The problem with deregulation by job cuts

THE PROBLEM WITH DEREGULATION BY JOB CUTS With new headlines cropping up each day about massive cuts in U.S. government jobs, Jaret Seiberg, financial services policy analyst at TD Cowen, a division of TD Securities, examines the reason behind the cuts and the risks they bring. After a federal judge gave the green light, President Donald Trump's administration on Tuesday targeted bank regulators, rocket scientists and tax enforcers for dismissal.Since Trump took office last month, tech billionaire Elon Musk's Department of Government Efficiency, or DOGE, has been slashing thousands of jobs in federal agencies.Trump claimed without evidence on Tuesday that the cuts would save "hundreds of billions of dollars," while Musk's team has claimed that it saved $55 billion so far, or less than 1% of the annual $6.7 trillion federal budget.However, Seiberg argues that the mass layoffs are designed to reduce regulation rather than to reduce the deficit. Instead of trying to repeal laws and regulations, which could take years, Seiberg says the administration's unique approach is simply "reducing personnel available to enforce laws and rules." But while Seiberg generally views "deregulation as positive for economic growth" he says that achieving it via layoffs is "an imperfect solution." Even though the enforcers who lost their jobs won't be around to enforce, the "rules will remain," Seiberg says. So this means that financial firms will "retain legal risk from the states and future administrations."And also he worries that "needed approvals could take longer with fewer personnel." So Seiberg argues that the strategy "sets the stage for even harsher supervision if there is consumer harm or economic troubles attributable to understaffed regulators." "It is why we see long-term risk," he writes.Also, Seiberg points out that "potential conflicts of interest" are also a threat. For example, the DOGE is trying to cut the Consumer Financial Protection Bureau (CFPB) at the same time that "Elon Musk via X is entering the payments space which the agency oversees." Also he notes that crypto backers are looking to reduce the reach of the SEC, which has been their primary enforcement risk."We do not yet see a backlash, though it is early," he says.(Sinéad Carew) *****FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:THE PROBLEM WITH DEREGULATION BY JOB CUTS - CLICK HERE BOFA CLIENTS SHUN SMALL CAPS, SNAP UP JUST ABOUT EVERYTHING ELSE - CLICK HEREFED CAUTION LIKELY TO PUSH RATES IN MAJOR EMERGING MARKETS HIGHER, S&P GLOBAL RATINGS SAYS - CLICK HEREHOME GAMES: HOUSING STARTS/BUILDING PERMITS, MORTGAGES- CLICK HEREU.S. INDEXES EASE EARLY AS TRUMP PLANS MORE TARIFFS - CLICK HERELARGE CAPS PARTY, SMALL CAPS LEFT OUT - CLICK HEREWHAT DOES EUROPE NEED FOR FURTHER RE-RATING? - CLICK HEREFRENCH CORPORATE SPREADS: GLASS HALF FULL OR HALF EMPTY? - CLICK HEREMARKETS TOO RELAXED ABOUT CANADIAN DOLLAR DECLINES - WESTPAC - CLICK HEREWHO CARES ABOUT TARIFF THREATS? - CLICK HEREEUROPE BEFORE THE BELL: STOCKS RALLY CALMING DOWN - CLICK HEREMORNING BID MARKETS BECOMING NUMB TO TARIFF VOWS CLICK HERE