Marketplace, Thursday, April 6, 2017

There are indications that Trump administration is doubling down on something some would have thought it is anti-Wall Street. Wants to bring back the separation of plain old banking and high finance Bloomberg news reports the White House economics advisor Gary Cohen was touting this to some members of congress this week some commentators argue the repeal of 1933 Glass-Steagall act contributed to the last financial crisis but that’s a debate that’s not settled. Karen Petrou, managing partner at Federal Financial Analytics in Washington follows these matters closely.

David Brancaccio: So the Trump administration amid all its talk of de-regulating Wall Street wants to bring back some old regulation here that seems a little counterintuitive

Karen Petrou: It does but it isn’t. Because what this idea is, is returning parts of banking to a far less regulated state. Wholesale banking, investment banking, non-traditional services, this type of restructuring is very very good for you.

Brancaccio: So the higher finance parts of Wall Street might find themselves having to bare less regulation if the Glass-Steagall type rules came back but what? Plain old banking would get more regulation?

Petrou: Traditional banking would get more regulation but for the vast majority of banks I don’t think it would be all that different than what they have now and indeed they might get some relief from some of the Dodd-Frank’s tough stress test and other things. The big challenge is the very big, very diversified banks, the banks that want to be everything to everybody, and this proposal forces them to pull themselves apart into component pieces and then to wall those pieces off. But that’s a small segment of the industry.

Brancaccio: Karen, I think I remember you saw this coming from the Trump administration, were some of your clients doubtful?

Petrou: I thought that it might be essentially a very neat solution to making some very big supporters of the President happy, making community banks happy, and bringing Republicans and even very progressive democrats like Senator Warren together.