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Treasury Secretary Nominee Offers Sophistry on Need for Glass-Steagall; Up the Pressure on Sen. Cantwell and Trump!

Jan. 20, 2017 (EIRNS)—At yesterday’s Senate Finance Committee confirmation hearing for Steven Mnuchin, Donald Trump’s nominee for Treasury Secretary, Sen. Maria Cantwell (D-Wash.), a co-sponsor of Glass-Steagall banking separation legislation, insistently questioned the nominee on his stand on Glass-Steagall. As seen from the exchange below, Mnuchin engaged in "real sophistry" as Helga Zepp-LaRouche put it today, talking about the need for an "updated" Glass-Steagall, combined with the Volcker Rule.

Lyndon LaRouche has been very clear that Franklin Roosevelt’s 1993 Glass-Steagall Act is what is required, without modification. As Zepp-LaRouche elaborated, it’s good that Sen. Cantwell has now put herself on the spot on this issue, and it is our role to keep the pressure on her, and on Trump, to guarantee implementation of the original Glass-Steagall along with LaRouche’s full Four Laws program.

Cantwell: do you support returning to glass-Steagall?

Mnuchin: No, I don’t support going back to Glass-Steagall as is. What we’ve talked about with the President-elect is that perhaps we need a 21st century Glass-Steagall. But, no I don’t support taking a very old law, and saying we should adhere to it as is.

Cantwell: So, is that the position of what the Republican platform was, because I thought it was Glass-Steagall.

Mnuchin: Again, the Republican platform did pass at the convention Glass-Steagall, but when we talked about policy with the President-elect, our view is that we need a 21st century Glass-Steagall.

Cantwell: So when did that change?

Mnuchin: Again, that’s been part of the campaign; that’s been in some of his speeches.

Cantwell: So, like October? But after the convention, because at the convention it was Glass-Steagall.

Mnuchin: At the convention, the Republican position was Glass-Steagall.

Cantwell: So, his position was never Glass-Steagall? Is that what you’re saying? All along he meant a different version?

Mnuchin: I can only tell you, post convention, that this is an issue he and I have discussed and it’s something we’ll be looking at.

Cantwell: Did Mr. [Paul] Manafort’s leaving have anything to do with this? [a reference to Trump’s former campaign director]

Mnuchin: No.

Cantwell: To me this is a very important issue. In fact, I would have said that at some point, in August, that the Republican platform had a stronger position on Glass-Steagall than the Democratic platform. But, now I understand that the President-elect doesn’t really support Glass-Steagall, but supports some modern version which I don’t really understand, so maybe you can help me what that modern version is.

Here Mnuchin offered bogus arguments that separating banks under Glass-Steagall would have "very big implications" in terms of liquidity and capital markets, and banks being able to perform "necessary lending." (This reflects the American Enterprise Intitute’s line that Glass-Steagall will damage capital markets.) He adds that in terms of "regulatory issues, the administration will look at Glass-Steagall."

Sen. Cantwell replied, "I just want to be clear," noting that in his testimony, Manuchin had

"alluded to the damage done by the implosion of our economy brought on by toxic financial instruments that didn’t have the backing they needed."

Referencing a Dallas Fed report pointing to a "$14 trillion hole in our economy," she asked Manuchin about his statement that proprietary trading

"doesn’t belong in the bank. So, where does that go? Are you saying you don’t see a clear prohibition [of proprietary trading] or want to see a clear prohibition?"

she asked. Mnuchin argued there had to be a "proper definition" of proprietary trading, and that it can’t be left up to regulators to make that definition. He said he supported the Volker rule, if modified, and then blathered that there has to be a proper definition of what banks can and can’t do, and what proprietary trading is—all questions addressed by Roosevelt’s Glass-Steagall.

Sen. Cantwell said that based on Mnuchin’s testimony, it’s not clear "where things stand" on Glass-Steagall, but said that

"hopefully, we’ll get answers...because there has to be a bright line [between investment and commercial banks] so that this [a 2008-style crisis] never happens again."

Of interest is Cantwell’s observation that the Democrats probably lost the 2016 presidential election because of their failure to address the "frustration" of the average American, who has not recovered from the "implosion of our economy" in 2008, and suffered from the lack of "very bright line" separating investment banks from commercial banks—Glass-Steagall.