Glass-Steagall, Dodd-Frank, Trump-Clinton: What Donald Trump and the Democratic Party Have in Common
July 28, 2016 - The Republican National Convention is over. The Democratic National Convention is over. The results: Donald Trump, the Republican nominee, will be running against Hillary Clinton, the Democratic nominee, in the 2016 election. All of this adds up to, what may be, one of America’s most historic and heated presidential races to date. It’s already been a long road and hopefuls have come and gone. Of those that remain, Donald Trump seemed the least likely to make it this far. Originally, Trump’s candidacy seemed more like publicity for Trump, with news media covering every word he said from every angle imaginable, instead of a serious bid for the presidency. Now, it’s obvious that Trump is to be taken seriously and that he has real ideas about policy that could have real affects.
Recently, Trump’s policy views regarding the financial industry have been making headlines. Trump, apparently, wants to break up big banks, an idea often presented by U.S. Senator and 2016 Democratic candidate, Bernie Sanders and out of line with the historical lean of the Republican Party. Specifically, Trump wants to reinstate the Glass-Steagall Act and repeal the Dodd-Frank Act, both of which were born out of financial crises, and both of which regulate financial institutions.
The Glass-Steagall Act, which usually refers to four provisions of the Banking Act of 1933, forced the separation of investment banking and commercial banking. It was signed by President Franklin Delano Roosevelt (famously a Democrat, unlike his older cousin: President Theodore Roosevelt) days after Roosevelt took office in 1933. Reeling from the Great Depression, the U.S. government recognized the need for banking reform and, subsequently, made the Glass-Steagall Act law. In 1999, The Gramm-Leach-Bliley Act, signed by President Bill Clinton, repealed part of the Glass-Steagall Act.
After the Gramm-Leach-Bliley Act was signed, the recent financial crisis, known as the Great Recession, brought banking regulation to the forefront of American politics once again. In 2010, President Barack Obama signed the Dodd-Frank Act into law. The Dodd-Frank act regulates the financial industry in several ways, including the establishment of the Financial Stability Oversight Council (FSOC), which monitors risks that could affect the entire financial industry. The Act, among other things, also requires banks to have plans in place for a shutdown in the event of insolvency.
Despite the apparent confusion of wanting to increase regulation and repeal it, Trump’s views are still incredibly important, even if it is highly unlikely that the Glass-Steagall act will be reenacted, or the Dodd-Frank Act repealed. This importance lies in the fact that the reinstatement of the Act is included in both the Republican and Democratic Party platforms. It seems strange, but it’s true; Donald Trump, the Republican Party, and the Democratic Party all want the same thing. The only person who isn’t on board is Hillary Clinton, who believes the Act does not have the reach needed to regulate Wall Street, which now consists of more than just banks.
Regardless of whether or not Glass-Steagall, or any derivative of it, actually becomes law again, the fact that both the Republican and Democratic Parties have made this part of their platform, potentially has heavy implications for the financial industry. It seems that financial reform will be an important issue addressed in the coming election and the ensuing presidency, whichever party wins.
By: Ed Carr
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