Nearly 20 years after Congress killed it, Glass-Steagall is making a comeback in the Trump era. One problem: no one knows what a revival of the Depression-era banking law should look like.
The original Glass-Steagall Act of 1933 prohibited traditional banks from also doing the riskier work of investment banks. Congress repealed Glass-Steagall in 1999, clearing the way for the creation of banking behemoths like JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C).
All of them have big presences on Main Street that allow them to take deposits. At the same time, they participate in Wall Street activities like selling stocks and bonds to investors.
Calls for the law to be brought back reached a fever pitch after the 2008 financial meltdown. That push has returned under President Trump. The 2016 Republican Party platform explicitly called for a return of Glass-Steagall.
But there's a lot of confusion about what that means because there are multiple proposals floating around, including one from the Senate and a bank regulator.
Just last week Trump was asked if he supports breaking up the banks. "Some people ... want to go back to the old system, right? So we're going to look at that," Trump said without explaining.
Asked about the comments, White House press secretary Sean Spicer made no mention of breaking up the banks. He simply told reporters that Trump is "looking at a 21st Century Glass-Steagall."
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'Nothing in common'
Recent statements from Trump officials show that the Glass-Steagall name means different things to different people.
"They all use the words 'Glass-Steagall,' but they have nothing in common with each other. We're talking about a fish, a bird and a reptile," said Margaret Tahyar, a partner at Davis Polk who represents big banks.
Besides the White House comments, there is a "21st Century Glass-Steagall" bill that was reintroduced last month by Senators Elizabeth Warren and John McCain. The bill would take an aggressive approach toward preventing banks from acting as both commercial lenders and investment banks.
A third proposal was put out in March by FDIC Vice Chairman Thomas Hoenig, an admirer of Glass-Steagall. Hoenig proposed requiring big banks to revamp their internal structures to make them less risky to the system.
"21st Century Glass-Steagall has become a Rorschach test. Different people are pouring different meanings into it," said Tahyar.
Just a 'catchphrase'
Each of those ideas could lead to vastly different outcomes, especially in terms of whether the biggest banks would effectively be broken up.
"We don't know what a 21st Century Glass-Steagall is. It's thrown out as a catchphrase," said Trent Reasons, a former high-ranking official in the Treasury Department who is now an associate director at the Boston Consulting Group.
Even big bank CEOs seem unsure.
Asked about the merits of bringing back Glass-Steagall, Wells Fargo (WFC) CEO Tim Sloan recently told CNN's Poppy Harlow, "When people use that phrase today, I think they mean a lot of different things."
But Sloan said that if it means a push to "break up the big banks," that would be a "mistake."
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Trump officials drop hints
Trump's top economic officials have not been explicit about what they mean by a 21st Century Glass-Steagall. But they've dropped hints suggesting it's something far more relaxed than the approaches of both Hoenig and Warren-McCain.
Treasury Secretary Steven Mnuchin has told the Senate that a "bright line" between commercial and investment banking could hurt lending and capital markets activity that "support a robust economy."
Gary Cohn, the former Goldman Sachs (GS) president who is now Trump's top economic adviser, recently told Bloomberg that a "21st Century modern Glass-Steagall" could allow the US to better "tailor regulation" in a way that increases lending.
Isaac Boltansky, director of policy research at Compass Point Research & Trading, said he's "highly suspicious" of Trump's talk of a 21st Century Glass-Steagall.
"I don't see Donald Trump coming out here like Teddy (Roosevelt) getting the trust-buster name," said Boltansky.
Aggressive Warren-McCain approach
By comparison, the Warren-McCain bill looks like more of an attempt to bring back the original Glass-Steagall.
The proposal explicitly prohibits banks that use federal deposit insurance from controlling or being affiliated with entities that deal in stocks and bonds. The bill also said individuals who work at securities entities may not work at insured depository institutions.
Tahyar, the lawyer who represents big banks, argues the bill goes too far.
"Warren-McCain is not going back to 1933," she said, "it's going back to the last part of the 19th Century."
Hoenig wants higher fences
FDIC's Hoenig takes more of a middle ground. He calls for the largest banks to add more capital to absorb losses and "partition their commercial and investment banking activities," rather than separate them into two banks.
Banks are already required to "ringfence" their traditional banks from their investment bank, But Hoenig's proposal is about "making the fence taller, broader and wider," Tahyar said.
Of course, if those fences are high enough, some banks may be forced to completely rethink their business models.
No matter the meaning behind the various proposal, Glass-Steagall talk isn't going away anytime soon.
"Glass-Steagall has enormous political power," said Compass Point's Boltansky. "It's one of the issues where you see agreement in principle from the far left and far right."