Donald Trump campaigned on taking the axe to what he sees as the main impediments of America’s growth prospects.
During the campaign, two industries were cited as being ripe for deregulation: banking and energy.
But judging by the sheer number of banking executives Trump has tapped for cabinet positions, it’s banking’s sprawling regulatory regime that’s likely first on the chopping block.
What Trump said on the campaign trail versus what he’s saying now – and what his cabinet picks are likely telling him – will have a huge impact on how this goal is achieved, and what – if any – upside there is for investors.
Here’s how I see “Government Sachs” playing it…
21st Century Glass-Steagall: Bringing Back the Firewall
Before he was elected, candidate Trump’s website said, “It’s time for a 21st Century Glass-Steagall.”
In other words, Trump wanted to somehow revert to the 1930s-era legislation that separated investment banks and trading operations from the commercial banks where depositors actually parked their savings.
The Financial Services Modernization Act of 1999, which tore down the last remaining vestiges of the old Glass-Steagall Act (principally to smooth the way for the illegal 1998 Citibank and Travelers Insurance merger), was spearheaded by the Treasury secretary at the time, Robert Rubin. The former Goldman Sachs CEO would earn over $100 million when he subsequently joined Citigroup.
Trump even wanted his call for a 21st century Glass-Steagall to be a plank in the Republican Party’s 2016 platform. It wasn’t.
In August, Trump called for a moratorium on new bank regulations. His supporters said it wasn’t at odds with his call for a revamped Glass-Steagall, but a signal that overregulation was different than prudent regulation.
After berating Hillary Clinton on the campaign trail for taking money from the likes of Goldman Sachs and being in the pocket of big banks, once elected he quickly changed his tune.
