The last-minute decision to include in the Republican platform a call to restore the firewall between commercial and investment banking comes as a surprise, because Donald Trump himself has never publicly addressed or endorsed such a reform in his year-long presidential run.
Trump did once say at a debate in New Hampshire, “nobody knows banking better than I do,” but a review of the transcripts of all 12 Republican debates shows that he never endorsed restoring Glass-Steagall, legislation first passed in 1933. Websites devoted to detailing Trump’s positions find no record of him having any opinion on the Depression-era law. The issues pages of Trump’s presidential website steer clear of anything related to banks or finance.
In fact, Trump campaign manager Paul Manafort, who first leaked word that the platform would endorse the reintroduction of Glass-Steagall, ran a campaign consulting firm in the 1980s that helped elect to Congress Phil Gramm, co-author of Glass-Steagall’s repeal. (Gramm supported Ted Cruz in the GOP primaries.)
The measure is haphazardly attached to the end of a paragraph decrying regulatory overreach by the Environmental Protection Agency, National Labor Relations Board, Federal Communications Commission, and more. Tacking on a call to restore a law that prevents private corporations from particular lines of business suggests that there wasn’t much thought put into it before Monday.
To the extent that Trump has expressed anything about financial reform, it’s been a desire to roll it back. He told The Hill last October that the Dodd-Frank law is “terrible” and “the regulators are running the banks.” Dodd-Frank’s repeal is also in the Republican platform.
Last August, Trump did address the Volcker rule, a kind of Glass-Steagall “lite” that limits some investment banking activities, like proprietary trading with depositor money, and the amount that banks can invest in hedge funds. But the comments had mostly to do with Trump’s personal relationship with Volcker. “I’m not sure if he likes [the Volcker rule], but if he’s happy, I’m happy,” Trump told Bloomberg News. “He’s a terrific guy.”
The Volcker rule is included in Dodd-Frank, which Trump wants to eliminate.
Carl Icahn, the activist investor and Trump confidant, did propose a return to Glass-Steagall two years ago. But the late addition to the platform appears more like a tactical bid to bolster support from community bankers.
Manafort, in his comments about the platform, claimed that “the Obama-Clinton years have passed legislation that has been favorable to big banks,” and that Trump would “support small banks and Main Street.” This unabashed play for community banks is mirrored in the platform, which notes the sector’s decline from 13,000 in 1985 to only 1,900 today. “Community banks are essential to ensuring small businesses have easy and affordable access to the capital they need to grow and prosper,” the platform says. “Community banks should be relieved of excessive regulations.”
Why would community banks like restoring Glass-Steagall? Because a firewall between deposit-taking and investment bank activity would force the top six banks in America to break up. This, in turn, would bolster the ability of community banks to regain market share.
In addition, the announcement gives Trump a way to appeal to Bernie Sanders supporters, who extolled Glass-Steagall restoration as a key way to cut off depositor money from excessive risk-taking in trading markets. Hillary Clinton resisted this idea during the primaries, and her husband while president signed the legislation repealing Glass-Steagall, after its critical measures had been chipped away for many years. Trump would like to paint Clinton as in thrall to big bank donors, and unwilling to break up their firms. Former Clinton advisor Dick Morris endorsed just such a strategy two months ago.
However, the Democratic Party platform also calls for “an updated and modernized version of Glass-Steagall.” With both parties endorsing the same measure, financial reformers have called on Congress to pass such a bill without delay.
“It’s up to Sen. [Richard] Shelby and Rep. [Jeb] Hensarling to make this more than an empty promise,” said Jon Green, spokesman for Take on Wall Street, a coalition of pro-reform groups, in a statement. Green was referring to the two chairpeople of the Congressional committees with jurisdiction to revisit Glass-Steagall. “They should quickly back up these words with action,” Green added.
Legislation does exist to bring back Glass-Steagall. In 2013, Sen. Elizabeth Warren, D-Mass., introduced the 21st Century Glass-Steagall Act, which restores some provisions of the old law, while restricting “shadow banking” activities from receiving cross-subsidies from the federal government.
Sen. John McCain, R-Ariz., co-authored the Warren bill, meaning that two of the last three Republican presidential nominees now support restoring the Glass-Steagall firewall between investment and commercial banks. But Shelby and Hensarling have never supported such a measure, and neither has the overwhelming majority of the GOP caucus in Congress. Democrats have never had much use for Glass-Steagall restoration either; Warren’s bill, introduced a year ago, only has eight co-sponsors that caucus with Democrats, out of 46.
That creates a unique situation, where the platforms of both parties support a piece of legislation that neither party has had much interest in advancing for the past several years.