President Donald Trump said he is considering breaking up big banks, but former Wells Fargo chairman and CEO Richard Kovacevich thinks "it would be a mistake."
Kovacevich said during CNBC's "Closing Bell" on Monday that history and, more recently, the latest financial crisis, show that adding regulations on banks and limiting their lending ability has not helped the U.S. economy and the average American.
"The key to safe and sound banking is diversity," Kovacevich added. "You can't depend on any one sector, and when you become concentrated you have a very high possibility of failing sometime in the future."
He added that "it's the worst thing [Trump] can do," and he hopes the president will reconsider.
"The president has said things on many occasions that after thinking about it and getting input from others, decided to change those positions so this could be one of them," Kovacevich said
Deregulation for Community Banks
In the same meeting with community bankers where Trump suggested reinstating big bank regulations, he pledged to reduce regulations on community banks, according to Camden Fine, president and CEO of the Independent Community Bankers of America.
Trump does not unilaterally have power over deregulating community banks, however, and "it takes mostly congressional action," Fine noted in the joint CNBC interview on Monday.
"One of the good things is most community bank regulatory relief legislation is fairly bipartisan — and that helps us a long way, particularly in the Senate," Fine added.
Kovacevich also said community banking reform is needed.
"It makes no sense that the same regulations are for big banks and small banks," Kovacevich said.