Repeal Gramm-Leach-Bliley?

Will the separation of investment and commercial banking end "too big to fail"?

One of the first acts of the Roosevelt administration in 1933, besides the creation of federal deposit insurance, was to pass the Glass-Steagall Act, which separated investment hanking from commercial banking. The law survived until the passage of the Gramm-Leach-Bliley Act of 1999.

In the intervening decades, the securities industry found creative ways to encroach on the markets of commercial banks, including the use of bond issuances and IPOs for corporations. In the consumer arena, the advent of 401Ks and other non-bank investment vehicles also hurt traditional banks.

Over the years, with some creative assistance from the Federal Reserve, banks were allowed more product flexibility. Congress finally ratified the Fed's changes and went further by allowing the creation of financial holding companies that could engage in insurance, securities and conventional banking.

Since the 1970s, there have been critics of larger financial institutions as being "too big to fail." The argument being that these institutions enjoyed implicit backing from the federal government and, therefore, had a competitive advantage over smaller banks when it came to funding from creditors and depositors.