On November 12, 1999, 16 years ago today, a longtime banking safety law known as the Glass-Steagall Act was effectively repealed when President Bill Clinton signed the Gramm-Leach-Bliley Act. The original Glass-Steagall law was passed in 1933 in response to the Wall Street crash of 1929 which led to the Great Depression. Its purpose was to build a wall between commercial and investment banking in order to prevent banks from using taxpayer-backed deposits to make risky investments. Much of the repeal came from regulatory decisions dating from the 1980s, but the 1999 law completed the task.
In the decades following Glass-Steagall, the nation enjoyed relative financial tranquility. Within a half-decade after the repeal of Glass-Steagall, Wall Street recklessness caused a crash that left a $12+ trillion hole in the economy.
The need to revive the “Safety Glass” separation between commercial and investment banking has been in the news quite a bit recently — for good reason. The nation’s biggest banks are bigger than ever and the risk of a financial meltdown and government bailouts to banks considered to be “too big to fail” is still all too present.
U.S. Senators Elizabeth Warren (D-Mass.) and John McCain (R-Ariz.) reintroduced their bipartisan “21st Century Glass-Steagall Act” legislation in July and bipartisan companion legislation was introduced in the House as well. More