In an unexpected statement made by the former COO of Goldman Sachs and current director of Trump’s National Economic Council, Gary Cohn told a private meeting with lawmakers on the Senate Banking Committee on Wednesday evening that he could support legislation breaking up the largest U. S. banks – a development that could provide support to congressional efforts to reinstate the Depression-era Glass-Steagall law – and impact if not so much his former employer, Goldman Sachs, whose depository business is relatively modest, then certainly the balance sheets of some of Goldman’s biggest competitors including JPM and BofA.
According to Bloomberg, Cohn said he generally favors banking going back to how it was “when firms like Goldman focused on trading and underwriting securities, and companies such as Citigroup Inc. primarily issued loans.”
What Cohn may not have mentioned is that with rates as low as they are, issuing loans – i.e., profiting from the Net Interest Margin spread – remains far less profitable than trading and underwriting securities in a world in which virtually every “developed world” central banker is either directly spawned from Goldman, or is advised by an ex-Goldman employee,
The remarks surprised some senators and congressional aides who attended the Wednesday meeting, as they didn’t expect a former top Wall Street executive to speak favorably of proposals that would force banks to dramatically rethink how they do business.
Yet Cohn’s comments echo what Trump and Republican lawmakers have previously said about wanting to bring back the Glass-Steagall Act, the Depression-era law that kept bricks-and-mortar lending separate from investment banking for more than six decades.
This post was published at Zero Hedge on Apr 6, 2017.