While America’s corporate press remains singularly obsessed with unproven and likely fabricated Russia-collusion conspiracy theories, Wall Street’s well on its way to getting away with financial murder thanks to an army of cronies embedded within the Trump administration. Indeed, Goldman Sachs running Donald Trump’s economic policy is perhaps the most concerning aspect of his Presidency when it comes to negative impacts on average citizens, yet it’s almost never placed at the forefront of the corporate press narrative. Many of you probably recall headlines in recent weeks about how Trump might be in favor of “bringing back Glass-Steagall” as well as breaking up the big banks. These are two things I think are extraordinarily necessary and important, but it turns out Trump has no intention of actually doing any such thing. As the title of Bloomberg’s recent article on the topic so perfectly sums up…
# Here are a few excerpts from the extremely disturbing, yet entirely unsurprising piece:
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.
The above is sort of obvious and easily understandable. What follows is essentially Orwellian.
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does push for a sequel to Glass-Steagall, the 1933 law that separated commercial and investment banking and was partly repealed 66 years later, the new version would just scrap rules for smaller banks without breaking up large ones.
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.
Did you catch that? They’re essentially talking about calling some bill that has nothing to do with the spirit of Glass-Steagall, a “21st century Glass-Steagall,” in order to achieve some unrelated objective while simply hoping nobody notices. Indeed, if the corporate press does what it normally does, nobody will notice. This is just such gigantic middle finger to the American public, it’s almost hard to wrap your head around it.
# But it gets worse still.
Wall Street’s biggest firms also want Trump to roll back regulations that bother them. High up on their wish list is Volcker, the rule in the 2010 Dodd-Frank Act that limits how they trade with their own money and invest in private equity and hedge funds.
On May 8, at a meeting behind closed doors in Washington, Mnuchin told five regulatory agencies to reexamine what’s allowed under Volcker, according to two people familiar with the sit-down. It was a step that could give banks the flexibility to trade without getting into trouble. Banks also want the stress tests required by Dodd-Frank to be easier and less frequent. Trump said this year he expects “to be cutting a lot out of Dodd-Frank.”
This will basically allow another nuclear bomb to go off within our financial sector, you can guarantee it.
# Now here’s how Wall Street will achieve it’s destructive ends.
Bankers know it won’t be easy to gut that law in Congress, where House Financial Services Committee Chairman Jeb Hensarling’s Financial Choice Act is facing resistance from some members of his own party. But they’re confident friendly appointees will relax rules even if Congress doesn’t change them. Mnuchin, his counselors Justin Muzinich and Craig Phillips, Securities and Exchange Commission Chairman Jay Clayton, acting Comptroller of the Currency Keith Noreika and Randy Quarles, said to be Trump’s pick for top regulator at the Federal Reserve, have all worked at big banks or for them.
The shift from clashing with regulators to working with them isn’t lost on lobbyist Sam Geduldig, a partner at CGCN Group in Washington, whose clients include Goldman Sachs Group Inc.
“This is night and day,” the former top aide on the House Financial Services Committee said. He added that the industry always takes a president’s words on big issues seriously but there’s been no appetite on the Hill for reviving Glass-Steagall.
There’s your firebrand populist....