WASHINGTON Four key senators introduced a bill Thursday that would effectively reinstate a Depression-era law that separated the investment and commercial sides of U.S. banks.
The bill, coined as a 21st-century Glass-Steagall Act, would bring back the original intent of the previous law, which separated a bank's traditional activities (like deposits that are backed by the Federal Deposit Insurance Corp.) from riskier activities like investment banking, insurance, swap dealing, and hedge funds. The law was repealed by the Gramm-Leach-Bliley Act in 1999.
The proposed legislation by Sens. Elizabeth Warren, D-Mass.; John McCain, R-Ariz.; Maria Cantwell, D-Wash.; and Angus King, I-Maine; said the bill would help make "too big to fail" institutions smaller and safer, while also minimizing the likelihood of a government bailout.
"The four biggest banks are now 30% larger than they were just five years ago, and they have continued to engage in dangerous, high-risk practices," Warren said during a Senate Banking Committee hearing on Dodd-Frank.
The proposed legislation "would restore clear bright lines that separate risky activities from the traditional banking system. Too many Main Streets across America have paid the prices for risky gambling on Wall Street," said Cantwell.