Although much coverage late last week suggested that Treasury nominee Mnuchin’s comments on U.S. financial-structure reform were “confused,” we believe they present a surprisingly coherent policy framework despite the distractions and diversions of a particularly contentious confirmation hearing. In this report, we say why as well as suggest the course the Trump Administration may take on housing-finance reform and other client-relevant issues. As discussed below, we think Mr. Mnuchin laid out a course of action that links key elements of the GOP platform and campaign rhetoric with the populist goals of progressive Democrats. Although aspects of the Mnuchin outline – e.g., regarding the Volcker Rule – appear at odds with the Hensarling plan, significant areas of consensus are already evident. Most important of these are actions that would ring-fence insured depositories from proprietary trading (possibly expanded beyond Volcker permission for governmental trading). However, prop trading would be allowed for a wide array of obligations in non-bank affiliates in concert with Title II repeal, CFPB reform, and other significant changes to the Dodd-Frank regime.

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