Restoring Glass-Steagall likely campaign rhetoric

Is President-elect Donald Trump really going to reinstate the Glass-Steagall Act as he’s previously said? The Depression-era laws limit the risks that commercial banks can take and put up dividers between investment and commercial banking.

Trump’s former campaign manager, Paul Manafort, made statements in the summer that Glass-Steagall would be brought back and support for its restoration found its way into the official 2016 GOP Platform.

Trump’s support for Glass-Steagall was fairly vague in the election, but did exist. On the trail in October, he told a crowd he wanted a modern, 21st-Century version of Glass-Steagall, emphasizing that it would be especially aimed at “helping African-American businesses get the credit they need.”

During the election, Trump employed anti-Wall Street rhetoric as a populist catch-all and, later, to woo disgruntled Bernie Sanders supporters who were uncomfortable voting for Hillary Clinton.

Indeed, Glass-Steagall was also an important part of Sanders’ platform that had supporters (and opponents) on various areas of the left and right.

Speaking at the Republican Convention, Manafort signalled that restoring Glass-Steagall would be a way to show Republican support for, “small banks and Main Street.” In addition, it would dismantle failing aspects of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Glass-Steagall was enacted in 1933 to prevent the kind of speculation that had contributed to the financial collapse of 1929 and the ensuing Great Depression. Over the decades, the act was eroded, little-by-little, until finally being legislated away completely by former President Bill Clinton in 1999.

For Team Trump, bringing it back up was a way to stick it to the Clintons and Wall Street all at once.

However, like the “lock her up” chants and the claim that he’d appoint a special prosecutor to investigate Hillary Clinton, restoring Glass-Steagall was merely a political tactic rather than a firm position. As Trump said recently on his victory tour, “now we don’t care.”

Treasury Secretary-designate Steven Mnuchin and Commerce Secretary-designate Wilbur Ross do care, however. They are concerned about throwing a massive wrench like Glass-Steagall into the financial system they’ve built a livelihood upon and alienating market participants whose cooperation they need to succeed in their respective new positions.

When Glass-Steagall rhetoric was heating up, it was also being cursed and dismissed by Wall Street. Despite annoyance that they were in the spotlight again, those working in financial services largely dismissed the chances of Glass-Steagall’s restoration.

As CNBC reported, skepticism was high that such a law could be passed even if Trump tried.

“No one is actually worried this will become law,” one banker said.

Indeed, before he was let go as head of Trump’s transition team, New Jersey Gov. Chris Christie let a group of financial services lobbyists know that his boss was open to dropping Glass-Steagall once he was in power.

It’s clear that Trump may be making some big changes with respect to American trade priorities, infrastructure spending and aspects of banking to help with loan access. The prospect of a Glass-Steagall comeback is very unlikely, however.

Despite potential bipartisan support, Glass-Steagall isn’t backed by the establishment wings of either party or those close to Trump’s ear, except for Chief Strategist Stephen Bannon. It’s unknown how much Bannon’s heterodox views will sway the conversation among a crowd of more conventional Republicans close to Trump.

As Trump has recently said, “things were gloomy” before he won. Now people can spend one trillion dollars on Christmas presents and invest in the stock market to support the world’s wonderful consumerist system.

Citizens can enjoy the freedom of choosing which mall full of Third-World goods to frequent. Of course, Trump may also want to consider that the bull market is being driven by expectations of big-league tax cuts and massive deficit-financed spending that are nearing the horizon should he follow through on campaign promises.

Restoring Glass Steagall is likely to remain campaign rhetoric.

Paul Brian is a freelance journalist whose interests include politics, religion and world news. He covered the U.S. presidential primary in New Hampshire in the summer of 2015. Find him at www.paulrbrian.com.

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