Morning everyone, hope we are all having a good start to the week.
The following quote is from this article that I came across this morning.
“I’m looking at that right now,” Trump said of breaking up banks in the 30-minute Oval Office interview. “There’s some people that want to go back to the old system, right? So we’re going to look at that.”
The article went on to further discuss breaking up banks by saying
During the presidential campaign, Trump called for a “21st century” version of the 1933 Glass-Steagall law that required the separation of consumer and investment banking. The 2016 Republican party platform also backed restoring the legal barrier, which was repealed in 1999 under a financial deregulation signed by then-President Bill Clinton.
The article goes on to discuss a few other topics such as increasing the U.S. gas tax to fund infrastructure development, meeting with Kim Jong Un, and other aspects of public/foreign policy.
Do you guys believe splitting up consumer and investment banking is a good route to go? Do you think banks who had consumer and investment banks tied together helped create the recession in 2008? (Yes I have seen and read "The Big Short" there is no need for a discussion on how the crisis started)
Happy Tuesday.
What do people even think this will accomplish? I've never heard a benefit from any of the proponents, it's just anti wall street rhetoric that sounds good to the uninformed masses. The volker rule basically did separate them, deposits aren't used for any prop activity. Shrinking US banks balance sheets will just make foreign banks more powerful in the market and the US a less desirable place to do business.
He talks about cutting a lot out of Dodd-Frank, then talks about breaking up Wall Street banks. I can't say I believe a ton of what this man says he will do at a single point in time, reading him is like reading a balance sheet. I'll wait to see the cash flows before I make any judgments.
This was my main question on this article... I don't see a benefit really. Just seems like everyone hates "Wall Street" and wants high finance to cease to exist.
Yea I can't think of an actual benefit and I've never heard Bernie, Warren, Hillary, Occupy weirdos, anyone actually give a benefit. It's just; we bailed them out (and profited off of TARP interest/dividends) so we have to break them up! Legally and structurally how exactly would this work considering the main holding companies? XYZ Banking Corp. parent of XYZ CIB and XYZ commercial bank would have to create 2 separate entities under 2 separate holding companies independent from the other in the event of bankruptcy? Basically what would happen to ownership of JP Morgan and what would happen to the ownership of Chase and the what happens to JP Morgan Chase & Co.?
This. I think reinstating Glass-Steagall will just cause chaos and not accomplish much. Plus I don't trust Trump at all, him and his Goldman buddies are ultimately looking to deregulate as much as possible
This. Goldman's basically trying to leap over the other BB banks which are sustained by their high commercial banking divisions. America's biggest bank is JPM, lead by Dimon, an avowed popular influential liberal Democrat, and Cohn-Mnuchin don't like that, and neither does GS, so they decided to play the President card. Just ask DickFuld about the last time it happened.
The main benefit of breaking up the banks is reducing risk to the financial sector. JP Morgan, for example, has $2.4 trillion of financial assets; if it were to fail, it would be a real risk to the financial sector. Dodd-Frank, however, allowed for the regulatory agencies to paint such a broad brush that financial institutions with several billion in assets (in relation to the $82 trillion of worldwide dollar denominated financial assets) were getting labeled as critical risks to the financial sector and facing heavy regulatory burdens. For example, GE unwound its financing arm with $32 billion in assets as it was crushed under the regulatory burden of getting labeled as a critical risk to the financial sector.
Reducing the size of the largest banks would do much more to reduce risk to the financial sector than micromanaging small lenders.
Exactly, this is the point.
I think what people are most frustrated by with Wall Street (and large corporations in general) is that the organizations themselves protect high level employees from criminal prosecution when they engage in blatant illegal activity. The company gets fined, the stock price dips for a couple days and life goes on. At most, individual people might get fired but that's about it. Of course it's notoriously difficult to prove if an individual should be held criminally responsible for the action of a multinational company but it's easy to understand how it would be angering to some people that you can be put in jail for a few years for stealing a candy bar from a gas station but receive a huge severance package and no jail time for knowingly and systematically defrauding customers.
Well, realistically, illegal activity is really just less than stellar performance. And we know how common mediocrity is.
That's just not true. Look at what Wells Fargo did with creating duplicate accounts without customer permission. They were fined a few hundred million dollars but that's about it. That's just a recent example. Plenty of other examples where banks engaged in blatantly fraudulent activity and nobody was held criminally responsible.
Sure. You want some line between B2B(IB) and B2C(Consumer/Commercial) banking. Once B2C companies who normally runs on tight margin enter the B2B market, IB competition becomes too intense. I guess companies make terrible mistakes when competition becomes too heated. You need to make these companies focus on their core business- B2C in B2C and B2B in B2b because they are two very different animals.
Well it seems like implication will be enormous to financial community. Banks like JP Morgan/Wells Fargo's IBD will be gone as they will be forced by the regulators to sell the unit.
Winner: Goldman Sachs, Morgan Stanley, , Rothschild,Lazard, Evercore.... Loser: JP Morgan, Wells Fargo, Citi, Bank of America, Barclays, Stifel.....
Other banks?
Do you think that's what would happen, just forced sales and strong IB's would buy the weaker and strong Consumer's would buy the weaker and they would just consolidate to their strengths? Wouldn't you worry about Chinese banks gobbling these businesses up in the event they were for sale? I'm not sure I would feel comfortable with my gov't forcing sales and dramatically disrupting a multi century long industry, whether it be the industry that I work in or not.
First off, Glass Steagall happened once already. This would not be the first time. Nobody expected Trump to win the election in the first place. It happened. I am not say it is going to take place for sure but do not rule out any possibilities. During Glass Steagall in 1935, IB division of JP Morgan left the company and found a new one -Morgan Stanley. They did not sold the IBD to another bank. Morgan Stanley achieved 24% market share that year.
I believe if this happens, JP Morgan's IBD will be sold to Morgan Stanley. For other banks, I think IBD will become independent company like Morgan Stanley was founded in 1935.
Chinese banks will not be gobble up US banks especially when Trump's in office.
I love how the how the headline reads "breaking up the banks" and the reality reads "contemplating Glass-Steagall". It's almost as if people imagine that big banks did not exist before 1999.
It's like my non-stop, let-down iPhone News headlines: "Mnuchin says Trump has no intention of releasing tax returns". What Mnuchin is acutally quoted as saying: "...until the audit is over". YUGE difference. WOMP WOMP.
graham leach bliley (repeal of glass steagall) happened in 1999, but let's not forget the salomon treasury bond scandal of the 90s and the S&L crisis of the 80s and 90s, not to mention LTCM & Michael Milken. it's not like the banks were totally fine before glass steagall was repealed.
these laws like dodd frank are designed to prevent bad behavior, and while I think some of the mortgage reforms were good additions to the law books, you can't regulate greed out of the system. in order for banking to be profitable, you have to allow some level of risk taking, which means some people will fuck up. I think all you try to do is minimize collateral damage and take away unnecessary safety nets. if they think reinstating glass steagall will do this, fine. but I'm not convinced.
caveat: I wouldn't care either way, it would probably make my PWM firm more valuable.
The GOP has spent the last 7 years taking the teeth out of Dodd-Frank and the pitch is to enact something more stringent?
This is just to appease the Democrats, Liberals, Left, anti-Capitalist, and people who don't even understand what investment banks do and whose knowledge is limited to The Big Short and Wall Street (1987).
All this is is simply a cycle. When the markets slow down and we're faced with economic conditions like the 1970s we'll elect a President that is pro-business who will deregulate and then we'll have the highs and then a crash after which we'll elect a Democrat who'll reign in on Wall Street rinse and repeat.
Trump says a lot of things, I generally deem most of it as him just pulling stuff out of his ass. Holds no real relevance.
I actually tend to agree with this. I wouldn't worry or celebrate until something is actually introduced in congress.
Slow claps
He's saying it to make his core (blue collar mid-America) voter base happy.
It was a promise during his campaign.
Never going to happen in a million years.
MonacoMonkey I don't think blue collar America cares as much about Wall Street as your Liberal city folks (mostly younger people). Nonetheless if we have a Democrat in the WH and both Senate and House you may see this come to fruition unless the Blue Dog Democrats sound the voice of reason and push back.
Ah ah Trump is a real ripoff. Make European banks great again with this
Even if Trump wanted to break up the banks does anyone think he has the ability to pass such complicated legislation through Congress?
There is no point in analyzing Trump's words when he has objectively gone back on a wide array of topics from the border wall to China being a currency manipulator to ripping up the Iran deal.
Even his budget plan was completely disregarded by Republicans in Congress with Ryan passing a bill that gave Democrats 90% of what they wanted and very little that Republicans got except the obligatory military raise. (And the Senate is disregarding his health bill)
I am not trying to be pro or anti Trump, but even his top supporters say that his words don't matter. And there is nothing that Trump has done in the last 100+ days that proves he has the ability or patience to push a bill against his own party.
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