The Separation of Commercial and Investment Banking: The Glass-Steagall Act Revisited and Reconsidered

The 1933 passage of the Glass-Steagall Act by Congress has profoundly effected the way banking has been conducted in the United States. Designed to prevent the kinds of bank failures that resulted from the Crash of 1929 and the Great Depression that followed, the Act made it illegal for commercial banks to engage in investment banking, and for investment banks to engage in commercial banking. This study explores the reasons for the passage of the Act, offers new insights into the forces that shaped the final legislation, and examines the possible consequences of repealing the Act--arguing that repeal will not result in the resumption of the problems that created a need for protective legislation.