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April 6, 2017, 10:34 a.m. EDT

White House’s Cohn backs return to Glass-Steagall law: report

Former Goldman banker favors revisit of Depression-era split between commercial and investment banks

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By Greg Robb, MarketWatch


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White House economic adviser Gary Cohn

White House economic adviser Gary Cohn told lawmakers in a private meeting this week that he supports a policy to reshape Wall Street by returning to the Depression-era law separating commercial and investment banks, according to a report by Bloomberg News.

Cohn, an ex-Goldman Sachs Group investment banker, said he favored banking going back to the Glass-Steagall law that mandated firms, including Goldman /zigman2/quotes/209237603/composite GS -0.08%  , focus on trading and underwriting securities, while companies such as Citigroup Inc /zigman2/quotes/207741460/composite C -0.40%  focus on lending.

A return to Glass-Steagall was in the Republican party platform last year but analysts thought that the idea had lost favor among President Donald Trump’s top economic advisers.

After years of wrangling between investment and commercial banks, Glass Steagall was repealed in 1999, allowing Bank of America /zigman2/quotes/200894270/composite BAC +0.64%   , Citigroup and J.P. Morgan & Co. /zigman2/quotes/205971034/composite JPM +0.87%   expand into mega banks.

Read: Fed’s Tarullo says Volcker rule may be hurting trading

Brian Gardner, an analyst at Keefe, Bruyette & Woods, said he thought the odds were still against reinstatement of the law.

“We think congressional Republicans are unlikely to support reinstatement of the old law because they would view it as too high a price to pay for changes to Dodd-Frank,” he said.

Dodd-Frank, tightening banking laws, especially those impacting consumers, was enacted largely in reaction to the 2008-2009 financial crisis. The president, and some congressional Republicans, have regularly criticized the law.

Read: Trump Today: Dodd-Frank to get ‘major haircut,’ president says

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Greg Robb is a senior reporter for MarketWatch in Washington. Follow him on Twitter @grobb2000.

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