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Wall Street is not pleased.
A top advisor to presumptive GOP presidential nominee Donald Trump said on Monday that the party wants to reimplement Glass-Steagall, Depression-era legislation that was designed to prevent big bank "supermarkets," but which was repealed in 1999.
After the surprise announcement, which came on the first day of the Republican National Convention, Wall Street sources sounded off on the idea that a Republican would reverse course on policies nearly 20 years old and now taken for granted by big banks.
One lawyer, who works with financial institutions on behalf of a white-shoe firm in New York, called the idea "scary." Even Wilbur Ross, one of the Trump campaign's biggest supporters from the finance industry, called it "surprising." Others on Wall Street who spoke to CNBC used stronger language that can't be printed.
A spokeswoman for the Trump campaign did not respond to multiple requests for comment.
Glass-Steagall is legislation the U.S. imposed in the wake of the 1929 market crash aimed at limiting the relationships between securities firms and commercial banks, and by extension of that, systemic risk to U.S. markets and the economy. In 1999, legislation was passed that did away with Glass-Steagall, but now, the GOP is ready to bring it back and break up banks.
"We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment," according to the 2016 Republican Party platform statement.
In a seeming contradiction, the 2016 Republican platform simultaneously calls for the dismantling of Dodd-Frank, post-financial crisis regulation that's aimed at curtailing risk at too-big-to-fail institutions. Ross said on Tuesday that Dodd-Frank puts regulatory requirements on banks that are too onerous.
Specifically, the GOP platform highlights the decline in the number of community banks in the U.S. and says Dodd-Frank is "regulatory harassment of local and regional banks," arguing that it and the Consumer Financial Protection Bureau "would leave us with just a few enormous institutions, as in many European countries."
Calling for the repeal of Gramm-Leach-Bliley, the legislation that in 1999 took Glass-Steagall off the books, is politically expedient on a number of levels for Trump, one banker said.
For one, the legislation was signed into law by President Bill Clinton, and the narrative gives Trump further opportunity to attack Hillary Clinton, who will run opposite Trump representing the Democratic Party after next week's convention in Philadelphia. The presumptive Democratic nominee has come under fire for her relationship with Wall Street, notably for speeches she gave at Goldman Sachs, the contents of which have yet to be fully disclosed.
Further, Trump's willingness to take on Wall Street could resonate with disenfranchised Bernie Sanders supporters who are now on the fence, another Wall Street pro noted.
"[I]t seems a bit suspicious that he rolled it out now, [it's] clearly not something he's given much thought to before," said one source at a big bank who spoke to CNBC on the condition that his name and his company not be disclosed.
Trump has obfuscated much about his future policies, but the shift toward more aggressive regulation of Wall Street could hamper his fundraising efforts, which still have a long way to go in terms of shoring up cash to support his candidacy. It could also hurt the efforts of other Republicans.
The Trump campaign has pushed to get more support on Wall Street and from the financial services industry as it looks to take on the Clinton juggernaut, expected to be armed with $1 billion to advertise in key swing states.
For all of Wall Street's surprise, however, a common link between supporters and detractors of the Trump campaign was their expectations for legislation that would simultaneously tear down Dodd-Frank, and reimplement Glass-Steagall. While the prospect of legislation to that effect becoming reality is intimidating, finance pros think other checks and balances within the U.S. government will head off the GOP candidate's pledge to rearrange Wall Street.
"No one is actually worried this will become law," one banker said.