The ex-Goldman Sachs Group executive and the man handpicked by President Donald Trump as The White House Economic Advisor, Gary Cohn has said in a private meeting with lawmakers that some of the biggest firms of Wall Street could be split soon. He supports separating the consumer lending business and investment business of top Wall Street firms.
The proposal has come as a huge surprise to some senators. If the Economic Advisor could have his way and the ears of the President, it could force banks to dramatically change their business plans and processes. It is generally believed by many political observers that many Republican lawmakers and the President himself are hugely supportive of this version of the law that was implemented during the Great Depression era. Investment banking and conventional lending were completely independent business wings of banks during those tough days.
Economic experts and financial professionals are of the opinion that splitting of investment and commercial banking would affect Wall Street adversely. Those firms with a heavy tilt towards consumer lending operations are likely to be hit hardest by these proposed changes. Goldman has a limited footprint in consumer lending, while it’s a big part of JPMorgan’s business. However, Republicans are of the opinion that this could well be the first step towards creating a healthy banking system.