Here’s what to make of President Trump’s comments about breaking up banks.
President Trump has expressed his interest in putting protections in place and separating consumer and investment banks. Yet he has suggested eliminating Dodd-Frank many times.
The Risks
In the U.S. there are indeed financial institutions, corporations, and manufacturers who would devastate the economy if they collapsed. Since the recession, the economy has been corrected, yet not to the extent that it should be. Risk is still present. Now there are less government-backed institutions propping up high risk mortgages, but they have been redirected to the Federal Housing Authority so the risk is still there – it has just been relocated.
Government’s Involvement
The government shouldn’t be in charge of breaking up “too big to fail” financial institutions, nor is it their responsibility to keep them from faltering. Those who run the big banks should understand that people would feel more secure if their investments were held in companies of a more sustainable size.
Trump knows that banks don’t want to separate their commercial and investment branches, so he may just be trying to persuade them to change before the government intervenes. As long as taxpayers aren’t left holding the bill, they should be free to work it out.