Treasury Secretary Steven Mnuchin sat in front of the Senate
banking committee on Thursday and attempted to explain the Trump
administration’s position on various economic policies, including
the regulation of large banks.
Mnuchin continually said the administration supported a
“21st-century Glass-Steagall” — except for the Depression-era
“We do think there are potential things we could look at around
regulation, but we do not support separation of banks and
investment banks,” Mnuchin said.
A flabbergasted Sen. Elizabeth Warren, who sits on the committee,
pointed out that Glass-Steagall was best known for the separation
of commercial and investment banks.
“There are aspects of Glass-Steagall that you support, but not
breaking up the banks and separating commercial banking from
investment banking?” Warren asked. “What do you think
Glass-Steagall was if that’s not right at the heart of it?”
What Warren is getting at is this: The Trump administration is
doing its best to make everyone think it is bringing back the
Wall Street regulation — to deliver on a Republican campaign
promise — when all it’s really doing is using the old law’s name.
For background, Glass-Steagall was repealed in 1999, clearing the
way for commercial-investment mergers on Wall Street, such as
combinations of JPMorgan and Chase along with Bank of America and
Merrill Lynch. This intermingling of the two sides of banking has
been blamed by critics — including Warren — for helping to cause
the financial crisis (though this point is up for debate among
many economists and academics).
Reinstating the law has since become a favorite talking point of
the anti-Wall Street movement in Washington.
Anti-Wall Street campaign
Mark Wilson/Getty Images
As a presidential candidate, Donald Trump railed against Wall
Street firms like Goldman Sachs, attacked Hillary Clinton for her
ties to big banks, and pitted himself as a populist who would
stand up to Wall Street. In fact, the official Republican
platform included, for the first time, a call to reinstate
Even after taking office, Trump said he would consider breaking
up the banks, and economic advisers like Mnuchin and Gary Cohn
reiterated support for a “21st-century Glass-Steagall.”
Mnuchin’s statements, however, appear to have nothing to do with
the core of Glass-Steagall (or at least its most looming legacy)
and appear to simply be an attempt to slap a tough name on
another deregulation measure.
The White House press secretary, Sean Spicer, maintained that the
president was “consistent” in his support of reinstituting
Glass-Steagall in February and March, but the so-called
21st-century Glass-Steagall sounded a bit different when Spicer
discussed it May 1.
“The president’s pro-growth agenda, including instituting what he
has called a 21st-century Glass-Steagall, will allow [small]
banks to spend less time complying with unnecessary requirements,
many of which were designed to police much larger entities, and
more time infusing their communities and local small businesses
with capital,” Spicer said.
This, instead of sounding as if it would regulate larger banks,
appears to be a deregulation effort for community financial
Tim Pawlenty, the former governor of Minnesota who now leads the
Financial Services Roundtable,
told Bloomberg’s Max Abelson that the new bill from the
administration wouldn’t really focus on large banks with both
investment and commercial arms at all.
“Following the president’s remarks on the topic, Gary Cohn
clarified the administration’s view of a modern-day
Glass-Steagall is a two-tiered approach to regulation in which
smaller banks would receive some regulatory relief,” Pawlenty
Basically, Abelson reported, bank executives expect the new
Glass-Steagall to be a deregulation effort for smaller banks,
with little involving larger banks, that is sold under the guise
of a bill for which anti-Wall Street groups have been clamoring.
As Warren pointed out during the testimony, the Trump
administration is even cribbing the 21st-century-Glass-Steagall
language from a bill partially written by Warren that would, in
fact, break up large banks if adopted.
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