The Glass-Steagall Act of 1933 separated commercial banking from investment banking in the United States — prohibiting deposit-taking banks from underwriting or dealing in securities. Its core provisions were repealed by the Gramm-Leach-Bliley Act (GLBA) in 1999, allowing the formation of universal banks (bank holding companies combining commercial, investment, and insurance activities).
Formally titled the Banking Act of 1933 (Pub. L. 73-66; see govinfo.gov for historical text), Glass-Steagall emerged from the Pecora Commission hearings that documented widespread conflicts of interest and speculation by commercial banks in the lead-up to the 1929 crash. The Act's four core provisions — Sections 16, 20, 21, and 32 of the Banking Act of 1933 — erected a firewall between commercial banking (accepting deposits, making loans) and investment banking (underwriting securities, dealing in corporate stock). Key Glass-Steagall provisions: Section 16 prohibited national banks from purchasing corporate securities for their own accounts. Section 20 prohibited Fed member banks from affiliating with entities engaged principally in underwriting securities. Section 21 prohibited securities firms from accepting deposits. Section 32 prohibited interlocking directorates between banks and securities firms. Glass-Steagall also created the Federal Deposit Insurance Corporation (FDIC) and mandated interest rate ceilings on deposits (Regulation Q). The erosion of Glass-Steagall began in the 1980s through Federal Reserve reinterpretations that allowed bank holding companies to derive up to 5% (later 25%) of revenues from securities activities. Full repeal came with the Gramm-Leach-Bliley Act of 1999 (Pub. L. 106-102, 15 U.S.C. §§ 6801–6827), which created the 'financial holding company' framework allowing bank holding companies to affiliate with securities firms and insurance companies. The FDIC's historical overview of the Glass-Steagall era is at fdic.gov/bank/historical/history/. Post-2008 context: The financial crisis renewed academic and political debate about Glass-Steagall restoration. The Volcker Rule (Section 619 of Dodd-Frank, 12 U.S.C. § 1851) addressed proprietary trading but did not reinstate the commercial/investment banking separation. The Federal Reserve's current framework for financial holding companies is codified at 12 U.S.C. § 1843 and governed by the Bank Holding Company Act (federalreserve.gov/supervisionreg/bhc.htm).
Yes. The Gramm-Leach-Bliley Act of 1999 (Pub. L. 106-102) repealed Sections 20 and 32 of the Banking Act of 1933, effectively ending the commercial/investment banking separation. Sections 16 and 21 remain, with modifications. Whether the repeal contributed to the 2008 financial crisis is debated: proponents of restoration argue universal banks took excessive risk with insured deposits; opponents argue Glass-Steagall wouldn't have prevented the specific failures of Bear Stearns, Lehman, and AIG. The FDIC's history at fdic.gov/bank/historical/history/ provides context.
The Gramm-Leach-Bliley Act (GLBA) replaced Glass-Steagall's bright-line separation with a 'financial holding company' framework supervised by the Federal Reserve. GLBA also added significant consumer financial privacy protections (15 U.S.C. §§ 6801–6809) requiring financial institutions to disclose data-sharing practices — the basis for bank privacy notices you receive today. Post-2008, the Dodd-Frank Act's Volcker Rule (12 U.S.C. § 1851) added proprietary trading limits. Current Federal Reserve FHC framework: federalreserve.gov/supervisionreg/bhc.htm.
Indirectly yes. The universal banking model that emerged post-GLBA means large banks cross-sell investment products alongside commercial loans, and large bank holding companies allocate capital across many business lines. For small businesses, the more relevant legacy is that community banks — which were never primarily investment banks — still dominate small business lending; the Fed's Small Business Credit Survey (federalreserve.gov/publications/small-business-credit-survey.htm) documents that community banks have higher approval rates for small business loans than megabanks.