(Bloomberg) -- President Donald Trump said he’s actively considering a breakup of giant Wall Street banks, giving a push to efforts to revive a Depression-era law separating consumer and investment banking.
“I’m looking at that right now,” Trump said of breaking up banks in a 30-minute Oval Office interview with Bloomberg News. “There’s some people that want to go back to the old system, right? So we’re going to look at that.”
Trump also said he’s open to increasing the U.S. gas tax to fund infrastructure development, in a further sign that policies unpopular with the Republican establishment are under consideration in the White House. He described higher gas taxes as acceptable to truckers -- “I have one friend who’s a big trucker,” he said -- as long as the proceeds are dedicated to improving U.S. highways.
Separately, Trump said he’d be willing to meet under certain conditions with North Korean dictator Kim Jong Un, against the recommendations of his political advisers, to avert a military confrontation with the U.S. adversary. He also said that a Republican replacement for the Affordable Care Act would protect Americans with pre-existing conditions at least as well as Obamacare.
During the presidential campaign, Trump called for a “21st century” version of the 1933 Glass-Steagall law that required the separation of consumer and investment banking. The 2016 Republican Party platform also backed restoring the legal barrier, which was repealed in 1999 under a financial deregulation signed by then-President Bill Clinton.
A handful of lawmakers blame the repeal for contributing to the 2008 financial crisis, an argument that Wall Street flatly rejects. Trump couldn’t unilaterally restore the law; Congress would have to pass a new version.
Trump officials, including Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn, have offered support for bringing back some version of Glass-Steagall, though they’ve offered scant details on an updated approach. Both Mnuchin and Cohn are former bankers who worked for Goldman Sachs Group Inc.
Wall Street has repeatedly shrugged off politicians’ calls for bank breakups in recent years.
The KBW Bank Index of 24 major U.S. lenders was up about 1.2 percent on Monday before Trump’s comment sent it tumbling about a percentage point. It soon recovered most of that, and was up 0.9 percent as trading closed in New York. Firms including JPMorgan Chase & Co. and Bank of America Corp., the nation’s two largest banks, were among companies that swooned.
The Glass-Steagall law essentially split banking into two categories: deposit-taking companies backed by taxpayers that primarily made loans to businesses and consumers, and investment banks and insurers that trade and underwrite securities and create or focus on other complex instruments. Severing those businesses would prevent Americans’ nest eggs from flowing into more volatile capital markets, Congress reasoned at the time.
Large banks see little interest in Congress for reviving the prohibition between commercial and investment banking, especially since lawmakers are currently bogged down with more pressing issues like repealing Obamacare and passing a tax overhaul.
Only one Republican in the Senate, John McCain of Arizona, has endorsed a proposal by Democratic Senator Elizabeth Warren of Massachusetts to reinstate Glass-Steagall. That signals that passing any legislation will be an uphill battle. During meetings with bank executives at the Treasury Department about Trump’s February executive order on financial rules, the topic of Glass-Steagall has rarely come up.
“This isn’t a near or even medium term threat,” said Ian Katz, an analyst at Capital Alpha Partners LLC who follows bank regulation.
Promoting the tax overhaul outline his administration released last week, Trump said the tax cuts he’s seeking would, along with renegotiated trade agreements, serve as badly needed stimulus for the economy.
The president called first-quarter economic growth, which the Commerce Department said declined to a 0.7 percent annual rate, “really bad.”
Although he’s taken credit for monthly job growth figures and stock market gains since entering office on Jan. 20, Trump said he’s not responsible for the GDP number.
“The first quarter, second quarter really isn’t my quarter. That’s really a leftover from -- in all fairness, I just got here,” he said. “So you’re growing at 1 percent or less in the country, so we need something, we need a stimulus.”
Trump touched on a host of foreign and domestic issues during the interview.
‘Honored to Do It’
Addressing the most urgent foreign policy and national security issue before him, Trump said he’d be willing to meet with North Korean leader Kim “under the right circumstances” if it would result in defusing tension on the Korean Peninsula.
“If it would be appropriate for me to meet with him, I would absolutely, I would be honored to do it,” Trump said.
“Most political people would never say that,” he said, “but I’m telling you under the right circumstances I would meet with him.”
No U.S. president has had direct contact with the North Korean regime and any contacts between the two nations have been limited since the signing of an armistice that halted the Korean War in 1953. Kim has never met with a foreign leader since taking charge after his father’s death in 2011 and hasn’t left his isolated country.
Trump also defended his White House invitation to Philippine President Rodrigo Duterte, who’s come under criticism from human rights groups for a brutal crackdown on the drug trade.
“The Philippines is very important to me strategically and militarily,” Trump said. “He’s been very, very tough on that drug problem but he has a massive drug problem.”