Glass-Steagall Act

The Glass–Steagall Act describes four provisions of the U.S. Banking Act of 1933 that limited securities, activities, and affiliations within commercial banks and securities firms.

The Glass–Steagall Act also is used to refer to the entire Banking Act of 1933, after its Congressional sponsors, Senator Carter Glass (Democrat) of Virginia, and Representative Henry B. Steagall (D) of Alabama. This article deals with only the four provisions separating commercial and investment banking. The article 1933 Banking Act describes the entire law, including the legislative history of the Glass–Steagall provisions separating commercial and investment banking. A separate 1932 law also known as the Glass–Steagall Act is described in the article Glass–Steagall Act of 1932.

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. Congressional efforts to "repeal the Glass–Steagall Act", referring to those four provisions (and then usually to only the two provisions that restricted affiliations between commercial banks and securities firms), culminated in the 1999 Gramm–Leach–Bliley Act (GLBA), which repealed the two provisions restricting affiliations between banks and securities firms.

By that time, 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."

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