President Trump has vowed to roll back financial regulation, saying that it is preventing banks from lending and businesses from growing.
Wall Street, it would seem, has found its dream president.
There is just one possible complication: His top advisers continue to float an idea that would not only hurt the nation’s largest banks, it would upend them.
In a meeting on Wednesday with senators from both parties, Gary D. Cohn, Mr. Trump’s chief economic adviser, said the administration was considering a proposal that would require separating retail banking from investment banking and trading. Mr. Cohn mentioned the idea to members of the Senate Banking Committee as one of several financial regulations on the table.
He offered few specifics on how the proposal would work or when it could be carried out, according to people briefed on the matter. It was part of a wide-ranging discussion, reported earlier by Bloomberg, that also touched on the president’s tax policy.
The former No. 2 executive at Goldman Sachs, Mr. Cohn is not the first administration official to signal Mr. Trump’s support for restoring some version of the New Deal-era Glass-Steagall Act, which forced the separation of deposit taking from trading and investment banking activities. Treasury Secretary Steven Mnuchin has also expressed support for some new version of the law.
The goal of Glass-Steagall was to prevent banks from taking risks with people’s federally insured deposits.
Senator Elizabeth Warren, the Massachusetts Democrat who is arguably Wall Street’s harshest critic on Capitol Hill, has said restoring Glass-Steagall would reduce the risks bank pose to the economy by creating a “wall between commercial and investment banking.”
“Despite the progress since 2008, the biggest banks continue to threaten our economy,” Ms. Warren said in a statement.
On Thursday, she seized on the news of Mr. Cohn’s comments to reintroduce a bill that she sponsored with Senator John McCain, Republican of Arizona.
It was a rare moment of harmony between the Trump administration and Ms. Warren. They are even calling their proposals by the same name.
“The president spoke to the need for a simplification of the banking system on the campaign trail, what he called a ‘21st century Glass-Steagall,’ to make it easier for businesses to grow and create jobs in their communities,” a White House spokeswoman said in a statement on Thursday.
Since the Republican convention last July — when the restoration of Glass-Steagall was inserted into the party’s platform — Mr. Trump has on occasion signaled a willingness to break up the big banks.
The idea seems incongruent with the president’s many other policies on taxes and the environment that will largely benefit corporations and the wealthy.
Yet invoking Glass-Steagall, which was repealed in 1999, seems tailored to appeal directly to the angry voters who elected Mr. Trump.
Many Americans are still smarting from the 2008 recession, which was caused by the financial crisis, and still believe that the Obama administration did not go far enough in reining in Wall Street.
Still, it is unclear whether a return to Glass-Steagall is politically feasible.
Banking lobbyists dismissed Mr. Cohn’s comments as empty politics and ineffective policy.
“Large financial institutions play a role in the American economy other institutions are not able to fill,” said Tim Pawlenty, the chief executive of the Financial Services Roundtable, an industry group, and a former Republican governor of Minnesota.
Even regulators, who worry about the systemic risks posed by huge banks, say restoring Glass-Steagall is no cure-all.
During the financial crisis, the failure of investment firms that had no major retail business — Bear Stearns and Lehman Brothers — posed grave risks to the economy.
“Glass-Steagall by itself will not address ‘too big to fail,’” said Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, who was a Treasury official during the financial crisis.
Others warned that breaking up large banks could benefit firms like Mr. Cohn’s former employer, Goldman Sachs, whose retail deposit business is relatively recent and small: It would have a greater impact on Goldman rivals like JPMorgan Chase and Citigroup.
Goldman, said Dennis Kelleher, president and chief executive of Better Markets, a group that advocates more restrictions on Wall Street, “would be king of the financial world where bank holding companies couldn’t compete.”
If anything, the proposal to restore Glass-Steagall shows the shifting sands of Wall Street’s position in Washington.
During the presidential campaign, Wall Street executives overwhelming supported Hillary Clinton, who was seen as a moderate on financial issues, someone who understood the important role that big banks play in the global economy.
Mrs. Clinton said during the campaign that bringing back the law would not make the banks safer or eliminate the chance of another crisis like 2008.
Glass-Steagall had been repealed during her husband’s administration, ushering in an era of consolidation that created behemoth banks like JPMorgan Chase and Citigroup that did everything from issuing auto loans to trading complex derivatives.
Despite backing the Democrat, Wall Street has already benefited greatly from Mr. Trump’s election.
Stocks of banks like Bank of America and Citigroup, beaten down for years, have had their biggest rebound in recent memory — a rally driven in part by proposed regulatory relief. In particular, Mr. Trump has said he will be taking aim at the Dodd-Frank regulatory overhaul, passed in the wake of the financial crisis, which contains a thicket of restrictions on trading and oversight.
Banks are also hoping that Mr. Trump’s appointments to important positions on the Federal Reserve will provide relief on how much capital they need to hold to cushion against losses.
On Tuesday, JPMorgan’s chief executive, Jamie Dimon, declared in his annual letter to shareholders that new regulations and capital requirements largely eliminated the chance of a major bank’s failing again, creating a domino effect across the economy.
“Essentially, too big to fail has been solved,” Mr. Dimon wrote. “Taxpayers will not pay if a bank fails.”
One day later, talk of breaking up the big banks was back in vogue and the industry’s regulatory fortunes seemed more uncertain than before.