Bipartisan 21st Century Glass-Steagall Act Introduced to Split Traditional Banking from Riskier Financial Services

On Thursday, a small bipartisan group of U.S. senators including Elizabeth Warren, John McCain, Angus King, and Maria Cantwell introduced the 21st Century Glass-Steagall Act of 2013 to reinstate and modernize core banking protections. The intent is to break up Wall Street’s megabanks by separating traditional banking activity such as accounts backed by the FDIC from riskier financial services such as investment banking, insurance, swaps and hedge funds. According to Insurance Journal this legislation has an uncertain future, but it shows some lawmakers’ frustration that banks have only continued to grow since the 2007-2009 financial crisis. The original 1930s-era Glass-Steagall Act, also known as the 1933 Banking Act, was repealed by Congress in 1999. Aside from the 2010 Dodd-Frank financial reform law (which stopped short of busting up companies and instead curtails Wall Street’s risk-taking), there has been interest since the financial crisis to bring back Glass-Steagall but attempts failed to gather significant momentum. A press release by Senator Warren states “The bill will give a five year transition period for financial institutions to split their business practices into distinct entities — shrinking their size, taking an important step toward ending ‘Too Big to Fail’ once and for all, and minimizing the risk of future bailouts.”