Ben Bernanke: Glass-Steagall Not a Big Issue #SALT 2017

May 17 2017 | 12:32pm ET

In a morning session on Tuesday, May 17 at the 2017 SALT Conference, former Federal Reserve Chair Ben Bernanke said that he does not consider the reimplementation of the Glass-Steagall Act a "big issue."

Erik Schatzker, editor at large at Bloomberg Television, asked Dr. Bernanke to discuss the pros and cons of any proposal to separate commercial lending with investment banking.

Bernanke also said that Glass-Steagall has also become a symbol of the deregulatory environment before the financial crisis. He stated that much of the reaction on Cohn's part came after Senator Elizabeth Warren (D-Mass.) made a statement on the banking industry.

Bernanke said that investors should question why President Trump's adviser Gary Cohn and Sen. Elizabeth Warren would be agreeing on this issue. He stated that both Cohn and Warren likely have competing goals.

"[Sen.] Warren has in mind to break up these firms and make them less politically powerful," Bernanke said. He said that Cohn's vision is to break off the investment banks and let them be freer to do things with less regulation.

The former Fed chair said that breaking up the banks would likely have an adverse impact on the economy and to the financial sector. 

Bernanke discussed other topics ranging from the source of the next financial crisis, the Fed's efforts to reign in its balance sheet, and the health of the U.S. economy.

He cited Boston Fed Eric Rosengren's concerns about the state of the U.S. commercial real estate market. Though he said the commercial markets wouldn't create a 2008-style crisis, he did raise concerns about a possible regional shakeup similar to what happened in 1990.

Bernanke stated that the U.S. economy is still doing well – in the ninth year of the recovery. He said that growth has not been sensational because productivity hasn’t been where the central bankers want it. He said that he expects the United States to continue its moderate growth in the future barring a surprise shock. The nation is just two to three years away from reaching its longest period of economic expansion in its history.

The former Fed chair also discussed the impact of politics on the U.S. economy. Before the election, Bernanke expressed his concerns about the Trump administration’s lack of political experience and combativeness to free trade.

Bernanke said he had heard comparisons of Trump to Jimmy Carter. While he acknowledged that view might not be popular, he explained how being an outsider can create market uncertainty.


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