Definition of Glass-Steagall Act
When US officials talk of "restoring Glass-Steagall", they mean the Banking Act of 1933, which sought to prevent a repeat of the mass bank collapses seen in the Great Depression. Sponsored by Henry Steagall and Carter Glass, it was largely a reaction to the perception that banks had run itno trouble through their securities business.
Some had lost by investing in speculative securities, some had made companies in which they had invested and others had pressed customers to invest in securities they were distributing.
Government protection was provided for depositors, whose funds were walled off from the activities of the securities business.
Glass-Steagall created the Federal Deposit Insurance Corporation and imposed conditions on the banks that received its protection.
These banks, deemed to be commercial banks, were barred from underwriting and distributing the securities of private companies.
Commercial banks could not own or be closedly affiliated with a brokerage business. Then, in 1956, the Bank Holding Company Act barred them from underwritng insurance.
However, the restrictions were gradually narrowed and the law repealed by the Gramm-Leach-Bliley Act in 1999.