Big banks caught a break today as federal regulators moved to loosen the rules on lending. Meanwhile, another report said the economy slowed its growth pace in the first quarter of the year. And the Federal Reserve Board said economic activity "expanded moderately" in late April and early May, meaning that the near term growth outlook is "generally upbeat."
Taken together. all this could mean that lenders will have more incentive to make loans, even at greater risk, giving firms more incentive to invest in more production, in turn stimulating the economy.
The economy seems to be doing well, despite a slower growth pace as the year started. During the first three months of 2018, gross domestic product (GDP) in the U.S. expanded by 2.2 percent, according to the Bureau of Economic Analysis, down from 2.9 percent in the fourth quarter of last year.
Profits, however, fell by $12.4 billion as the year began, compared to a drop of $1.1 billion in the final three months of 2017.
Separately, another government agency said jobless rates were lower in April compared to a year ago in most metropolitan areas, with payroll jobs up.
Perhaps the most important of these reports is the move to revise the so-called "Volcker rule," which prohibits banks from owning or controlling hedge funds or private equity funds, and from so-called propriety trading, in which a financial institution makes stock trades for its own account rather than for depositors.
The rule, named after former Fed Chairman Paul Volcker, was put in place in 2010 as part of the Dodd-Frank law that tightened restrictions on how and whether major banks could engage in potentially risky financial trades.
If successful, all this could bring stronger growth to a healthy economy. If not, short-term bets on long-term activity might fail, dragging everything down.
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