'This is like something out of George Orwell': Treasury Secretary Mnuchin and Elizabeth Warren battle over breaking up the big banks

Treasury Secretary Steven Mnuchin just said the words that will lead to a sigh of relief on Wall Street.

During his testimony to the Senate Banking Committee, the Treasury Secretary said the Trump administration did not support the separation of investment banks and commercial banks.

"We think that would have a very significant problem on financial markets, on the economy, on liquidity," he said. "We do think there are potential things we could look at around regulation but we do not support separation of banks and investment banks."

Senator Elizabeth Warren quickly pointed out that this runs against previous statements by President Trump, Mnuchin, and economic adviser Gary Cohn who all said the White House was considering a new form of Glass-Steagall, the law that once mandated the separation.

Trump even told Bloomberg in an interview on May 1 that he was "looking into that right now" when asked about breaking up the big banks and the idea was even in the Republican party platform.

Glass-Steagall was passed during the Great Depression to keep the kind of risk Wall Street firms take with trading out of the commercial banking system. It was repealed in 1999, leading to a wave of combinations and the repeal is considered a factor in the financial crisis in 2009.

Warren went after Mnuchin to task on this apparent reversal, noting that the original Glass-Steagall was designed to separate commercial and investment banks.

"There are aspects of Glass-Steagall that you support, but not breaking up the banks and separating commercial banking from investment banking?" Warren asked. "What do you think Glass Steagall was if that's not right at the heart of it?"

Mnuchin said Trump and the administration have not changed their position.

"We during the campaign... specifically came out and said we do support a 21st Century Glass-Steagall," Mnuchin said. "That means there are aspects of it that we think may make sense, but we never said before that supported a full separation of banks and investment banks."

Warren said that Mnuchin's support for a 21st Glass-Steagall, but rejection of the main aspect of the original Glass-Steagall made little sense.

"Let me get this straight, you're saying you are in favor of Glass-Steagall, which breaks apart the two arms of banking. Except you don't want to break apart the two parts of banking. This is like something out of George Orwell," Warren said, referring to "doublespeak" from Orwell's dystopic novel 1984.

Mnuchin concluded by reiterating the administration is in favor of a "21st Century Glass-Steagall" not Glass-Steagall.