In what could be considered a preemptive strike against a future economic crisis, President Trump is considering two actions: Break-up the big banks, and press Congress to restore the Glass-Steagall Act. These actions would originate from a belief that powerful banking interests engaged in actions that caused or exacerbated the 2008 financial crisis.
President Donald Trump said he’s actively considering a breakup of giant Wall Street banks, giving a push to efforts to revive a Depression-era law separating consumer and investment banking.
“I’m looking at that right now,” Trump said of breaking up banks in a 30-minute Oval Office interview with Bloomberg News. “There’s some people that want to go back to the old system, right? So we’re going to look at that.”
Part of his push would to encourage Congress to restore some form the Glass-Steagall Act.
During the presidential campaign, Trump called for a “21st century” version of the 1933 Glass-Steagall law that required the separation of consumer and investment banking. The 2016 Republican Party platform also backed restoring the legal barrier, which was repealed in 1999 under a financial deregulation signed by then-President Bill Clinton.
A handful of lawmakers blame the repeal for contributing to the 2008 financial crisis, an argument that Wall Street flatly rejects. Trump couldn’t unilaterally restore the law; Congress would have to pass a new version.
Trump officials, including Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn, have offered support for bringing back some version of Glass-Steagall, though they’ve offered scant details on an updated approach. Both Mnuchin and Cohn are former bankers who worked for Goldman Sachs Group Inc.
A controversial issue to be sure. And so is the other action he is considering regarding the banking industry — breaking up the big banks.
Here’s why Glass-Steagall came into existence in 1933 as well as why enacting a similar law today would not be easily done:
The Glass-Steagall law essentially split banking into two categories: deposit-taking companies backed by taxpayers that primarily made loans to businesses and consumers, and investment banks and insurers that trade and underwrite securities and create or focus on other complex instruments. Severing those businesses would prevent Americans’ nest eggs from flowing into more volatile capital markets, Congress reasoned at the time.
Large banks see little interest in Congress for reviving the prohibition between commercial and investment banking, especially since lawmakers are currently bogged down with more pressing issues like repealing Obamacare and passing a tax overhaul.
Congress does have trouble focusing on multiple issues simultaneously, and with divisions among Republican legislators plaguing the legislative process, the likelihood of Congressional leadership taking on yet another controversial economic issue under the current conditions is unlikely.
That said, President Trump does have a portrait of President Andrew Jackson hanging in the Oval Office. If he admires the positions Jackson took, going after the big banks will be more than just a passing thought. With the power the banks hold, and the positions former top executives occupy in the administration, this would be no small project for the president to tackle.
Source: Bloomberg
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Go for it. The big banking “cartel”(can you say the name “Rothchild?”) Is ruining the World. They should be broken up.
Good call! Bank monopolies are a danger to our society. Smaller stable banks like Federal Credit Unions and private banks, will see recessionary times better than huge ones that totally go belly-up. Hard to shut down the Federal reserve but taking smaller moves to decentralize massing banking conglomerates is an excellent idea. Thanks Pres. Trump!
I’m glad one person understands this their monopolies are total Destruction to our way of life.
Destroy the big banks they control to much.