Trump To Sign Executive Orders On Corporate Inversions and Dodd-Frank Regulations

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As pressure mounts on Trump to post some victories within the totally arbitrary window of the “First 100 Days” of his administration, the President is expected to join Treasury Secretary Steven Mnuchin later this afternoon to sign a combination of executive orders and memos targeting the reduction of tax regulations and certain components of Dodd-Frank. 

Per a statement from the White House, one of Trump’s new executive orders will seek to undo tax rules put in place in the last year of Obama’s presidency that were designed to limit so-called ‘corporate inversions’ which allows U.S. traded companies to recognize income in lower cost countries like Ireland.  Per Bloomberg:

Under President Barack Obama, Treasury sought to rein in U.S. companies’ attempts to shift their profit offshore by proposing rules that would curb so-called “earnings stripping” and inversions — mergers in which U.S. companies transfer their tax address overseas to low-tax countries like Ireland to cut their tax bills.

 

Some of those rules, first proposed in April 2016, sought to restrict lending among subsidiaries of the same corporate parent, a technique that can create income in low-tax countries and tax-deductible interest payments in the U.S. The proposed rules met a barrage of criticism from corporations and tax lawyers, who complained that they went too far by banning common, everyday cash-management practices that have nothing to do with tax avoidance.

 

Amid the criticism, Treasury last October softened the proposed rules to allow cash pooling, a common corporate money-management technique in which excess cash in subsidiaries is swept daily into a single pool. It also delayed a related proposal, which would require companies to extensively document their related-party lending, until Jan. 1, 2018.

Trump

 

Other actions expected today include a memo that will require a review of the Financial Stability Oversight Committee’s designation process for systemically important banks and a review of the orderly liquidation authority granted to the Federal Deposit Insurance Corp. (FDIC) under Dodd-Frank. 

Under Dodd-Frank, the FDIC is granted the power to wind down the biggest banks but Trump’s memo is expected to call for a study on whether enhanced bankruptcy authority is a better alternative for failing financial companies.

The 2010 financial-regulation law known as Dodd-Frank established a so-called orderly liquidation authority under which the Federal Deposit Insurance Corp. is empowered to untangle and wind down the biggest banks. Republican lawmakers have said the law doesn’t address the fact that Wall Street firms remain too big to fail, meaning taxpayers will still be on the hook for future rescues.

 

The U.S. House of Representatives earlier this month approved legislation to create a new bankruptcy process for financial companies with more than $50 billion in assets that could allow for a quick transfer of a failed bank’s assets and impose a temporary stay of some contractual rights to give the company time to restructure. The measure aims to address concerns that led lawmakers to approve taxpayer bailouts during the 2008 credit crisis. At the time, the structures of Wall Street banks were considered too complex to go through bankruptcy court.

The orders are expected to be signed around 3pm EST.

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