Trump considers breaking up Wall Street’s big banks
Trump’s comments could give a push to efforts to revive the Depression-era Glass-Steagall law that separated commercial lending from investment banking
US President Donald Trump is reviewing a possible breakup of large US banks.
Trump said that he was considering a “21st century” version of the 1933 Glass-Steagall law that separated consumer lending and investment banking and was repealed in 1999 by President Bill Clinton.
“I’m looking at that right now,” Trump said of breaking up banks in the 30-minute 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.”
Trump also said he’s open to increasing the US gas tax to fund infrastructure development, in a further sign that policies unpopular with the Republican establishment are under consideration in the White House. He described higher gas taxes as acceptable to truckers.
“I have one friend who’s a big trucker,” he said, as long as the proceeds are dedicated to improving US highways.
He also said that a Republican replacement for the Affordable Care Act would protect Americans with pre-existing conditions at least as well as Obamacare.
Trump’s comments about banks are his first on the subject and follow other statements from administration officials such as National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin expressing broad support for the idea.
Several liberal Democrats, including Senator Bernie Sanders, have also supported a breakup of the biggest banks.
However, the Trump administration has not released details about what an eventual breakup plan might look like.
A handful of lawmakers blame the repeal of the Glass-Steagall law 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.
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.
Trump said the tax cuts he’s seeking would, along with renegotiated trade agreements, serve as badly needed stimulus for the economy.
The president called first-quarter economic growth, which the Commerce Department said declined to a 0.7 per cent annual rate, “really bad”.
Although he’s taken credit for monthly job growth figures and stock market gains since entering office on Jan. 20, Trump said he’s not responsible for the GDP number.
“That’s really a left over from - in all fairness, I just got here,” he said.
“So you’re growing at 1 per cent or less, so we need a stimulus.”
US stocks sharply pared gains on Monday after Trump’s comments and the S&P 500 bank index dropped nearly 1 per cent before rebounding.
Agence France-Presse, Bloomberg, Reuters