Glass-Steagall on U.S. Election Agenda; Wall Street Is Not Happy

The Republican Party convention’s passage Monday of a Glass-Steagall plank for its platform, featured by Donald Trump campaign manager Paul Manafort at his press conference, following upon the Democratic Party Platform Committee’s unanimous vote to include passage of Glass-Steagall in its platform, has set bank lobbyists into high gear, and generated a wave of teeth-knashing in Wall Street’s press. Every outlet from the Wall Street Journal to Barrons, to The American Banker, and in-between, ranted against the proposal to reinstate FDR’s Glass-Steagall law. After all Wall Street had done to rig arguably the worst presidential election in U.S. history!

Amidst the refrain that political platforms are non-binding and often don’t get implemented, Wall Street has to acknowledge that restoration of Glass-Steagall has been adopted by both parties, not because of the parties, and certainly not because of their candidates, but because it is a burning national sentiment.

The Hill wrote: “The embrace of Glass-Steagall by both parties is a telling indication of how unpopular Wall Street remains with the public, years after the financial crisis…”

Bloomberg, too, admitted that the Republican Party plank should not come as a “total surprise, given there’s little love of global investment banks in Washington right now.”

Barrons acknowledged: “The Democrats and Republicans are in agreement on one thing in this presidential election, and of all things, it’s about banking regulations. Both parties, it seems, are calling for a return of Glass-Steagall, a Depression-era banking law whose repeal in 1999 is credited by some for causing the financial crisis.”

Politico quotes two reporters from the Financial Times on how Wall Street is now “on edge… Presidential candidates do not have to follow party platforms, but big banks will be troubled by the cross-party support for legislation inspired by the 1933 Glass-Steagall act because such ideas can gain a life of their own once in official documents. Any prohibition barring investment bankers from operating under the same roof as federally insured deposits would pose an existential challenge to Citigroup, JPMorgan, Bank of America, Wells Fargo and, to a lesser extent, Goldman Sachs.”

So, too, Keefe, Bruyette & Woods investment bank’s Brian Gardner issued a note warning that Wall Street should not dismiss the possibility of Glass-Steagall being adopted: “There could be a unique political coalition forming to make changes to Dodd-Frank while at the same time reinstating the old separation between commercial and investment banking… There is an unappreciated risk that Glass-Steagall might be reimposed in 2017 or 2018… regardless of who wins the presidential election.”

Meanwhile, take note that with the July 14th addition of Sen. Jeff Merkley (D-OR) as a co-sponsor of S1709, one tenth of the U.S. Senate is now co-sponsoring the Senate bill to restore Glass-Steagall.