Our President Trump met with the CEO’s of various small and community banks earlier today as part of the financial reform that underpins much of the overall Trump economic agenda.
Previously President Trump issued an executive order which modified, actually tiered, the choking rules, regulations and compliance reporting within Dodd-Frank banking rules which buried smaller locally operated banks with the same regulatory framework as massive financial institutions.
The next aspect of Trump’s financial reform will most likely come in some form of reinstatement of the Glass-Steagall Act. President Trump personally put the reinstatement of Glass-Steagall into the GOP platform as part of uncoupling Wall Street financial policy from Main Street financial needs. [More explanation on that below]
[Transcript] 11:17 A.M. EST – THE PRESIDENT: Thank you, everybody, very much. Good morning and I greatly appreciate you being here. We have some real experts with us and we have some great bankers with us.
Today’s discussion is crucial to my jobs agenda and to the American people. Community banks play a vital role in helping create jobs by providing approximately half of all loans to small businesses, and that’s been dwindling because the community banks have been in big trouble.
Nearly half of all private-sector workers are employed by small businesses. We must ensure access to capital. Small businesses — small businesses to grow. Community banks are the backbone of small business in America. We are going to preserve our community banks.
You probably know this — I signed an executive order on regulation on February 3rd, I believe it was. And that’s a big executive order, a very powerful executive order. It’s taking a lot of the regulation away. You’ll be able to loan. You’ll be able to be safe. But you’ll be able to provide the jobs that we want and also create great businesses.
So it’s an honor to have you with us today, and perhaps we could go around the room. And we’ll start with Dorothy, and say who you are and who you represent.
Go ahead, Dorothy.
MS. SAVARESE: Thank you, Mr. President. I’m Dorothy Savarese. I’m from Cape Cod Five Mutual Company on Cape Cod, Massachusetts.
MS. ANDERSEN: And I’m Leslie Andersen, and I’m with the Bank of Bennington in Bennington, Nebraska.
MR. ZIMMERMAN: Tim Zimmerman, Standard Bank in the suburbs of Pittsburgh, Pennsylvania.
THE PRESIDENT: Great.
MS. ROMERO RAINEY: Rebeca Romero Rainey from Centinel Bank in beautiful Taos, New Mexico.
THE PRESIDENT: Very good.
MS. CUNDIFF: I’m Luanne Cundiff with First State Bank of St. Charles.
MR. Heitkamp: I’m Scott Heitkamp, ValueBank Texas in Corpus Christi, Texas.
THE PRESIDENT: Good. Thanks, Scott.
MS. STEWART: Laura Steward from the other Washington — Seattle. (Laughter.)
MR. SZYPERSKI: Jeff Szyperski from Chesapeake Bank from Kilmarnock, Virginia.
THE PRESIDENT: Good, thank you.
MR. BURGESS: And I’m Ken Burgess with FirstCapital Bank of Texas in Midland, Texas.
THE PRESIDENT: Good. Thank you.
Okay, thank you very much. Thank you.
Specifically demanded in 2016 by Donald Trump himself:
“We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment,” said the platform released by the Republican National Committee. (link)
♦ In most of the modern post-war industrial era (1950-1980) banking was a boring job and only slide rule bean-counters and actuarial accountants moved into that sector of the workforce. Most people don’t like math – these were not exciting jobs. Inside the most boring division of a boring banking industry were the bond departments within the larger bank and finance companies.
The excitement was in the actual economy of Main Street business. The giants of industry created businesses, built things, manufactured products, created innovation and originated internal domestic wealth in a fast-paced real economy. Natural peaks and economic valleys, as the GDP expanded and contracted, based on internal economic factors of labor, energy, monetary policy and regulation.
Main Street generated the pool of politicians because the legislative conduct of politicians had more impact on Main Street. The business agents had a vested interest in political determinations. Political candidates courted industrialists, business owners, and capitalist giants to support them. Main Street USA was in control of DC outcomes.
Despite the liberal talking points to the contrary, this relationship was a natural synergy of business interests and political influence. It just made sense that way, and the grown-ups were generally in charge of it.
♦ Commercial banks courted businesses because bankers needed deposits. Without deposits banks could not generate loans; without loans banks could not generate profits…. and so it was. By rule only 10 percent of a commercial bank’s income could stem from securities.
One exception to this 10% rule was that commercial banks could underwrite government-issued bonds. Investment banks (the bond division) were entirely separate entities. The Glass-Steagall banking laws of 1932 kept it that way.
However, mid 1970’s bank regulators began issuing Glass–Steagall interpretations -that were upheld by courts- and permitted banks and their affiliates to engage in an increasing variety and amount of securities activities. After years of continual erosion of the Glass-Steagall firewall, eventually it disappeared.
This became the origin of the slow-motion explosion of investment banking. If you look back historically from today toward 1980 (ish) what you will find is this is also the ultimate fork where economic globalism began overtaking economic nationalism.
Banks could now make money, much more money, from investment divisions issuing paper financial transactions, not necessarily dependent on actual physical assets. The transactions grew exponentially.
The bond market portion ultimately led to the ’07/’08 housing collapse, and derivative trading (collateralized debt obligations or CDO’s) generated trillions of paper dollars. Business schools in 1980 began calling this the second economy (a false economy, or the invisible economy).
The second economy, which ultimately became the global economy, is also the Wall Street investment economy. Two divergent economies: Wall Street (paper), and Main Street (real).
There is no real property, real capital, real tangible assets in the Wall Street economy. The false economy is based on trades and financial transactions, essentially opinions. Paper shifts, and buys and sells based on predictions and bets (derivatives).
Insurance products create an even larger subdivision within the false economy as hedgers wagered on negative outcomes. The money wagered is exponential – some say more than a quadrillion currently floats.
♦ Now you realize, in hindsight, there had to be a point where the value of the second economy (Wall Street) passed up the first economy (Main Street). Investments, and the bets therein, needed to expand outside of the USA. hence, globalist investing.
However, a second more consequential aspect happened simultaneously.
The politicians became more valuable to the Wall Street team than the Main Street team, and Wall Street had deeper pockets because their economy was now larger.
As a consequence Wall Street started funding political candidates and asking for legislation that benefited their interests.
When Main Street was purchasing the legislative influence the outcomes were beneficial to Main Street, and by direct attachment those outcomes also benefited the average American inside the real economy.
When Wall Street began purchasing the legislative influence, the outcomes therein became beneficial to Wall Street. Those benefits are detached from improving the livelihoods of main street Americans because the benefits are “global” needs. Global financial interests, investment interests, are now the primary filter through which the DC legislative outcomes are considered.
There is a natural disconnect.
♦ When Speaker Paul Ryan says: “Donald Trump and I come from two different wings of the party”, he is specifically pointing out this disconnect, yet few draw attention to it.
Trump represents the Main Street wing, Ryan represents the Wall Street wing.
The news and opinion punditry never take the time to explain the root cause of the disassociation, because: A) Younger punditry do not truly understand it; and B) Older punditry are compensated by large financial interests to remain willfully blind, and to ignore or not explain it.
Yes, there is a fundamental ideological conflict as an outcome of the 2016 election:
WHITE HOUSE: Today President Donald J. Trump hosted a National Economic Council listening session in the Roosevelt Room of the White House with community bankers from around the country.
The President and the community bankers—along with Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn—discussed how excessive regulation is threatening the future of community banking in America. President Trump noted that community banks are crucial to our Nation’s economy, particularly because they provide approximately half of all loans to small businesses—the engines of economic growth and job creation in the United States.
Current one-size-fits-all banking regulations have badly hurt America’s community banks. President Trump promised to work to tailor the Nation’s regulatory framework so that it accounts for the unique challenges faced by community banks. (link)