How Trump’s new bank regulator will turn banks into money magnets

Nobody wants another financial crisis, but CNBC’s Jim Cramer knows that the bank cohort has been utterly squeezed by the strict regulations placed on it during the Obama administration.

“The industry was subject to stringent regulations that made riskier banking impossible, while dividend growth was forbidden without the approval of the Federal Reserve,” the “Mad Money” host said.

But one Fed newcomer could change that, Cramer argued. President Donald Trump’s nominee for the central bank’s board, Randal Quarles, will take over as the Fed’s vice chair of supervision.

“And while you can argue about the merits of deregulation, one thing is clear: Quarles is going to be fabulous for those of you who own bank stocks,” Cramer said.

Quarles’ confirmation hearing at the Senate laid plain the policymaker’s positions. Quarles told Congress that Dodd-Frank, the financial legislation enacted in response to the 2008 recession, “undoubtedly” needs “refinements.”

Federal stress tests, which determine if a given bank is able to withstand financial collapse, should be more “transparent,” he said.

Moreover, the former Bush administration under-secretary for domestic finance worked in private equity for years with specific exposure to long-term private businesses, something Cramer said would give him better insight into the workings of small businesses.

“Why does all of this matter? Let’s put it together,” Cramer said. “If the banks no longer have to guess what the examiners want from them in the stress tests, if they’re allowed to increase their dividends as they think prudent, and…

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