President Donald Trump on Monday said he is considering breaking up big Wall Street banks, by splitting their consumer business from their investment operations.
“I’m looking at that right now,” he told Bloomberg News.
White House spokesman Sean Spicer said there were no further details and no announcement was planned.
Shares in banks initially fell after President Trump’s comments before recovering ground.
US banks were permitted to own both High Street banks and investment banking operations in 1999, when the Glass-Steagall Act was repealed.
Some argue the repeal set the groundwork for the financial crisis in 2007-8.
During the campaign, President Trump expressed support for a “21st-century” Glass-Steagall Act.
“There’s some people that want to go back to the old system, right? So we’re going to look at that,” the president told Bloomberg, in response to a question about breaking up the banks.
But the odds of anything happening this year are low, according to Larry McDonald the author of A Colossal Failure of Common Sense, a book about the collapse of Lehman Brothers.
While keeping consumer deposits and riskier banking practices separate makes sense, Mr McDonald said the Trump administration has more pressing priorities, such as tax reform.
“With all the lobbyists and everything they have to do… this is way down the list,” he said.
‘Score points’
Mr McDonald said there are good political reasons why the president might want to take a tough line on the banking industry.
“The average little guy loves to hear this, so he’s going to score points with his base and it may not hurt him politically at all because it may not get done,” he said.
The idea has support from some key US congressional figures, such as Democrat Elizabeth Warren and Republican John McCain.
But any change is likely to face stiff resistance from the banking industry, making approval in Congress difficult.
The American Bankers Association said on Monday it opposes reintroduction of Glass-Steagall.
“There is broad agreement, including among all our bank regulatory agencies, that Glass-Steagall would not have prevented the crisis or the housing market collapse,” association president Rob Nichols said in a statement.
Regulation pledge
President Trump has also promised to roll back legislation covering the banking sector, including the Dodd-Frank regulations introduced following the financial crisis.
Dodd-Frank was designed in part to protect consumer banking operations from riskier investment banking business.
Among other provisions, it required banks keep money in reserve at levels the president has said he thinks are onerous on smaller operations.
Earlier, US Treasury Secretary, Steve Mnuchin said he believed the American economy could be growing at a rate of three percent within two years, thanks to the administrations proposed tax reforms.
On the campaign trail Trump promised growth of 4% a year. The economy is currently growing at a rate of 0.7%.
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