THE Republican convention has left Wall Street on edge by embracing a populist proposal to break up big banks, an idea loved by many Democrats, in a new twist to the Donald Trump era.

Defying nearly two decades of party tradition, the Cleveland convention adopted policies that include banning institutions that hold deposits from carrying out riskier investment banking, mirroring a law from the Great Depression.

The policy platform was written by a committee of Republican lawmakers and officials.

Proposals to cut banks down to size have created an unexpected accord between the Republican and Democratic platforms after Hillary Clinton’s party — under the influence of her bank-bashing former rival, Bernie Sanders — made a similar call.

Bipartisan enmity towards the biggest banks continues to run high amid widespread economic discontent, with many Americans still feeling the hangover of the 2008-09 financial crisis in which Wall Street played a role.

‘We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment’ — Republican Cleveland convention document

Presidential candidates do not have to follow party platforms, but big banks will be troubled by the cross-party support for legislation inspired by the 1933 Glass-Steagall Act because such ideas can gain a life of their own once in official documents.

A prohibition of investment bankers operating under the same roof as federally insured deposits would pose an existential challenge to Citigroup, Bank of America, JPMorgan,Wells Fargo and, to a lesser extent, Goldman Sachs.

The original Glass-Steagall Act was abolished in 1999 when President Bill Clinton signed bank reform legislation that had been crafted by Republican lawmakers and backed by many Democrats in Congress.

Aaron Klein, a former Treasury official in the Obama administration who is at the Brookings Institution, said calls to reinstate Glass-Steagall failed to recognise how the world had changed, but tapped into an understandable strain of popular feeling.

“At the most simple level, the idea is that our grandparents put in place strong rules after the depression; we went away from those rules in the deregulation of the 1980s, 1990s and 2000s; and we need to remember the wisdom of that generation,” Mr Klein said.

One line of a 54-page document adopted by the Republican platform on Monday says: ‘We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.’

Tony Fratto, a bank ally and former Treasury official under President George W Bush, said: “Glass-Steagall is dumb politics and dumb economics ... Returning to Glass-Steagall would be destructive and unworkable. As every analysis has demonstrated, Glass-Steagall would have done nothing to prevent the crisis. There is a lot in this platform to ignore.”

The Democratic platform, due to be adopted at the convention in Philadelphia next week, states: ‘Banks should not be able to gamble with taxpayers’ deposits or pose an undue risk to Main Street. Democrats support a variety of ways to stop this from happening, including an updated and modernised version of Glass-Steagall and breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy.’

The inclusion of such language is an important victory for Mr Sanders, a self-declared socialist, who is seeking to use influence from his successful primary campaign to make Mrs Clinton take a tougher line on Wall Street.

Critics of the new Glass-Steagall movement point out that the act would have done little, if anything, to affect Lehman Brothers, the investment bank whose collapse precipitated the darkest days of the last crisis.

The top Republicans on banking policy in Congress — Richard Shelby in the Senate and Jeb Hensarling in the House of Representatives — have shown little enthusiasm for Glass-Steagall.

Additional reporting by Ben McLannahan in New York.

Published in Dawn, Business & Finance weekly, July 25th, 2016