In what is likely to be his last public speech as the head of the Federal Deposit Insurance Corporation, Chairman Martin Gruenberg in a speech delivered at an event at the Brookings Institution “Financial regulation – a post-crisis perspective,” offered a warning against the current deregulatory fever gripping President Trump’s newly installed financial regulators and the dangers to the economy and the financial system of going too far.

Rolling back current financial protection rules would be misguided he said:

“Weakening the core reforms that apply to our largest banking organizations would increase the risk of future banking crises that would be very costly for the U.S. financial system and economy.”

Specifically, weakening capital and liquidity requirements, proprietary trading rules, and Orderly Liquidation Authority would all pose a systemic risk to the financial system.  Gruenberg also cautioned against changes in the asset threshold for stronger regulatory requirements:

“The danger is that changes to regulations could cross the line into substantial weakening of requirements.  Let’s be clear: Our largest banking organizations are not voluntarily holding the enhanced capital and liquid asset cushions required by current rules.”

Finally, as we have repeatedly detailed, Gruenberg also noted that banks have been prospering even under the Dodd-Frank rules protecting Main Street jobs, homes and savings:

“[T]he core reforms have promoted a strong banking industry that can support economic activity. By any traditional measure, the performance of the U.S. banking industry and its support to economic growth has been strong in this post-crisis period.”