The Biggest Challenges Facing the Next Treasury Secretary


U.S. Secretary of the Treasury Jacob Lew is seen at the close of the G20 Finance Ministers and Central Bank Governors meeting on July 24, 2016, in Chengdu, China.

  • Dodd-Frank rules also among Obama administration’s leftovers
  • Trump presidency could dilute impact of financial regulations

Jacob J. Lew looks set to close out his tenure as one of just two Treasury secretaries to serve during the Obama administration. Not since the days of Eisenhower has a two-term U.S. president had such stability at the helm of the Treasury Department.

But that continuity doesn’t mean the Treasury will have time to finish every big issue it’s been involved in, and Lew’s successor will take a fresh look at some weighty matters. Here’s a look at some of the loose ends facing the next administration and how Democrat Hillary Clinton and Republican Donald Trump might handle them:


The Treasury has proposed rules intended to curb inversions, or corporations’ ability to shift their American tax addresses overseas to cut their tax bills. The rules, unveiled in April, have led to a corporate backlash. Some say they are written so broadly that they also hit daily internal financing operations in global companies that aren’t avoiding taxes. The Treasury Department is working to finalize their proposed earnings-stripping regulations, while temporary anti-inversions rules went into effect in April.

Under Clinton:
Clinton would probably look to change the corporate tax code to address inversions, said William Gale, an economist at the Brookings Institution in Washington. “The reforms would encourage companies not to invert, keep their headquarters here and to keep their expansions here,” he said.

Under Trump:
Republicans want a complete overhaul. Representative Kevin Brady of Texas, chairman of the tax-writing Ways and Means Committee, says the proposed regulations could hurt American businesses. Trump himself has suggested cutting the corporate tax rate to 15 percent, from 35 percent. That would make inversions less attractive, although it could have some negative indirect effects, Gale said.

Iran sanctions

Iran is courting global companies with the aim of doubling foreign direct investment in 2016 to the tune of about $15 billion. But in the seven months since some sanctions were lifted, international banks have shied away from entering the country. That’s due in part to a U.S. restriction on dollar-denominated trades involving Iran inhibiting the sealing of additional agreements. At stake are deals with oil and construction companies, and airplane and car manufacturers from around the world. The Treasury’s Office of Foreign Assets Control helps enforce the sanctions program.

For an explainer on why big powers use sanctions, click here.

Under Clinton:
While she may seek to distance herself from the deal to soothe the relationship with an increasingly partisan Congress, Clinton will probably be tough on Iran without spending too much political capital helping the nation gain access to the global financial markets, said Stephen Myrow, managing partner at Beacon Policy Advisors in Washington.

“A Clinton administration would be more likely than an Obama administration to call Iran out” on sanctions violations, said Myrow, who was a Treasury official in the George W. Bush administration.

Under Trump:
He has come out against the agreement, dubbing it as “disastrous,” and says it would be among the first policies he would try to renegotiate, according to a Washington Post interview in April. While it’s possible Trump would try to take unilateral action to do so, he would at the very least “crack down on Iran,” with sanctions being part of the strategy, said Mark Dubowitz, executive director of the Foundation for Defense of Democracies, which has argued for tighter measures against Iran.


Since the law’s enactment six years ago, the Treasury has held constant discussions with U.S. regulators responsible for implementing it. Agencies such as the Federal Reserve and the Securities and Exchange Commission are almost done with writing all the rules in the landmark legislation, which imposed new capital requirements on big banks and a ban on proprietary trading to prevent a repeat of the financial crisis. But it isn’t bulletproof and critics, concerned in part its the impact to community banks, are reviving their efforts to roll it back.

Under Clinton:
She has promised to enforce regulations and consider more, but that wouldn’t be without pushback from Republicans. So far, the Democratic nominee hasn’t said anything to suggest that she will depart from what President Barack Obama has done on this front, nor is there interest to do so, according to Thaya Brook Knight, associate director of financial regulation studies at the Cato Institute in Washington.

Under Trump:
House Financial Services Committee Chairman Jeb Hensarling, of Texas, has a bill in the works to rewrite financial rules and end parts of Dodd-Frank. He has briefed Trump on the reform, who “was encouraged by” the proposal, Hensarling said in a phone interview Tuesday. Cato’s Knight says Trump could, at the very least, choose not to enforce certain parts of the law.

A Trump administration could also mark the return of the Glass-Steagall Act, a Depression-era measure that separated commercial and investment banking. Some say that former President Bill Clinton’s 1999 repeal of that law may have contributed to the financial crisis.

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