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Make Financial Reform About Simplicity

There's a better way than Glass-Steagall.
How radical does Cohn aim to be?

How radical does Cohn aim to be?

Photographer: Andrew Harrer/Getty Images

President Donald Trump's top economic adviser -- former Goldman Sachs executive Gary Cohn -- has come out in favor of a radical reform: restoring the Depression-era Glass-Steagall Act, which for much of the 20th century separated bread-and-butter commercial banking from high-octane investment banking.

The thinking behind this proposal is appealing. The basic idea is to narrow the scope of financial activities that taxpayers support through deposit insurance and emergency loans from the Federal Reserve. In principle, this makes a lot of sense. The challenge is to do it in a way that simplifies the overly complex rules that banks and other firms have had to contend with since the Dodd-Frank reforms. Glass-Steagall isn't the best approach.