Despite President Donald Trump’s repeated assertions that he might support breaking up big banks, Wall Street isn’t worried. Yet.
The calm is fueled by signals from administration aides in private meetings with industry executives to discuss rolling back financial rules, a Trump priority. While not making any assurances, the officials aren’t harping on the issue, according to people who have participated in or been briefed on the discussions. In fact, the topic of reviving Glass-Steagall, the 1933 law separating investment and commercial banking, rarely comes up.
Just last month, Trump’s top economic adviser Gary Cohn eased the concerns of at least two bank chief executives officers who called him after he spoke approvingly of Glass-Steagall in a meeting with senators, people familiar with the matter said. Neither Cohn nor the Treasury Department’s Craig Phillips made a case for splitting up banks when they met recently with an important financial lobbying group, said some attendees.
There is also a sense in the industry that lawmakers have little appetite to take on another controversial legislative fight, especially one that would anger big donors. Republicans, who control both houses of Congress, are particularly loath to support such a dramatic reshaping of the banking system.
“I’m sure it will be brought up,” said Bob Corker, a Republican from Tennessee who sits on the Senate Banking Committee. “But is there a lot of momentum around this in the House and Senate? Currently there is not.”
Still, Trump’s most recent comments about breaking up banks, made in a Bloomberg News interview this week, have caused a few tremors as banking executives try to parse what he meant. Firms taking special notice include Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. All three have substantial footprints in commercial and investment banking, so their business models would be severely impacted if they had to break up.
Though they still think any action is unlikely, those firms are telling their trade associations and lobbyists they shouldn’t dismiss Trump’s comments out of hand. A nightmare scenario, some finance executives say, would be another major scandal like the JPMorgan trader known as the London Whale who lost billions of dollars, or Wells Fargo & Co.’s fake accounts fiasco. Such an embarrassment could spur a wave of lawmakers to support a drastic move like breaking up banks.
Spokesmen for the banks declined to comment.
Nevertheless, interviews with about a dozen people, including executives at most of the largest banks, industry lobbyists and lawyers focused on financial regulation, show that the administration’s rhetoric is often different from reality.
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