The debate on re-enacting the Glass-Steagall Act in the United States has become very hot over the past weeks, in particular around the Senate confirmation of Steven Mnuchin as Treasury Secretary. At the Senate Finance Committee hearing on the issue on Jan. 19, Democratic Senator Maria Cantwell used the entire time allotted to her to confront the former Goldman Sachs banker on separating commercial banks from investment banks, which was widely covered in the media. Asked point-black “do you support returning to Glass-Steagall”, Mnuchin replied: “No, I don’t support going back to Glass-Steagall as is.”
Pressed by Sen. Cantwell, herself a leading sponsor of Glass-Steagall legislation in the last Congress, Mnuchin admitted that although the Republican Party Platform calls for Glass-Steagall, what he discussed with Donald Trump and what he claims is now Trump’s position is not Glass-Steagall but a version of the Volcker rule, which only bans commercial banks from proprietary trading.
One argument Mnuchin raised against Glass-Steagall is that, according to a recent Federal Reserve report, it “would have very big implication to the liquidity and the capital markets, and banks being able to perform necessary lending.” In other words, that the original law separating the banks would result in a less liquid bond market for economic investments, and less lending by banks.
The truth is that that Federal Reserve report, released last September, criticized the Volcker Rule on that point, not the Glass-Steagall Act. During the roughly 60 years when Glass-Steagall was enforced, the United States’ capital markets for bank lending and bond issuance were the strongest and deepest in the world.
U.S. Economist Lyndon LaRouche reacted very strongly to Mnuchin’s misrepresentation and position, calling him a “destructive force” who “is not qualified” for the job. Mnuchin “will make a mess in the Trump administration” and the President should get rid of him. “I think there is no other option but to state that he must be gotten out” of the Treasury, LaRouche concluded.
What Donald Trump will end up doing on the question of reining in Wall Street and separating the banks, as Franklin D. Roosevelt would have done, is the most crucial issue for the new Administration. Although Trump has not said anything on the issue since he was elected, his press secretary Sean Spicer was asked about it explicitly by an EIR correspondent at his press conference on Feb.1. Asked whether “the President still supports Glass-Steagall”, he responded “The President’s position is consistent.”
Further reading: Mnuchin is a Soros mole.