Executive Order 13772: Principles of Financial Policy

What the Executive Order Say

Executive Order (EO) 13772 is entitled "Core Principles for Regulating the United States Financial System." and it was issued on February 3, 2017.  It has 3 sections

Section 1

This section defines the policy and gives 7 distinct goals.

Section 2

This section directs the Secretary of the Treasury to prepare a report within 120 days to present to the President.

Section 3

This section includes the necessary legal fine print to ensure the constitutionality of the EO.

My Commentary

So I would have probably just sent an email rather than issued an executive order.  Granted it gets the 7 goals into the media to some extent, but this EO does not get anything done.  The report required by this EO is here.  I find it ironic that Steve Mnuchin was appointed Secretary of the Treasury on February 13th, 10 days after the issue of this EO.
Let's look at the policy goals one by one.  First, it states that the administration wants citizens to make informed and independent decisions about their finances.  This requires transparency in markets.
Next, it states the administration wants to prevent tax-payer funded bailouts.  This is a laudable goal, and there is a definite argument to be made for moral hazard in some of the dealings with Wall Street that have occurred over the years.  It is not only moral hazard for the financial companies, but also moral hazard for the investors.  However, an average Joe going to try to invest $25,000 that a rich uncle might have left him is going to struggle to find any investment outside of a Treasury bond or bill that has the transparency needed for an individual to make any sort of informed decision on how much risk the investment entails.  The lack of transparency has turned financial markets into a bit of a casino and bailouts have been made out of political expediency.  How do you run an election campaign and defend a decision not to bail out General Motors and cause 60,000 people to lose their jobs?  As much as I agree that we have ended up in a situation where we have privatized profits and socialized losses, I can also see that the politicians have made the choices required for re-election, pure and simple.
The next item is to enhance regulation to reduce systemic risk, moral hazard and information asymmetry.  However, the signature piece of this administration has been deregulation (see a number of EO's that were issued) whereas what is really required is enhanced transparency in markets.  Transparency is how you fight systemic risk.  It's how you fight moral hazard.  It's how you fight information asymmetry.  If the investors can't find out what is going on, they will game the system as best as they can to protect against losses through mechanism that benefit the insiders and create losses for those not in the club.
The next point is regarding trade.  There is some validity to the notion that foreign companies operating off-shore are able to cut corners that domestic firms operating domestically cannot.  But to think that it can be solved with the stroke of a pen or just by changing some regulations is a fantasy.  Domestic manufacturing must compete using advantages of efficiency, automation and cutting edge technology rather than the cost of labor.  And yet, how has the current administration supported that?
The next point is in regards to negotiation of international terms of trade.  I will have to concede that I do not know whether the US is disadvantaged or not in the currently held terms of trade with all the trading partners that we have financial transactions with.
The next point hints at reduction regulation which is nearly the opposite to where the President want to ensure that regulation prevented systemic risk, moral hazard and information asymmetry.
Finally, we get to an item that is within the control of the executive branch: public accountability within the Federal financial regulatory agencies and rationalizing the Federal financial regulatory framework.  And frankly, this goal is one that clearly the current administration has been trying to achieve.  In line with repealing regulations, the administration has also pulled back on oversight of market players.  Going back to the example of the average Joe who wants to invest a modest, but personally important, windfall: while the administration would argue that they want to give him the freedom to chose how to invest their money, I would draw an analogy to a rural rube who goes to the county fair and has the freedom to pick which of the rigged midway carnival games he is going to lose his money on because he simply does not know enough to model the risks of losing.
Overall, this EO is a piece of marketing rather than any kind of attempt to stand up for the average tax payer and investor.