GOP Lawmakers Blindsided by Trump's Embrace of Glass-Steagall
The eleventh-hour move by the Donald Trump campaign to add a plan to reinstate the Glass-Steagall Act to the Republican platform caught GOP lawmakers off guard, with some of them expressing disappointment with the decision.
While the 1930s-era law, which separated commercial and investment banking activities, is strongly supported by progressive Democrats, it is not popular among most Republican policymakers.
"I was completely surprised," Rep. Steve Stivers, R-Ohio, a member of the House Financial Services Committee, said in an interview here hours before Trump's formal nomination Tuesday evening. "It was a late addition. I am not sure how it happened. I was very disappointed that that got included, because frankly I think that will make our banks more vulnerable if we try and put Glass-Steagall back in and make them more likely to fail, because they will be more focused on fewer classifications of assets."
Another panel member, Rep. French Hill, R-Ark., was also taken aback.
"That issue per se was not something that contributed to the financial crisis," Hill said in a separate interview here. "Commercial bank underwriting and distributing of securities is not something that was a major contributor to the financial crisis."
Stivers said the Trump campaign might have been wise to seek more input from the banking industry before including it in the platform.
"I think it was put in there and supported by folks who maybe don't understand how banking works," said Stivers, who was interviewed in a subterranean lounge that resembled the kind of speakeasy that would have existed when Glass-Steagall was written. "If we do that, the other thing is we will never be a magnet for money-center organizations, because the biggest banks in the world will be in Europe and Asia instead of here in the United States. They obviously didn't consult very many folks on the Financial Services Committee or folks that knowledgeable, which is too bad."
Although the move alarmed lawmakers, they nonetheless maintained that Trump would be a better choice for the economy and the country than his rival, former Secretary of State Hillary Clinton, who is expected to be formally nominated at the Democratic convention next week in Philadelphia.
"People are beginning to come together because Hillary is no option. She wants to take your profits, your operating capital and wants to tax everything," Rep. Roger Williams, R-Texas, said in an interview here. "A lot of us have a lot of conservative ideas to get the economy going … that would never happen under President Obama."
Republican lawmakers see Trump's decision to tap Indiana Gov. Mike Pence as his running mate as a positive sign and believe the former Congressman could be influential when it comes to policymaking.
"Mike Pence is a solid thinker and a conservative leader and I think hopefully he will have real influence on the administration's way they interpret laws and the way they carry out the laws throughout the [federal financial] agencies," said Stivers, who briefly overlapped with Pence in the House. "I am hopeful he will have a major voice."
Hill commended Pence's work in Congress and Indiana and added that he and Trump complement each other.
"You have got Pence, who knows business, but who also knows how policy works at the state and federal level and you have Trump, who is an instinctive entrepreneur. I think that would be a pretty dynamic combination to listen to a 'How to get an economy going faster,' " Hill said.
Many Republicans view federal regulators as having too much power and going beyond congressional intent, but the next president will be able to appoint people to key positions at the Federal Reserve Board, Federal Deposit Insurance Corp. and eventually the Consumer Financial Protection Bureau that will shape how financial regulation is carried out.
Democrats have called for fewer bankers to serve as heads of the regulatory agencies and have included language in a draft of the party platform that would prevent executives of financial institutions from serving on the boards of the regional Fed banks.
"I don't understand the negative feelings about having people that understand that industry help work on macro policy solutions," Hill said.
Stivers said having a background in the industry is important "but most importantly it is about demeanor, somebody that will listen and work together with the industry to find solutions that work, that don't take away choice from consumers."
Republicans have been hard-pressed to roll back the 2010 financial reform law that many believe is disproportionately hurting community banks. House Financial Services Committee Chairman Jeb Hensarling has introduced the Financial Choice Act, which would create an alternative regulatory framework for well-rated banks that hold higher amounts of capital.
That plan is strongly embraced by Republicans on the committee — and they hope Trump will support it as well.
"It helps balance [the playing field] because approximately over 6,000 community banks already meet" or almost meet the capital requirements to be eligible for the alternative framework, Hill said.
The bill is highly unlikely to pass this year, but some lawmakers are pushing for a committee vote to show the next president it has support.
"I would love to mark up the bill if there is time this year and go into the new presidency with a concrete direction that the House thinks is the way to go," Hill said.
Stivers also said a new president could take other approaches to reforming Dodd-Frank, including doing a "call for evidence" — a system being implemented by European bank regulators in which they re-evaluate which regulations are working.
Congress "can try and change the laws, but most of the" financial regulations "we are talking about aren't even written into the laws," Stivers said. "They are interpretations of the agencies, so we have to have the administrators on board. We have to make sure the agencies actually work with whoever the next administration is to try and get a call for evidence."