Donald Trump’s Top Economic Advisor Wants to Reinstate a Crucial Banking Law that Bill Clinton Repealed

The Banking Act of 1933—more commonly known as Glass Steagall—consisted of four provisions designed to separate commercial banking and investment banking. It was implemented as one of the core lessons learned from the Great Depression, and the legislation put a stop to investment banks like Merrill Lynch gambling with your savings account. As one of the last gifts to his friends on Wall Street, Clinton blew a hole in this law and signed the Gramm-Leach-Bliley Act (calling it the Financial Services Moderation Act of 1999), helping to set the stage for the 2008 financial crisis.

The repeal of sections 20 and 32 enabled actions which induced a wave of suffering across the globe, but their absence is a bit overhyped as to their overall influence on the crash of 2008—as they would not have been able to restrict the behavior of the pure investment banks who were responsible for most of the shady lending. Since then, there have been attempts to cover duct tape over the broken windows of one of our best vehicles for banking regulation, like the Volcker Rule, which attempted to step in to the void of section 20.

These two repealed provisions are typically referred to as the “banking firewall”—as they are the last barrier counteracting the natural inertia between traditional banking and investment banking. Section 20 stopped banking entities from using your savings to gamble on their bets, and section 32 took those restrictions down to the officer, director and employee levels. The other two portions of Glass-Steagall—sections 16 and 21—are still in place, and they regulate acceptable activities for banks. So when you hear that Bill Clinton repealed Glass-Steagall, that’s not technically true, he just removed half the legs from a table that some of our most vital banking regulations rest on. This was bad policy driven by a pure money grab from our True Masters on Wall Street, and Donald Trump’s chief economic advisor reportedly wants to put a stop to the madness.

Per Bloomberg:

In a private meeting with lawmakers, White House economic adviser Gary Cohn said he supports a policy that could radically reshape Wall Street’s biggest firms by separating their consumer-lending businesses from their investment banks, said people with direct knowledge of the matter.

Cohn, the ex-Goldman Sachs Group Inc. executive who is now advising President Donald Trump, said he generally favors banking going back to how it was when firms like Goldman focused on trading and underwriting securities, and companies such as Citigroup Inc. primarily issued loans, according to the people, who heard his comments.

This is in line with a new provision put in to the Republican platform at last year’s convention.

“We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.”

The Democrats also call for a modernized version of the law in their platform. This is quite significant given that the Republican platform is not exactly friendly to regulation—as it takes direct aim at Dodd-Frank and the Consumer Financial Protection Bureau. The idea to restore the firewall between investment and commercial banks shares a wide range of ideological agreement. Now that Trump’s most trusted economic advisor (a Democrat, by the way—any buyer’s remorse yet Trump voters?) has signaled to lawmakers that he is in favor of this reversion back towards something resembling sanity, this is officially a big freaking deal.

Good ideas can come from bad sources, and if you’re against this one simply because it’s endorsed by Trumplandia, then your partisan brain has officially overtaken your logical one. Democrats, Republicans and whatever the hell Donald Trump’s camp is all occupy the same space on this issue, and unlike many consensus bipartisan D.C. agreements (like the Iraq War), this one is actually good for the American public. Granted, it’s also good for the banks too. From a long-term perspective, 2008 demonstrated how an industry that operates on a quarter to quarter basis needs to have some safeguards in place to save itself from its worst instincts.

Ensuring that your savings cannot be gambled away by an investment bank is basic logic, and it was for 66 years until the 1990s convinced everyone that humanity had everything figured out and we didn’t need common sense anymore. This is a weird sentence to type, but it really looks like it may wind up being true: Bill Clinton is one of the prime individuals responsible for the crash of 2008, and Donald Trump may wind up fixing one of his biggest mistakes for the better.

Jacob Weindling is Paste’s business and media editor, as well as a staff writer for politics. Follow him on Twitter at @Jakeweindling.