Donald Trump is plotting a break-up of Wall Street banking giants, the US President said today.
The S&P 500 bank index dropped nearly one per cent on the news, yet quickly rebounded as investors shrugged off the comments. Financial stocks on Wall Street rose 0.6 per cent despite volatility caused by Trump’s statement.
“I’m looking at that right now,” Trump said in an interview with Bloomberg News in the Oval Office. “There’s some people that want to go back to the old system, right? So we’re going to look at that.”
Trump, who completed his 100th day in office over the weekend, backed a “21st century” version of the 1933 Glass-Steagall law in his presidential campaign. The law required the separation of consumer lending and investment banking.
The act was repealed in 1999 and is widely thought to have led to the rise of banking giants like Citigroup and JP Morgan. Some activists have argued that repealing the law led to the financial crisis.
Trump's treasury secretary Steven Mnuchin and National Economic Council director Gary Cohn, who are both former Goldman Sachs bankers, supported bringing back a version of Glass-Steagall. However, they haven't revealed details of what a new version might look like.