WASHINGTON (AP) — While Republicans in Congress craft a bill to unwind the tighter financial rules that took effect after the 2008 crisis, President Donald Trump is looking in another, seemingly opposite direction: He’s entertaining the idea of restoring the Depression-era firewall between commercial banking and its riskier investment side.
If Congress reinstated such a law, it might lead to the breakup of big banks.
Trump, who also has denounced the Dodd-Frank crisis financial law and promised to dismantle it, swung between those two extremes of restoring bank regulation and deregulating in a short space of time on Monday in two White House settings.
First, he indicated that he’s exploring a possible push to resurrect the bank separation law, known as Glass-Steagall, or some version of it.
“I’m looking at that right now,” Trump said in an 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.”
Chief among those who want to go back to the old system: Democratic firebrand and Wall Street critic Sen. Elizabeth Warren and Sen. Bernie Sanders, who rang breaking up the banks as one of his populist themes during his campaign for the Democratic presidential nomination against Hillary Clinton. They are hardly allies of Trump.
But Trump, too, endorsed restoring a version of the 1933 law during his presidential run — and even managed to get it into the Republican Party platform. That might have been aimed at luring Sanders supporters who didn’t want to vote for Clinton. But that calculus doesn’t apply now that Trump sits in the White House. Saying, as president, that he was considering a version of Glass-Steagall caused a stir.
About an hour and a half later, Trump rekindled his denunciation of the 2010 Dodd-Frank law to an audience of community bankers, calling it “out of control.” His administration is working to overhaul it, he assured the group from the Independent Community Bankers Association. They showed their enthusiasm with Trump-inspired red baseball caps embossed with “Make Community Banking Great Again!”
The Dodd-Frank law was enacted by Democrats and President Barack Obama. It put the stiffest restrictions on banks and Wall Street since the 1930s Depression, clamping down on banking practices and expanding consumer protections to prevent a repeat of the 2008 financial meltdown. Once in office, Trump launched an attack on the law, ordering a government review of the complex legislation. He says the restrictions on banks have crimped lending, the economy and job creation.
On Capitol Hill, meanwhile, a Republican-controlled House panel started Tuesday the laborious honing, section by section, of massive legislation to weaken the Dodd-Frank restrictions. Authored by Rep. Jeb Hensarling, the Texas Republican who is Dodd-Frank’s fiercest foe and heads the House Financial Services Committee, the bill would deliver a body blow to the law.
The effort got off to a slow start as Democrats insisted that the entire, nearly 600-page bill be read aloud before the panel even considered amendments. The marathon session stretched toward a potential all-nighter. Votes on amendments were put off until a second session on Wednesday.
The legislation calls for repealing about 40 provisions of Dodd-Frank. Federal regulators would lose the power to dismantle a failing financial firm and sell off the pieces if they decide its collapse could endanger the system. The Volcker Rule, which bars the biggest banks from trading for their own profit, would be repealed. The idea behind it was to prevent high-risk trading bets that could implode at taxpayer expense. The legislation paints a bull’s eye on the Consumer Financial Protection Bureau. The five-year-old agency is a prime target for Republicans, who have long accused it of regulatory overreach.
While passage of the bill by the GOP-controlled House could come in a few months, the Senate — where Republicans have only 52 of 100 seats — poses an obstacle.
The Glass-Steagall firewall for banking came in the wake of the stock market crash of 1929 and the thousands of bank failures that preceded the Great Depression. Banks got a stark choice: they could be either a commercial bank, an investment bank or an insurance company.
Sixty-six years later, banks had become bigger and more complex and were selling products in a way that blurred the commercial versus investment lines. Glass-Steagall was effectively dead, some economists argued. It was repealed by a Republican-majority Congress — in legislation signed by President Bill Clinton.
Trump gave no details Monday of what he was considering with a possible restoration of Glass-Steagall, or something like it. White House spokesman Sean Spicer, peppered with follow-up questions at his briefing with reporters, called it “a 21st Century Glass-Steagall.”
“He mentioned this on the campaign trail. It shouldn’t be a surprise to anybody,” Spicer insisted, dodging multiple requests for details during the briefing.
“We’re not at a point where we’re ready to roll out details of that yet,” he said.
Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
- Phoenix-area mayors ready to join forces to land Amazon headquarters
- Main Street Minute: Big-name companies set to attend Phoenix job fair
- Target is raising minimum hourly wage to $15 by end of 2020
- Main Street Minute: Free golf for girls clinic set for Phoenix course
- Campus museum honors Colangelo, ‘godfather’ of Phoenix pro sports