Bipartisan Group of Senators Introduce 21st Century Glass-Steagall Act

A small bipartisan group of U.S. senators last week introduced legislation that would break up Wall Street’s megabanks by separating traditional banking activity from riskier financial services. The 21st Century Glass-Steagall Act would bring back elements of the 1933 Glass-Steagall Act, which divided commercial and investment banking and was repealed in 1999.

The new legislation would separate the operations of traditional banks with accounts backed by the Federal Deposit Insurance Corp. (FDIC) from riskier activities such as investment banking, insurance, swaps and hedge funds. It would include a five-year transition period and would call for penalties if companies violated the law. The bill is sponsored by Sens. John McCain (R-Ariz.), Angus King (I-Maine), Maria Cantwell (D-Wash.) and Elizabeth Warren (D-Mass.).

“Since core provisions of the Glass-Steagall Act were repealed in 1999, shattering the wall dividing commercial banks and investment banks, a culture of dangerous greed and excessive risk-taking has taken root in the banking world,” said Sen. McCain. “Big Wall Street institutions should be free to engage in transactions with significant risk, but not with federally insured deposits. If enacted, the 21st Century Glass-Steagall Act would not end Too-Big-to-Fail. But, it would rebuild the wall between commercial and investment banking that was in place for over 60 years, restore confidence in the system and reduce risk for the American taxpayer.”

21st Century Glass-Steagall Act (bill text)