In the midst of trying to explain the riddle of productivity growth in less than 30 seconds and pretending not to hear a moment of ethically questionable praise for his Lego Batman movie at Thursday's Senate banking hearing, Treasury Secretary Steve Mnuchin faced the most vexing question possible: What does that financial-regulatory Rorschach test, the “Twenty-First Century Glass-Steagall,” really mean?
His answer (slightly paraphrased): Not a thing.
The topic came up during Sen. Elizabeth Warren's pump-action-shotgun interrogation of Mnuchin, in which she asked whether he could explain why the Trump presidential campaign and GOP platform had recommended reinstating Glass-Steagall, yet Mnuchin himself had, minutes earlier, said, “We do not support the separation of banks from investment banks.” Why the reversal?
Mnuchin's response at times approached the cosmic incomprehensibility of a Buddhist koan:
There actually wasn’t a reversal. The Republican platform did have Glass-Steagall. We, during the campaign . . . specifically came out and said we do support a 21st Century Glass-Steagall, which is – that means that there are aspects of it that we think may make sense. But we never said before that we supported a full separation of banks and investment banking, if we—
Here Warren interjected: “There are aspects of Glass-Steagall you support, but not breaking up the banks and separating commercial banking from investment banking? What do you think Glass-Steagall was if that’s not right at the heart of it?”
The exchange is worth quoting in bulk:
MNUCHIN: Again, I’m well aware of what Glass-Steagall was. As you may know the original concern about Glass-Steagall was about conflicts, not about credit risk. And if we had supported a full Glass-Steagall we would have said at the time that we believed in Glass-Steagall and not a 21st Century Glass-Steagall. We were very clear in differentiating it. I have realized and I had not realized that your bill was named the 21st century Glass-Steagall—
WARREN: And it has been for three years now.
MNUCHIN: I apologize that I was not aware of that, so—
WARREN: I still haven’t heard the answer to my question. What do you think Glass-Steagall was if it wasn’t separating commercial banking from investment banking?
MNUCHIN: Again, the fundamental part of Glass-Steagall was, as you’ve just outlined, the separation of investment banking from commercial banking because people were concerned about conflicts—
Again there's some back-and-forth as Warren takes on the look of someone watching a gory athletic injury in slo-mo. “This is like something straight out of George Orwell,” she says.
Yet she takes another crack at it. Again, worth quoting in full:
WARREN: I have to try this one more time. What does it mean to be in favor of 21st Century Glass-Steagall if it does not mean breaking apart these two functions in banking?
MNUCHIN: You know what, I’d be more than happy to come and see you and follow up—
WARREN: Just tell me what it means!
MNUCHIN: Had we – we never came out and said separate banks from investment—
WARREN: Just tell me what 21st Century Glass-Steagall means if it doesn’t mean breaking apart those two functions. It’s an easy question – or an impossible question.
MNUCHIN: It’s actually a complicated question because there’s many aspects of it, OK? The simple answer, which we don’t support, is breaking up banks from investment banks. We think that would be a huge mistake. But again, I’m more than happy to listen to your ideas on it. You obviously have strong views, and I’d be happy to follow up and listen to you.
WARREN: This is just bizarre, the idea that you could say we are in favor of Glass-Steagall but not breaking up the banks.
MNUCHIN: We never said we were in favor of Glass-Steagall, we said we were in favor of a 21st Century Glass-Steagall. It couldn’t be clearer!
There you have it! As we have long held, the Trump administration's “New Modern Twenty-First-Century Glass-Steagall” is just a vacuous string of mouth-sounds with no bearing on anything but the ability of Gary Cohn and Mnuchin to make it through an interview without sounding like a moron.
Whatever one's feelings about actually bringing back some form of investment/commercial banking separation – which even well-informed pro-regulation types dismiss as misguided – it's hard to muster sympathy for Mnuchin here. If the administration doesn't support Glass-Steagall, why not just drop it? Who are they trying to win over here? The lifetime fDemocrat steelworker who just can't bear the knowledge that the same Citibank where he cashes his checks also securitizes commercial mortgages? The Liberty University admissions director who will cast her next vote for whoever will both defund Planned Parenthood and make Goldman Sachs spin off Marcus? Why the contortions?
Perhaps they just have bigger steaks to char.