Congress passed the Glass-Steagall Act in 1933, in the midst of the Great Depression. The original intent was to prevent the kind of speculation and bank runs that led to the catastrophic stock market crash in 1929. But by 1999, the overwhelming consensus on Capitol Hill was that it was time for a change.
Then-President Bill Clinton and his treasury secretary, Larry Summers, urged Congress to ease the regulations that separated commercial and investment banks.
"If we don't pass this bill, we could find London or Frankfurt or, years down the road, Shanghai becoming the financial capital of the world," Sen. Chuck Schumer of New York said on the Senate floor.
Just eight senators voted against the repeal, including Democrat Byron Dorgan of Nebraska. The former senator tells weekends on All Things Considered host Guy Raz that at the time, he warned that repealing the law would fuel consolidation on Wall Street and raise the likelihood of taxpayer-funded bailouts.
"I was very concerned about what this was going to mean for the future of the country," he says.
Democrat Elizabeth Warren, who is running for U.S. Senate in Massachusetts, says she wants to bring Glass-Steagall back. She tells Raz that banks that offer commercial services — checking, savings and deposit accounts — should not be in the business of making financial bets that can result in massive losses — like at JPMorgan. That should be left to the Wall Street trading firms, she says.
"Glass-Steagall says there needs to be a wall between those two kinds of activities," Warren says. "It's not going to work to let the biggest financial institutions just go out and do what they want."
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