On Monday, President Donald Trump said the was looking into breaking up big banks in America, pushing forward Depression-era law that would separate consumer banking from investment banking.
“I’m looking at that right now,” Trump said of breaking up banks in an exclusive 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.”
In speaking about Glass-Steagall, Bloomberg reports on what Trump said during the inverview.
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 The 2016 Republican party platform also backed restoring the legal barrier, which was repealed in 1999 under a financial deregulation signed by then-President Bill Clinton.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.
The KBW Bank Index of 24 major U.S. lenders had climbed as much as 1.2 percent before Trump’s comment, before dropping about 1 percentage point. It soon recovered most of that, and was up 0.9 percent as of 1:07 p.m. in New York. Firms including JPMorgan Chase & Co. and Bank of America Corp., the nation’s two largest banks, were among companies that swooned.
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.
Sadly, we got Dodd Frank as a response to the 2008 financial crisis.
While Trump did not provide any details on his plan to deal with banks, he did say he wanted to prioritize "helping African American businesses get the credit they need."
Well, why not offer that to everyone? Why just Blacks?
Nevertheless, putting something like Glass-Steagall back in place would be a step forward. Even more important would be a full repeal of the Federal Reserve Act and a return to constitutional money. That would be one of the biggest steps that could be taken to put us on the road to economic recovery in this country.
We'll see if this is just more talk or whether or not he can actually accomplish what he says he is thinking about.Don't forget to Like Freedom Outpost on Facebook, Google Plus, & Twitter. You can also get Freedom Outpost delivered to your Amazon Kindle device here.