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Breaking up big banks a 'desperate lurch' by Trump, ex-Bush aide says

The Republican Party's call for the restoration of Glass-Steagall is a "desperate lurch" that won't win over Bernie Sanders' supporters, a former deputy press secretary under President George W. Bush said Tuesday.

The Depression-era legislation, which was designed to prevent big bank "supermarkets," would essentially break up many of the large institutions. It was repealed in 1999, and its reinstatement is part of the 2016 GOP platform.

Tony Fratto, founding partner of consulting firm Hamilton Place Strategies, said the Trump campaign always had a belief it could absorb Sanders' voters. However, Fratto believes it is "pure fantasy" that Donald Trump will be able to capture those voters, even if he goes after Wall Street.

"They are not going to be there and so it's a silly distraction from what has become a silly distraction of a campaign," Fratto told "Power Lunch."

Donald Trump
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Donald Trump

That's because Sanders' supporters don't just have a problem with Wall Street, they "hate" Trump because of what he's said about women and immigrants as well as his tax policy, Fratto said.

He doesn't believe they will overlook those things just because they may agree on breaking up the big banks.

"They know enough about Donald Trump not to trust him," he said.

For Terry Haines, managing director and head of political analysis at Evercore ISI, this is a "purely political" position for Trump, rather than a serious one.

"Anybody that thinks that Glass-Steagall is coming back — that's a fantasy," he said in an interview with "Closing Bell."

That's because there is no support in Washington to reinstate the law, Haines explained.

However, he thinks it does do two good things for Trump politically. First, it solidifies his talking points about Hillary Clinton being in the pockets of Wall Street. It is also an outreach to Main Street America to show that he is serious about protecting American's savings and investments.

Larry McDonald, managing director of ACG Analytics and a CNBC contributor, believes Trump made a "brilliant move."

McDonald, who wrote about the collapse of Lehman Brothers in "A Colossal Failure of Common Sense," agrees that Glass-Steagall should be restored.

He believes that when the law was repealed, investment banks massively levered up to compete with the bigger banks, which then contributed to the financial crisis in 2008.

Bringing the law back would even the playing field, he said.

"You can't take a commercial bank with $2 trillion in deposits and have it compete with a small investment bank," McDonald told "Power Lunch."

Fratto, on the other hand, contended that Glass-Steagall had "absolutely nothing to do with the financial crisis."

The instability was in institutions that were not affected by the law, he said. Plus, Lehman was levered up because of the deterioration of its assets and trying to save itself in 2008 from some "pretty bad practices," which had nothing to do with Glass-Steagall, Fratto said.