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Steve Bannon could be Wall Street's worst enemy

CNBC CNBC 17/11/2016 Jeff Cox

Wall Street may find a testy relationship with Donald Trump's White House if comments by one of his senior advisers are any indication.

In a presentation Steve Bannon gave during a conference at the Vatican in 2014, the Trump confidant ripped into big banks and their role in the 2008 financial crisis.

He rued that no one ever was held accountable, which he said helped fuel populist fury and groups like the tea party, according to a transcript of his remarks that Buzzfeed published Wednesday.

Bannon ultimately would take the reins of the Trump campaign and will be the White House chief strategist when Trump is sworn in Jan. 20.

Campaign CEO Stephen Bannon listens during Republican presidential nominee Donald Trump's round table discussion on security at Trump Tower in the Manhattan borough of New York: Steve Bannon© REUTERS/Carlo Allegri Steve Bannon

Bannon back then approached the issue of bailouts that accompanied the crisis with a religious zeal as he spoke with the Vatican as a backdrop:

For Christians, and particularly for those who believe in the underpinnings of the Judeo-Christian West, I don't believe that we should have a bailout. I think the bailouts in 2008 were wrong. And I think, you look in hindsight, it was a lot of misinformation that was presented about the bailouts of the banks in the West.

The stock market generally and bank stocksin particular have been in strong rally mode since Trump defeated Hillary Clinton last week, though the market and bank shares pulled back Wednesday. However, the relationship could be strained between the president-elect and the financial community.

At the conference, the former Goldman Sachs investment banker was asked about poverty and proceeded to riff on the role banks played:

The 2008 crisis, I think the financial crisis — which, by the way, I don't think we've come through — is really driven I believe by the greed, much of it driven by the greed of the investment banks. My old firm, Goldman Sachs — traditionally the best banks are leveraged 8:1. When we had the financial crisis in 2008, the investment banks were leveraged 35:1.

After diagnosing the conditions that led to the crisis, he talked about the fallout, or lack thereof, for the financial engineers who helped drive up risk and create the Great Recession but never really had to pay the price:

Particularly the fact — think about it — not one criminal charge has ever been brought to any bank executive associated with 2008 crisis. And in fact, it gets worse. No bonuses and none of their equity was taken. So part of the prime drivers of the wealth that they took in the 15 years leading up to the crisis was not hit at all, and I think that's one of the fuels of this populist revolt that we're seeing as the tea party. So I think there are many, many measures, particularly about getting the banks on better footing, making them address all the liquid assets they have. I think you need a real cleanup of the banks balance sheets.

The Republican Party raised eyebrows at its convention in July, a month before Bannon joined the Trump campaign, when it approved a plank to reinstitute the Glass-Steagall law that separated commercial and investment banking.

Bannon advocated breaking up the financial supermarkets during his Vatican speech:

In addition, I think you really need to go back and make banks do what they do: Commercial banks lend money, and investment banks invest in entrepreneurs and to get away from this trading — you know, the hedge fund securitization, which they've all become basically trading operations and securitizations and not put capital back and really grow businesses and to grow the economy.

Big bankers and hedge funds, he said, "have never really been held accountable for what they did [and that] has fueled much of the anger in the tea party movement in the United States."

The Trump campaign did not respond to a request for comment or to challenge or validate Bannon's remarks.

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