So based on a couple of reports, we definitely know that Gary Cohn went up to Capitol Hill for a friendly little chat with the Senate Banking Committee yesterday. We also know that he took a question about the notion of creating a new type of Glass-Steagall legislation and didn't scream "BAD!" before running through a wall in frantic escape and leaving a huge Gary Cohn-shaped hole in the side of the Dirksen Senate Office Building.
So now we also know that everyone is freaking out because the guy who used to almost run Goldman Sachs wants to break up the banks.
But does he?
Because he really doesn't.
Let's parse the chain of events that has led to this little misunderstanding.
As of yesterday, Gary is assumed to be suddenly way more powerful in the eyes of Beltway insiders because it seems like Steve Bannon has lost the love of our mad king President Trump. Under the new Jared Kushner administration, Gary's voice will become very loud in the West Wing, so everything he says until Trump inevitably turns on him from here on out will be imbued with way more importance than it necessarily deserves.
So right away we're looking at a perfect storm for Gary's musings to be over-analyzed while he bullshits with a room of legislators ranging from Mike Crapo to Elizabeth Warren. For all we know he was doing it Gary style (ie grundle-to-face) and Gary was feeling himself a bit too much on one of his first visits to the Senate as a White House power player. We might all be getting carried away because we don't actually know the words he said.
For instance, here's what Bloomberg seems to think happened:
In a private meeting with lawmakers, White House economic adviser Gary Cohn said he supports a policy that could radically reshape Wall Street’s biggest firms by separating their consumer-lending businesses from their investment banks, said people with direct knowledge of the matter.
The former Goldman Sachs executive who is the top White House economic adviser told lawmakers he could support legislation breaking up the largest U.S. banks, according to people familiar with the matter, a development that bolsters congressional efforts to reinstate the Depression-era Glass-Steagall law.
Both outlets agree that Cohn made his remarks while answering questions from Warren, and this might be the key to understanding what went down.
See, Warren has already tried to introduce a 21st Century version of Glass-Steagall only to see it go nowhere. Her interest in separating investment banking from retail banking is quite possibly the one thing she might have in common with the President and he probably doesn't even know that because if he did he'd be all like "Pocahontas likes Glass-Steagall? I don't like it anymore. Glass-Steagall is over."
Again, what was actually said appears in neither report so we are left to assume that Cohn was treated to the kind of subtle and measured questioning one would expect from Elizabeth Warren taking aim at the personification of her definition of evil. It would not be totally out of reason to think that Warren brought her baseball bat to the meeting, the one she had signed by Thomas Piketty before she wrapped rusty barb wire around it.
Now try to imagine the frisson in the room when Gary and Liz started verbally dancing. She has paved a path to power by playing on the public hatred for everything that Gary Cohn represents, yet he is the one now dictating White House financial policy and she is the one calling for a massive reshaping of the industry that he knows better than all but a small group of living humans. Yet the purpose of the whole conversation was to find common ground. What could go wrong?
It is not hard to see Gary Cohn trying to alleviate the tension in the room by not closing the door on whatever nonsense "A 21st-Century Glass-Stegall" means. We do not believe for even a moment that Gary will actually shepherd through a law that totally separates retail and investment banking (unless he has some latent Freudian yearning to murder Marcus Goldman in its crib as some sort of warped revenge on Lloyd Blankfein), and even if he did it would controvert reality to imagine him working closely with Warren to create it.
That is why we think the WSJ might have been a little more on the nose with its take on the meeting:
Mr. Cohn expressed an openness to working with Ms. Warren on the issue, and said he could support a simple policy completely separating the two businesses, these people said. There are various ideas for restoring some form of Glass-Steagall, running the gamut from splitting apart firms completely to separating their various operations under an umbrella holding company.
So, yeah, Gary Cohn is maybe not totally opposed to the latter idea: A law that fucks Citi and BofA a bit but leaves the rest of Wall Street pretty much intact.
While we wrote this, Reuters reported that the White House has confirmed Gary's statements. That would usually be a huge help in clarifying lame think-pieces like this one but in this particular case we don't actually know what Gary actually said to the Banking committee and we don't know which faction of the White House is confirming it, so we therefore don't know what version of the truth is being used over there today.
In conclusion, talking about a "new Glass-Steagall" is dumb not even Gary Cohn can float above the chaos these days.