The headline you're going to see is GARY COHN: GLASS-STEAGALL TO REVIVE LENDING. Or something. That's because on Friday the president's right-hand-man on the economy, a former Goldman Sachs president and card-carrying globalist, reaffirmed his commitment to Glass-Steagall, suggesting that splitting up the commercial banking and investment banking functions of our largest financial institutions will redound to the benefit of all.
But we remain unconvinced that Gary, in his heart of hearts, really wants to hop on Elizabeth Warren's hobbyhorse. Not that he's still taking orders from best buddy Lloyd or anything – just that his alleged support of a “New Modern Twentieth-Century Glass-Steagall” makes about as much sense as him being in the White House in the first place, a fact that remains somewhat mind-blowing.
But don't take our word for it. Just read the transcript to get a sense of how truly jazzed Cohn is to return to 1933. (The Glass-Steagall question comes just after Cohn delivered a desultory answer about the administration's plan to boost economic growth by slashing red tape.)
Q: Within the last 48 hours there have been reports here that you are open to the possibility of reinstituting some form of Glass-Steagall – could you connect that sort of re-regulation up with what you just said?
COHN: Remember that the president during his campaign talked about a modern, 21st-century Glass-Steagall. I was asked about that at the Senate Banking Committee, at a bipartisan committee meeting, and I talked about the president’s policy that he ran on about having a new, modern, 21st-century Glass-Steagall.
Well put. But uh, want to add some content to that answer?
Q: Does that help get more lending being done to more small- and medium-sized companies? What would that accomplish?
COHN: Look, we would like to get banks lending again. What we’re worried about is this one-size-fits-all regulation. So right now we’ve got this massive set of regulation that’s built to regulate all banks as if they’re equal. If we come up with a 21st-century modern Glass-Steagall we may be able to tailor regulations for different aspects of the financial markets and different aspects of the financial institutions and that would allow banks to get lending more aggressively to small and medium size companies.
Remove the obligatory reference to Glass-Steagall here, and you have something like the Financial CHOICE Act without the capital requirements, i.e., standard-issue hammer-and-chisel financial deregulation. This, as Cohn has repeatedlyassured us, will be the laxative big banks finally need to get small-business lending really flowing.
Let's leave aside whether it's true that rolling back capital and other rules will get more loans into the hands of mom and pop – though there's plenty to squabble over on that front – and focus on Glass-Steagall. Does Cohn really believe that de-Marcusing Goldman or tearing Citi asunder will pave the way for more better and more lending?
Probably not. The more likely story is that Donald Trump has a mid-1980s view of the banking world and just happens to like the words Glass-Steagall, particularly when issued from the mouth of his top Goldman guy. For Cohn, dutifully obliging the boss, “A New Modern Twentieth-Century Glass-Steagall” has become a sort of mantra, not words with an actual meaning but a mere string of syllables that facilitate detachment from our flawed earthly plane and ruminate on a nirvana of perfectly tuned financial regulations, where assets and liabilities sing in cosmic harmony, every conceivable risk is perfectly hedged, and Elizabeth Warren is consigned to nonexistence. For Cohn, “A New Modern Twentieth-Century Glass-Steagall” is transcendence.
Anyway. In the course of writing this article, the Wall Street Journal reported that Cohn might end up chief of staff, which is kind of karmic, in a way.