Society

Trump Considering Breaking Up Big Banks

| by Robert Fowler

President Donald Trump expressed interest in resurrecting the Glass-Steagall Act to break up large Wall Street banks in addition to raising the U.S. gas tax.

The president's comments arrived on the same day he vowed to roll back banking regulations put in place by the Barack Obama administration's Dodd-Frank Act.

On May 1, Trump stated that he was interested in introducing a modern version of Glass-Steagall to effectively separate consumer and investment banks, according to Bloomberg News.

"I'm looking at that right now," Trump said. "There's some people that want to go back to the old system, right? So we're going to look at that."

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The Glass-Steagall Act, which mandated the separation of consumer lending and investment banks, had been in effect from 1933 through 1999. After Congress and former President Bill Clinton rescinded the law, the two banking systems were able to consolidate in Wall Street.

An executive order could not implement a new form of Glass-Steagall. It would instead have to be proposed and passed in the GOP-majority Congress.

On April 5, White House economic adviser Gary Cohn privately told lawmakers that he was in favor of resurrecting Glass-Steagall. A former executive of Goldman Sachs, Cohn's endorsement of the law reportedly surprised several senators who were in attendance.

In addition to breaking up large banks, Trump asserted that he would like to institute a higher tax on gas to help pay for the restoration of U.S. highways. The president added that he had anecdotal evidence that the trucking industry would not protest higher gas prices.

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"I have one friend who's a big trucker," Trump said.

That same day, Trump told roughly 100 members of the Independent Community Bankers of America that his administration would work to repeal regulations put in place in 2010 by Dodd-Frank, a law designed to prevent the Wall Street lending practices that resulted in the 2008 crash, according to USA Today.

On April 21, Trump signed an executive order calling for Dodd-Frank to be reviewed by Treasury Secretary Steven Mnuchin, another former executive of Goldman Sachs, CNN Money reports.

While signing the executive action, Trump asserted that the Dodd-Frank regulations were "too complicated."

Rob Nichols, president of the American Bankers Association, asserts that Glass-Steagall would not have prevented the 2008 Great Recession and that it is instead Dodd-Frank that better protects the economy against Wall Street malfeasance.

"There is broad agreement, including among all our bank regulatory agencies, that Glass-Steagall would not have prevented the crisis or the housing market collapse," Nichols said, according to Bloomberg News. "America’s economy depends on banks of all sizes to meet the needs of a large and diverse group of clients, customers and communities."

Sources: Bloomberg News (2), CNN MoneyUSA Today / Photo Credit: Gage Skidmore/Flickr

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