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Secretary Mnuchin’s Sophistry on Glass-Steagall—No Need for Banking Separation

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EIRNS—In an appearance today before the Senate Banking Committee, Treasury Secretary Steven Mnuchin engaged in several levels of sophistry on Glass-Steagall, claiming that he is for a "21st Century Glass-Steagall," just not one that involves separating investment banks from commercial banks, or breaking up the megabanks, as is called for in the 21st Century Glass-Steagall Act of 2017 (S.881) co-sponsored by Senators Elizabeth Warren, Maria Cantwell, John McCain, and Angus King.

So, as Sen. Warren (D-MA) demanded to know, what is he for? She reminded him that both President Trump and the administration have repeatedly said they support a "21st Century Glass Steagall," that it was included in the Republican party platform, and that Mnuchin, himself, had stated in his confirmation hearing that "we need a 21st Century Glass-Steagall." Now, she argued, "you’re saying the opposite."

An increasingly uncomfortable Mnuchin then claimed that "there are aspects of [Glass-Steagall] that may make sense," but "we never said that we supported full separation" of investment and commercial banks." Sen. Warren challenged him:

"There are aspects of Glass-Steagall you support, but not breaking up banks and separating investment banks from commercial banks? What do you think Glass-Steagall was if that’s not right at the heart of it?"

True to his Wall Street banker pedigree, Mnuchin insisted that

"integration of commercial and investment banks has gone on for a long time—that’s not what caused the problem during the [2008] financial crisis... We do not support separation of banks and investment banks...that would have a very significant impact on liquidity and lending,"

on the economy, and the financial markets, he warned. Describing Mnuchin’s statements as "something straight out of George Orwell," Warren again challenged him:

"what does it mean to be in favour of a 21st Century Glass-Steagall, if it doesn’t mean breaking up the banks, those two [investment and commercial] functions?"

Unwilling to respond, Mnuchin was reduced to saying that he’d be happy to meet with Warren to explain himself, and pleaded that he never knew that the bill she is cosponsoring is called "the 21st Century Glass-Steagall Act," with which he clearly didn’t want to be associated.