President Trump isn’t interested in restoring the Glass-Steagall Act, reversing prior claims made by White House officials.
Treasury Secretary Steve Mnuchin said Thursday that the administration doesn’t support the segregation of retail and investment banking—the crux of the Depression-era legislation.
“We think that would have a very significant problem on [sic] the financial markets, on the economy, and on liquidity, and we think there are proper things that we could look at around regulation,” Mnuchin said. “But we do not support a separation of banks and investment banks.”
The Treasury Secretary made the comments before the Senate Banking Committee in response to a question asked by John Neely Kennedy (R-La.).
The statement clashed with prior claims made by the White House and the Trump campaign. Top economic aide Gary Cohn said in April that the administration supports a firewall between investment and retail banking.
The restoration of Glass-Steagall was also included in the Republican Party’s platform last year, and President Trump praised the law by name in a late October campaign speech.
Immediately following Kennedy’s questioning, Sen. Elizabeth Warren (D-Mass.) jumped on these competing claims. She also noted that Mnuchin himself had called for a “a 21st century Glass-Steagall Act” and asked him to explain.
The Treasury Secretary replied, saying the administration is interested in restoring “aspects” of the law.
“But we never said before that we supported a full separation of banks and investment banks,” he said.
Warren was confounded by the answer, and asked Mnuchin to clarify what parts of the law the administration would like to bring back, if not the seminal part. She said Mnuchin’s policy discussion was “like something out of George Orwell.”
“What does it mean to support 21st Century Glass-Steagall if it does not mean breaking apart these two functions of banking?” she asked.
“You know, I’d be more than happy to come see you and talk about this,” Mnuchin replied. “It’s actually a complicated question because there are many aspects of it,” he added.
“This is just bizarre, the idea that you can say you’re in favor of Glass-Steagall but not breaking up the big banks,” Warren eventually shot back.
“We never said we were in favor of Glass-Steagall. We said we’re in favor of a 21st Century Glass Steagall,” Mnuchin replied. “It couldn’t be clearer.”
“This is crazy,” Warren shot back, while wrapping up her inquiry.
Mnuchin was given a chance to elaborate on the administration position by Sen. Thom Tillis (R-N.C.), who immediately followed Warren.
“Our view is that what we should be doing is supporting and making sure that community banks and regional banks can grow so we don’t just end up with big banks,” Mnuchin said. He also said that segregating retail and investment banking was “completely different than the concept of breaking up big banks.”
The Glass-Steagall Act was signed into law in 1933 by President Franklin D. Roosevelt. It was fully repealed by Congress under President Clinton in 1999, less than a decade before both Republicans and Democrats responded to major bank failures with massive taxpayer bailouts.
Before asking Mnuchin about Glass-Steagall, Sen. Kennedy queried the Treasury Secretary about whether or not there were still “too big to fail” banks—a reference to the financial institutions bailed out in 2008.
“I do not believe that anything is ‘too big to fail,’” Mnuchin replied.
Kennedy then asked if there are still banks “that are so big that, if they did fail, it would have a substantial, reprehensible, if you will, impact on the economy?”
“It could,” Mnuchin responded.