The following article, originally published at 11:49 a.m. on Tuesday, Dec. 6, 2016, has been updated with comments from executives and analysts as well as market data.
The reason bank stocks have surged since a Republican sweep in November's elections is no secret: Wall Street believes the new government will move quickly to loosen post-financial crisis restrictions on the industry.
But how that happens, if it does, is important. Unlike the Dodd-Frank reform law, which was passed by a Democratic Congress in 2010 with only minimal Republican support -- three votes each in the House and Senate -- any changes should be agreed on across party lines, says JPMorgan Chase (JPM - Get Report) CEO Jamie Dimon.
Partisan passage of the law, designed to curb risky practices blamed for the 2008 financial crisis, "subjected our country to re-litigating this issue and re-legislating this issue until it's done bipartisanly," Dimon said Tuesday at a Goldman Sachs conference in New York.
Enacted just two years after the meltdown of the $15 trillion U.S. mortgage market led to the collapse of investment bank Lehman Brothers, the Dodd-Frank bill instituted annual stress tests of the biggest banks, barred financial institutions from trading on their own behalf and set up the Consumer Financial Protection Bureau.
Critics have blamed the law for curbing lending, partly because of heightened regulatory capital buffers intended to insulate companies from economic shocks, as well as pushing up compliance costs at firms from JPMorgan to Goldman (GS - Get Report) and Bank of America (BAC - Get Report) .
Steve Mnuchin, the former Goldman banker who is President-elect Donald Trump's choice for Treasury Secretary, told CNBC last week that revisiting Dodd-Frank would be his top regulatory priority.
"It's always been rational to look at major legislation and then open it up, take a look at it, recalibrate it and change it a little bit," Dimon said on Wednesday. "That was the expectation even by many of the Democrats, who told me that they would expect that to take place."
Eliminating the Volcker rule -- a prohibition on so-called proprietary trading that was named after its champion, former Federal Reserve Chair Paul Volcker -- would facilitate market-making, Dimon said. By allowing banks more latitude to buy securities and hold them until a profitable sale is possible, liquidity in some markets would get "a little bit better," he said.
Speculation that a Republican agenda would benefit financial institutions has pushed the KBW Index of bank stocks up 20% since the Nov. 8 elections, and New York-based JPMorgan alone has climbed more than 19% to $83.69.
That's more than triple the gains on the broader S&P 500 and the Dow Jones Industrial Average, and it's based on the expectation that the "Trump administration will be very good for kind of unleashing business," Dimon said.
Markets are speculating that the new government will "improve the GDP and allow banks to do their lending and that banks will benefit a little bit, both in higher rates and higher economic activity and possibly some reduced regulations," Dimon said. "So, hopefully that will turn out to be true."
While some analysts note that making administrative changes to help banks will be easier than legislative shifts, Byron Wien, vice chairman of New York private equity firm Blackstone, said in his monthly investment outlook that the most onerous provisions of Dodd-Frank have a good chance of being altered,
That's at least partly because the election reflects the country's shifting attitudes toward growth relative to safety and soundness in the financial industry, Richard Bove, a Rafferty Capital Markets analyst, said in a recent note to clients.
"Safety and soundness remains a primary target, but there is a demand for the banking system to facilitate growth," Bove said. "Thus, the conviction as to how the banking industry should be managed is being adjusted meaningfully."
While Dimon himself was once rumored to be in the running for the Trump administration Treasury post that eventually went to Mnuchin, the CEO reiterated Tuesday that he didn't consider himself well-suited for the government role.
He did, however, join a panel of executives who will advise Trump on job creation. The group also includes former Boeing CEO James McNerney and IBM CEO Ginny Rometty.
"I want to do my share to help America get better" by spurring growth and helping low-wage workers, Dimon added. "We've got a lot of ideas and thoughts on how to do that, and we'll do everything we can. I might be able to do better from the outside doing that than from the inside."