Warren Pushes Trump Administration on Plan to Break Up Megabanksby
Senator says discussions with administration have been ‘good’
Reviving Glass-Steagall would protect consumers, she says
U.S. Senator Elizabeth Warren is eager to pursue legislation that would break up Wall Street megabanks and has pushed the issue with members of the Trump administration.
“We’re certainly reaching out to the administration," Warren, a Massachusetts Democrat, said in an interview with Bloomberg Television airing Wednesday. “‘So far we’ve had some good conversations and that’s what I want to see happen. I’m ready. Because you know, this is one of those basic things -- folks on Wall Street may resist it. But most of the American people get it."
At issue is the Glass-Steagall Act, a Depression-era law repealed in 1999 that had separated investment and commercial banking. Warren says reviving it would make the financial system safer, while protecting consumers from Wall Street’s risky market bets. President Donald Trump and other administration officials, including top White House economic adviser Gary Cohn, have also spoken favorably of reinstating some version of the law.
Warren has repeatedly introduced a bill that would prohibit big banks from having a retail and an investment business, which would probably force firms like JPMorgan Chase & Co. and Citigroup Inc. to split apart. In the Bloomberg interview, she said her legislation would help smaller banks and investment firms compete with bigger rivals, while simplifying financial regulations.
“Your grandma’s checking account and banking account, that kind of banking should never be put at risk by the kind of high stakes gambling that goes on on Wall Street," Warren said. “Separate the two, build a wall."
But the prospect of a politically divided Congress approving any major financial services bill is slim, particularly one that would force banks to dramatically revamp their business models. Only one Republican in the Senate, John McCain of Arizona, has endorsed Warren’s reinstatement of Glass-Steagall.
While Trump has asserted that he might support breaking up lenders, his administration hasn’t laid out a specific plan. The lack of clarity, along with mixed messages from the president, have perplexed bankers. They have cheered Trump’s pledge to roll back financial rules, but been put off by the populist anti-Wall Street rhetoric that helped get him elected.
In the Bloomberg interview, Warren also weighed in on the nation’s housing-finance system. Fannie Mae and Freddie Mac, which back about 40 percent of U.S. home loans, have been under the government’s grip since the 2008 financial crisis. An overhaul is needed before that can change, she said.
“I think that’s looking at it the wrong way,” Warren said when asked whether it’s viable to let Fannie Mae and Freddie Mac build up capital and then free them from government control. “We’ve got to rethink how we do housing financing.”
On tax policy, Warren said giant corporations have “plenty of tax breaks as it is” and don’t need to see a rate reduction. Everybody, including corporations, should pay their “fair share” so the government has enough revenue to invest in “America’s families,” she said.