Monday, May 01, 2017

Big bank break-up?

According to Bloomberg News and to Gary Cohn,  Trump still supports his call during the campaign for a 21st century Glass Steagall.   Whether he has any understanding of what that entails is doubtful. While in some quarters across the political spectrum that would be welcome, the purpose of this post is not to discuss the merits of the idea.  It is to discuss the rationality of letting Donald Trump and his team reorder the national and in fact global banking system.

It is no mystery why Trump is in favor of the idea.  While he is tolerant of Jamie Dimon and other bankers, many large banks more or less blackballed him by the early 1990's.  Trump lied to bankers and sued bankers during his scrapes with bankruptcy in the late 1980's.  He was widely viewed as untrustworthy.  Of the four major banks that led to today's JPMorgan Chase, only one lent to him at all after 1991.  The original JPMorgan, Chemical Bank, and Manufacturers Hanover ended their relationships with him at that time, or a year or two earlier, while Chase Manhattan maintained what could only be called a schizophrenic relationship with Trump, befitting of their less than stellar management before they were gobbled up by Chemical in early 1996.

There is one other explanation for Trump's opinion on this.  His head of the National Economic Counsel and most favored economic adviser at the moment was a long time Goldman Sachs banker who had risen to President of the firm.  Traditionally commercial banks and investment banks were serious rivals, especially as the commercial banks were allowed to expand their powers.  Cohn's DNA would be such that he would enjoy seeing the break up again.  The balance sheets that the traditional bank run investment banks have has put huge pressure on Goldman Sachs, Morgan Stanley, and the tribes of pure investment banking employees that still exist.  It is natural that a Street fighter like Cohn would enjoy the battle over a break up.

More to come...but the point of the above is to suggest that any such considered action should not be based on intuition, resentments, or competition.  This is a serious topic that could become a maelstrom of bad ideas.  Opinion here is that big banks are necessary and beneficial if regulated and managed well.  The Trumpeted great America would diminish if it participated piece meal in global banking. Goldman Sachs would not care about that in the least.

 In his own unique way, Trump is clueless.  Maybe that is said in different ways post after post.  It doesn't make a difference. Read Evan Osnos's article in the current New Yorker magazine about letting Trump go, if a reader feels the same.

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