Donald Trump to DEREGULATE US banks in bid to separate consumer and investment arms
DONALD Trump is marching ahead with his plans to deregulate US banks, looking back to legislation that helped to turn the economy around during the Great Depression.
In early February, Mr Trump signalled that he planned to deregulate banks to bring market trading liquidity back.
In an executive order, the president also gave banks a warning that he will not step in to bail them out if they mess up.
Mr Trump wants to free up a plethora of regulations covering mortgages to allow working class Americans the right to buy homes without government interference.
Now he is going further by looking at ways to break up the banks so that their investment and consumer arms are separated, which in turn could protect the public and avoid gigantic bail outs.
As part of his extremely ambitious strategy he is looking to potentially reinstate the 1933 Glass-Steagall law that required the separation of consumer and investment banking.
That law was repealed by former Democratic president Bill Clinton in 1999 but was later said by some to be responsible for the 2008 global financial crisis, which was started by dodgy mortgages.
The Glass-Steagall law allowed for deposit-taking banks to make loans to businesses and consumers in simplistic business models that were easily tracked and more transparent.
Mr Trump wants to reduce regulations and restrictions
Investment banks and insurers that operate in more complicated markets were completely separate, meaning consumers and savers were less exposed to the volatility of capital markets.
Mr Trump's Treasury Secretary, Steve Mnuchin, is currently looking at ways that the president can strike a balance as well as ostensibly restore liquidity into the markets to effectively boost the mortgage market which has struggled to recover in the past nine years.
While details are currently scant, more information on the potential of banking sector reform will emerge in the coming months although the president will have to get approval from lawmakers.
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In February's executive order, Mr Trump said he wanted to: "Empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth and prevent taxpayer-funded bailouts".
And he gave a direct order to Mr Mnuchin to find out which "laws, treaties and regulations" are inhibiting the US financial services industry.
New York-based global banking analyst David Hendler told Express.co.uk that the jury is out until the fine detail emerges.
Mr Hendler CEO of Viola Risk Advisors said: "If handled carefully it could well improve market trading liquidity and restore normalcy to the US mortgage markets.
"Basically, Mr Trump wants to reduce regulations and restrictions across a number of industries, and Wall Street has been shackled by the various laws governing capital markets, to securitisation markets, to the lack of kick-starting a more normal mortgage market."
Mr Hendler also says Mr Trump's administration is set to wade into sort out the continued scandal surrounding Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, known in the US as Fannie Mae and Freddie Mac, which were bailed out in September 2008.
He added: "They have to restore the residential mortgage market.
"Regular, every day people are finding it hard to get mortgages because the guarantors Freddie Mac and Fannie Mae have been in conservatorship under the government's control.
"It was politically too radioactive but after almost nine years there is appetite to do something about it."