The Glass–Steagall Act is a term often applied to the entire Banking Act of 1933, after its Congressional sponsors, Senator Carter Glass (D) of Virginia, and Representative Henry B. Steagall (D) of Alabama. The term Glass–Steagall Act, however, is most often used to refer to four provisions of the Banking Act of 1933 that limited commercial bank securities activities and affiliations between commercial banks and securities firms. This article deals with that limited meaning of the Glass–Steagall Act. A separate article describes the entire Banking Act of 1933.
Starting in the early 1960s federal banking regulators interpreted provisions of the Glass–Steagall Act to permit commercial banks and especially commercial bank affiliates to engage in an expanding list and volume of securities activities. By the time the affiliation restrictions in the Glass–Steagall Act were repealed through the Gramm–Leach–Bliley Act of 1999 (GLBA), many commentators argued Glass–Steagall was already “dead.” Most notably, Citibank’s 1998 affiliation with Salomon Smith Barney, one of the largest US securities firms, was permitted under the Federal Reserve Board’s then existing interpretation of the Glass–Steagall Act. President Bill Clinton publicly declared "the Glass–Steagall law is no longer appropriate." Many commentators have stated that the GLBA’s repeal of the affiliation restrictions of the Glass–Steagall Act was an important cause of the late-2000s financial crisis. Some critics of that repeal argue it permitted Wall Street investment banking firms to gamble with their depositors' money that was held in affiliated commercial banks. Others have argued that the activities linked to the financial crisis were not prohibited (or, in most cases, even regulated) by the Glass–Steagall Act. Commentators, including former President Clinton in 2008 and the American Bankers Association in January 2010, have also argued that the ability of commercial banking firms to acquire securities firms (and of securities firms to convert into bank holding companies) helped mitigate the financial crisis.
Read more about Glass–Steagall Act: Name Confusion: 1932 and 1933 Glass–Steagall Acts, Legislative History of The Glass–Steagall Act, The Glass–Steagall Provisions Separating Commercial and Investment Banking, Glass–Steagall Developments From 1935 To 1991, Commentator Response To Section 20 and 32 Repeal, Glass–Steagall “repeal” and The Financial Crisis, Proposed Reenactment, Volcker Rule Ban On Proprietary Trading As Glass–Steagall Lite, ”Ring Fencing” Proposal in United Kingdom As Glass–Steagall Substitute, Glass–Steagall Role in Reform Proposals in Europe and North America
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... above to modify banks or banking regulation address issues beyond the scope of the Glass–Steagall separation of commercial and investment banking, each ... The ICB stated Glass–Steagall had been “undermined in part by the development of derivatives.” The ICB also argued that the development before 1999 of “the world’s leading investment ... CDOs, SIVs, and other “risky products” after Glass–Steagall was “repealed,” but he rejects Glass–Steagall reinstatement (after suggesting Paul Volcker favors it) as a “non-starter ...
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