the government $20
billion over a decade. That money would in fact be coming from
fees imposed on the financial industry, which would be used to
reimburse Treasury for any losses on what it lent to help with a
    There also is widespread support on Wall Street for
resolution authority. Leaving such a process to the alternative
- bankruptcy - is scarier, especially when the judge assigned
might not have expertise with complex, global financial
institutions or relationships with international regulators. And
another funding mechanism probably would be needed at the onset
to support any wind-down.
    Initial optimism over potential tax reform and major
regulatory rollbacks has been waning. These latest orders from
Trump easily could instill further confusion.
    On Twitter

    - U.S. President Donald Trump plans to sign executive orders
and memoranda on April 21 that direct the Treasury Department to
review significant tax rules proposed since 2016 and the process
set out to wind down big banks in a crisis.
    - Treasury Secretary Steven Mnuchin will check to see if
2016 regulations on so-called inversions, in which companies
move overseas to lower tax bills, impose any undue financial
burden on American taxpayers, add complexity or exceed statutory
authority. After the review, Treasury could repeal or modify
certain rules.
    - Mnuchin also will be expected to report back in 180 days
on the Orderly Liquidation Authority spelled out in the
Dodd-Frank law and assess how the Financial Stability Oversight
Council designates a financial institution as systemically
important. During the reviews, the council will refrain from
tagging any other firms with the label and the government won't
use OLA unless required by law and in consultation with the
    - For previous columns by the author, Reuters customers can
click on [CHON/]

Trump plans review of Obama-era rules on corporate inversions
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 (Editing by Jeffrey Goldfarb and Martin Langfield)
 ((; Reuters Messaging:


This article appears in: Stocks , World Markets , Economy , Politics , Banking and Loans
Referenced Symbols: AGN , PFE

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