WASHINGTON–Despite pledges to cut financial regulations, the Trump Administration is exploring the return of a long-time stalwart of bank regulation: Glass-Steagall. Glass-Steagall was repealed in 1999.
In a meeting with senators from both parties, Gary D. Cohn, President Trump’s chief economic adviser, said the administration is considering a proposal that would require separating retail banking from investment banking and trading. Cohn also mentioned the idea to members of the Senate Banking Committee as one of several financial regulations on the table, according to the New York Times.
The Times reported that few specifics on how the proposal would work or when it could be carried out have been released.
Cohn, who was formerly the number-two exec at Goldman Sachs, indicated Trump supports restoring some version of the Glass-Steagall Act, which dates to the Great Depression and which forced the separation of deposit taking from trading and investment banking activities. Treasury Secretary Steven Mnuchin has also expressed support for some new version of the law, according to Bloomberg.
Senator Elizabeth Warren (D-MA), a long-time Wall Street critic, has also called for creating a “wall between commercial and investment banking.”
“Despite the progress since 2008, the biggest banks continue to threaten our economy,” Warren said in a released statement.
The Times quoted a statement from the Trump White House that said, “The president spoke to the need for a simplification of the banking system on the campaign trail, what he called a ‘21st century Glass-Steagall,’ to make it easier for businesses to grow and create jobs in their communities.”
Both the New York Times and Bloomberg, however, quoted several analysts as saying that even full restoration of Glass-Steagall is no cure-all for the potential of another banking crisis.