Trump Is Unlikely to Bring Back Glass-Steagall

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WASHINGTON — There are growing doubts that President-elect Donald Trump was ever serious about his surprise call in July to reinstate the 1930s-era Glass-Steagall Act, which separated commercial and investment banking.

Trump's then campaign manager, Paul Manafort, went so far as to insist the idea be included as part of the official GOP platform.

But the candidate himself never discussed the idea, and the transition team has not resurrected it.

"It came from Trump's political people, not his policy people," said Mark Calabria, the director of financial regulation studies at the Cato Institute and a former top Republican Senate Banking aide. "It was mostly a wedge to go after Clinton and hammer the point about her being tied to Wall Street."

Big banks are widely opposed to restoring Glass-Steagall, while many small banks favor the idea. In the days since Trump's victory, however, the campaign has been decidedly more big-bank-friendly than it was during the campaign, going so far as to float JPMorgan Chase CEO Jamie Dimon as a potential Treasury secretary. On Thursday, the campaign said it wants to "dismantle" the Dodd-Frank Act, but made no mention of Glass-Steagall.

"It would be a gigantic error if he even brought up the subject of reinstituting Glass-Steagall," said Peter J. Wallison, co-director of the American Enterprise Institute's program on financial policy studies. "He ought to forget the idea."

Still, some observers say a Glass-Steagall 2.0 might still be an option, particularly as it could draw support from progressive Democrats to back a financial de-regulation bill.

"If there's any common ground to play out between the sides it would be on some revision of Glass-Steagall," said Pratin Vallabhaneni, an associate at Arnold & Porter.

In a speech at the AFL-CIO Executive Council on Thursday, Sen. Elizabeth Warren, D-Mass., who has co-sponsored a bill to create a modernized version of Glass-Steagall, noted Trump had run partially on anti-Wall Street sentiment.

"He criticized Wall Street and big money's dominance in Washington — straight up," she said in prepared remarks. "He supported a new Glass-Steagall."

Warren said she was prepared to "work with" Trump to "increase the economic security of middle-class families."

But advocates of stricter financial regulation are much less optimistic that Trump will follow through on promises to be tough on Wall Street.

"You do not consider Jamie Dimon for Treasury secretary if Glass-Steagall is anywhere" on the agenda, said Simon Johnson, a professor at MIT. "I think he's going to be a total friend of the big banks."

Instead, many in the industry remain optimistic that Trump will defend his populist mandate outside of the financial industry — by slamming down on free-trade deals and investing in infrastructure programs, for instance.

"I'm convinced that he does not feel like he ran and won on financial services issues," Calabria said. "A lot of his political copper is really going to be on his infrastructure package."

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