On the first day of May, Donald Trump sat in the Oval Office and declared that his administration was taking a look at breaking up Wall Street’s biggest banks. If they ever took him seriously, it didn’t last.
Instead of cowering, Wall Street executives and lobbyists are crowing, getting more confident about ditching rules that have annoyed them for years. That’s because the Trump administration is appointing friendly regulators and signaling it will make life easier for bankers.
“Break up the banks? That ain’t going to happen,” said Rick Hohlt, who has advised and lobbied for lenders including Citigroup Inc. for three decades. “You need legislation to do that. And the chance of that is about zero.”
Two weeks after Trump’s threat, Wall Street’s hopes are high. The biggest U.S. banks want him to relax capital requirements that limit their leverage, lighten up on stress tests designed to help them survive another crisis and weaken the Volcker Rule that stops them from placing speculative bets -- something the administration is already taking steps to do.
21st Century
Their confidence doesn’t stop there. Some executives think that if the White House really does push for a sequel to Glass-Steagall -- the 1933 law that separated commercial and investment banking and was partly repealed 66 years later -- the new version would just scrap rules for smaller banks without breaking up large ones.
Since taxpayer bailouts saved the financial system from toppling in 2008, some of the nation’s biggest banks have grown even bigger. JPMorgan Chase & Co. and Bank of America Corp. now have more than $2 trillion of assets each, and Wells Fargo & Co. isn’t far behind. Even Citigroup, which received the most generous bailout, still wields about $1.8 trillion.
Trump, Treasury Secretary Steven Mnuchin and economic adviser Gary Cohn have all endorsed a “21st century” version of Glass-Steagall without explaining what they mean. In the interview this month, Trump told Bloomberg News that bank breakups were under consideration. “I’m looking at that right now as we speak,” he said.
Tim Pawlenty, who runs the Financial Services Roundtable, a Wall Street lobbying group, doesn’t think the administration is really talking about Glass-Steagall when it refers to it.
“Following the president’s remarks on the topic, Gary Cohn clarified the administration’s view of a modern-day Glass-Steagall is a two-tiered approach to regulation in which smaller banks would receive some regulatory relief,” said the former Minnesota governor, whose group represents banks including Bank of America, Citigroup and JPMorgan, the firm that spun off Morgan Stanley because of the original law.