GOP Lawmakers Blindsided by Trump's Embrace of Glass-Steagall

WASHINGTON — The eleventh-hour move by the Donald Trump campaign to add a plan to reinstate the Glass-Steagall Act to the Republican platform caught GOP lawmakers off guard, with some of them expressing disappointment with the decision.

While the 1930s-era law, which separated commercial and investment banking activities, is strongly supported by progressive Democrats, it is not popular among most Republican policymakers.

"I was completely surprised," Rep. Steve Stivers, R-Ohio, a member of the House Financial Services Committee, said in an interview here hours before Trump's formal nomination Tuesday evening. "It was a late addition. I am not sure how it happened. I was very disappointed that that got included, because frankly I think that will make our banks more vulnerable if we try and put Glass-Steagall back in and make them more likely to fail, because they will be more focused on fewer classifications of assets."

"That issue per se was not something that contributed to the financial crisis," Hill said in a separate interview here. "Commercial bank underwriting and distributing of securities is not something that was a major contributor to the financial crisis."

Stivers said the Trump campaign might have been wise to seek more input from the banking industry before including it in the platform.

"I think it was put in there and supported by folks who maybe don't understand how banking works," said Stivers, who was interviewed in a subterranean lounge that resembled the kind of speakeasy that would have existed when Glass-Steagall was written. "If we do that, the other thing is we will never be a magnet for money-center organizations, because the biggest banks in the world will be in Europe and Asia instead of here in the United States. They obviously didn't consult very many folks on the Financial Services Committee or folks that knowledgeable, which is too bad."

Although the move alarmed lawmakers, they nonetheless maintained that Trump would be a better choice for the economy and the country than his rival, former Secretary of State Hillary Clinton, who is expected to be formally nominated at the Democratic convention next week in Philadelphia.

"People are beginning to come together because Hillary is no option. She wants to take your profits, your operating capital and wants to tax everything," Rep. Roger Williams, R-Texas, said in an interview here. "A lot of us have a lot of conservative ideas to get the economy going … that would never happen under President Obama."

Republican lawmakers see Trump's decision to tap Indiana Gov. Mike Pence as his running mate as a positive sign and believe the former Congressman could be influential when it comes to policymaking.

"Mike Pence is a solid thinker and a conservative leader and I think hopefully he will have real influence on the administration's way they interpret laws and the way they carry out the laws throughout the [federal financial] agencies," said Stivers, who briefly overlapped with Pence in the House. "I am hopeful he will have a major voice."

Hill commended Pence's work in Congress and Indiana and added that he and Trump complement each other.

"You have got Pence, who knows business, but who also knows how policy works at the state and federal level and you have Trump, who is an instinctive entrepreneur. I think that would be a pretty dynamic combination to listen to a 'How to get an economy going faster,' " Hill said.

Many Republicans view federal regulators as having too much power and going beyond congressional intent, but the next president will be able to appoint people to key positions at the Federal Reserve Board, Federal Deposit Insurance Corp. and eventually the Consumer Financial Protection Bureau that will shape how financial regulation is carried out.

Democrats have called for fewer bankers to serve as heads of the regulatory agencies and have included language in a draft of the party platform that would prevent executives of financial institutions from serving on the boards of the regional Fed banks.

"I don't understand the negative feelings about having people that understand that industry help work on macro policy solutions," Hill said.

Stivers said having a background in the industry is important "but most importantly it is about demeanor, somebody that will listen and work together with the industry to find solutions that work, that don't take away choice from consumers."

Republicans have been hard-pressed to roll back the 2010 financial reform law that many believe is disproportionately hurting community banks. House Financial Services Committee Chairman Jeb Hensarling has introduced the Financial Choice Act, which would create an alternative regulatory framework for well-rated banks that hold higher amounts of capital.

That plan is strongly embraced by Republicans on the committee — and they hope Trump will support it as well.

"It helps balance [the playing field] because approximately over 6,000 community banks already meet" or almost meet the capital requirements to be eligible for the alternative framework, Hill said.

The bill is highly unlikely to pass this year, but some lawmakers are pushing for a committee vote to show the next president it has support.

"I would love to mark up the bill if there is time this year and go into the new presidency with a concrete direction that the House thinks is the way to go," Hill said.

Stivers also said a new president could take other approaches to reforming Dodd-Frank, including doing a "call for evidence" — a system being implemented by European bank regulators in which they re-evaluate which regulations are working.

Congress "can try and change the laws, but most of the" financial regulations "we are talking about aren't even written into the laws," Stivers said. "They are interpretations of the agencies, so we have to have the administrators on board. We have to make sure the agencies actually work with whoever the next administration is to try and get a call for evidence."

Donald Trump Puts Reinstatement of Glass-Steagall Act Into 2016 Republican Party Platform…

Posted on July 20, 2016 by sundance

Well, you can put this huge and under-reported Trump platform position in the AFFIRMED PREDICTION column.

Anyone thinking Donald Trump is not intensely serious about America-First economics just got a massive dose of reality. Specifically demanded by Donald Trump himself:

“We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment,” said the platform released by the Republican National Committee. (link)

Trump thumbs up

CONTEXT – Beyond the larger context of Globalists VS Nationalists (Americanism), the internal opposition to Common Sense economic conservatism (Americanism) can be broken down into two categories:

♦ The first group are those who are fundamentally naive about large and historic economic issues; and how the economy was changed, forced to change through the past forty years, by financial interests who created a second, “false“, paper economy.

This first group is generally young, pseudo-intellectual, and their only reference is while formally educated within the last thirty years (they’re under 50). Most of the oppositional (conservative) punditry falls into this category. [Important to note, this group is also joined by the majority of politicians who are approximately the same age.]

Never trump crowd

♦ The second group are those who truly know better. They are older and wiser, they know the truth because they saw it unfold. However, they are also financially dependent on retention of a global narrative that sold the change in the past 40 years. These are the willfully blind who have sold-out to the benefit of, and enrichment from, the false economy.

This second group is intent on retaining a historic set of false assumptions by fraud and deception. Mark Levin, Rush Limbaugh, Chris Matthews and Hugh Hewitt fit into this second grouping. Their framework echo-chambered and passed down to the younger group #1.

Exhibit “A” would be conservatives standing at CPAC to applaud Speaker Paul Ryan who passed a $2+ trillion Omnibus spending bill to ensure 8 straight years without a budget. See the disconnect?

ben shapiro rich lowry

The world-view of the first group (younger voices, CPAC seal-clappers) is fundamentally seeded on social issues. They are in no position to speak accurately about economic matters because they don’t have a reference point underpinning their expressed outlook. Their economic arguments are esoteric opinions, and they never experienced the era of industrial giants.

♦ In most of the modern post-war industrial era (1950-1980) banking was a boring job and only slide rule bean-counters and actuarial accountants moved into that sector of the workforce. Most people don’t like math – these were not exciting jobs. Inside the most boring division of a boring banking industry were the bond departments within the larger bank and finance companies.

The excitement was in the actual economy of Main Street business. The giants of industry created businesses, built things, manufactured products, created innovation and originated internal domestic wealth in a fast-paced real economy. Natural peaks and economic valleys, as the GDP expanded and contracted, based on internal economic factors of labor, energy, monetary policy and regulation.

Main Street generated the pool of politicians because the legislative conduct of politicians had more impact on Main Street. The business agents had a vested interest in political determinations. Political candidates courted industrialists, business owners, and capitalist giants to support them. Main Street USA was in control of DC outcomes.

Despite the liberal talking points to the contrary, this relationship was a natural synergy of business interests and political influence. It just made sense that way, and the grown-ups were generally in charge of it.

government-money

♦ Commercial banks courted businesses because bankers needed deposits. Without deposits banks could not generate loans; without loans banks could not generate profits…. and so it was. By rule only 10 percent of a commercial bank’s income could stem from securities.

One exception to this 10% rule was that commercial banks could underwrite government-issued bonds. Investment banks (the bond division) were entirely separate entities. The Glass-Steagall banking laws of 1932 kept it that way.

However, mid 1970’s bank regulators began issuing Glass–Steagall interpretations -that were upheld by courts- and permitted banks and their affiliates to engage in an increasing variety and amount of securities activities. After years of continual erosion of the Glass-Steagall firewall, eventually it disappeared.

This became the origin of the slow-motion explosion of investment banking. If you look back historically from today toward 1980 (ish) what you will find is this is also the ultimate fork where economic globalism began overtaking economic nationalism.

Banks could now make money, much more money, from investment divisions issuing paper financial transactions, not necessarily dependent on actual physical assets. The transactions grew exponentially.

The bond market portion ultimately led to the ’07/’08 housing collapse, and derivative trading (collateralized debt obligations or CDO’s) generated trillions of paper dollars. Business schools in 1980 began calling this the second economy (a false economy, or the invisible economy).

The second economy, which ultimately became the global economy, is also the Wall Street investment economy. Two divergent economies: Wall Street (paper), and Main Street (real).

There is no real property, real capital, real tangible assets in the Wall Street economy. The false economy is based on trades and financial transactions, essentially opinions. Paper shifts, and buys and sells based on predictions and bets (derivatives).

Insurance products create an even larger subdivision within the false economy as hedgers wagered on negative outcomes. The money wagered is exponential – some say more than a quadrillion currently floats.

♦ Now you realize, in hindsight, there had to be a point where the value of the second economy (Wall Street) passed up the first economy (Main Street). Investments, and the bets therein, needed to expand outside of the USA. hence, globalist investing.

However, a second more consequential aspect happened simultaneously.

a17b2-hip-replacement-recall-bribery

The politicians became more valuable to the Wall Street team than the Main Street team, and Wall Street had deeper pockets because their economy was now larger.

As a consequence Wall Street started funding political candidates and asking for legislation that benefited their interests.

When Main Street was purchasing the legislative influence the outcomes were beneficial to Main Street, and by direct attachment those outcomes also benefited the average American inside the real economy.

When Wall Street began purchasing the legislative influence, the outcomes therein became beneficial to Wall Street. Those benefits are detached from improving the livelihoods of main street Americans because the benefits are “global” needs. Global financial interests, investment interests, are now the primary filter through which the DC legislative outcomes are considered.

There is a natural disconnect.

♦ When Speaker Paul Ryan says: “Donald Trump and I come from two different wings of the party”, he is specifically pointing out this disconnect, yet few draw attention to it.

Trump represents the Main Street wing, Ryan represents the Wall Street wing.

Going back to the opening paragraphs. The news and opinion punditry never take the time to explain the root cause of the disassociation, because:

A) Group one doesn’t understand it; and
B) Group two is compensated to remain willfully blind, and to ignore it.

Yes, there is a fundamental ideological conflict within this 2016 election:

us coc mexico

Wall Street/Globalists -vs- Main Street/Nationalists

trump lion

Donald Trump suit

Trump obviously has a very good grasp of the situation

Thank you for your simple and easily understood explanation of the situation.

Dood - Frank made mom and pop bank depositors deposits unsecured loans to the bank where the deposits are located

This means that widows and orphans savings accounts above FDIC insurance caps can be seized to offset the losses of risky investments made by wealthy and sophisticated investors .

Dont know the possible unintended consequences of re instituting Glass-Steagall at this late date, but it seems that the net effect of a new Glass- Steagall would be to fire wall regular bank deposits away from the risky financial investment side of the business.

It would not invalidate Dodd-Frank but it probably would limit losses
For widows and orphans type accounts to traditional banking exposure instead of unlimited exposure to under write losses from high risk financial and stock market speculation for wealthy, sophisticated investors

It's a start by repealing the monstrosity that is Dodd - Frank and passing a well thought out re do of Glass-Steagall updated for 21st Century interconnected and computerized financial systems to avoid unintended
negative consequences could be a life saver for middle class America if and when we see a serious economic crisis

If Donald Trump can pitch this in ways a joe six pack ( hate that term BTW) person can understand, Trump will play a winning hand by protect small depositors from losing their entire lives savings to under write the high risk, high return investments that make the well connected, wealthy Elite crony capitalists even richer on the backs of the American working class

I'm really more and more impressed and am lliking The Donald more and more as time goes on and he lays out his plans

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