WASHINGTON (Reuters Breakingviews) - It’s somehow fitting that an idea with growing bipartisan support in Washington probably isn’t going anywhere. Gary Cohn, the former Goldman Sachs president advising Donald Trump on economic matters, now finds himself on the same team as Wall Street scourge Elizabeth Warren on the subject of breaking up banks. Congress, however, is otherwise occupied.
Cohn surprised a roomful of senators on Wednesday by joining a mixed bag of supporters in favor of radically redesigning the financial industry. It’s a group that now includes everyone from progressive Senator Bernie Sanders to Sandy Weill, the former Citigroup chief executive who was instrumental in dismantling the Glass-Steagall law that kept commercial and investment banking operations separated in the first place.
Trump himself has backed the idea of bringing back the 1933 law in some form. The White House said Cohn was merely echoing his boss’s views and a fellow Goldman alum, Treasury Secretary Steven Mnuchin, has said the same. It’s also true their former employer probably wouldn’t suffer much if the business of taking deposits and making loans was isolated from selling bonds and underwriting stocks, although the question remains of whether Goldman would lose any of its access to funds from the Federal Reserve. In any case, the administration has done little to turn the idea into a concrete proposal, though Warren noted their support when she reintroduced her bank breakup bill on Thursday.
Instead, the priority has been to roll back the post-crisis Dodd-Frank reforms, the subject of an executive order signed by the president shortly after he moved into the Oval Office. Jeb Hensarling, chairman of the powerful House Financial Services Committee, also is pushing a proposal to achieve that goal. Those efforts are in turn taking a back seat to ones on healthcare, taxes and infrastructure. They’re all proving to be exceedingly difficult to navigate, especially given the lack of clear direction from the White House.
What’s more, Warren’s Democratic Party is in the minority. And the Massachusetts senator, in particular, has been a target of criticism from Trump and Republican lawmakers. It’s hard to imagine them working to advance one of her signature policy initiatives. That means even the Cohn-Warren odd couple will struggle to bring back Glass-Steagall.
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