The repeal of Glass-Steagall happened on November 12, 1999, when President Clinton signed the Gramm-Leach-Bliley Act, ending the 66-year legal separation between commercial banks, investment banks, and insurance companies.1Federal Reserve History. Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley) Congress acted after more than a decade of regulatory erosion and a headline-grabbing merger that had effectively dared it to change the law. What followed was a wave of consolidation that produced the trillion-dollar financial conglomerates now at the center of American finance, along with the systemic vulnerabilities the 2008 crisis exposed.
What Glass-Steagall Kept Apart
The Banking Act of 1933 rested on a straightforward premise: the bank holding your deposits should not also be gambling in the securities markets. Commercial banks take deposits and make loans. Investment banks underwrite stocks and bonds, trade securities, and advise on mergers. Before 1933, many banks did both, and when their speculative bets soured, depositors lost everything.
The law enforced that separation through four provisions. Section 16 barred national banks from underwriting or dealing in securities. Section 21 made it illegal for securities firms to accept deposits.2Federal Reserve Bank of San Francisco. Cracking the Glass-Steagall Barriers Section 20 restricted banks from affiliating with firms primarily engaged in securities dealing. Section 32 prohibited officers and directors from serving at both a bank and a securities firm. The same law created the FDIC and federal deposit insurance. The architecture was designed so that if a securities operation collapsed, the commercial bank next door would keep functioning and depositors would remain whole.
How the Wall Came Down Before Congress Acted
Glass-Steagall did not fall in a single vote. The Federal Reserve had been chipping away at it for more than a decade. Starting in the 1980s, the Fed began allowing bank holding companies to own subsidiaries that engaged in limited securities underwriting, provided the revenue from those activities stayed below a set threshold. The initial cap was 5 percent of the subsidiary’s total revenue. The Fed raised it to 10 percent, and in late 1996 pushed it to 25 percent, letting banks earn a quarter of their affiliate revenue from securities dealing that Glass-Steagall had originally prohibited.3Federal Reserve. Increase in Securities Revenue Limit for Section 20 Subsidiaries
The Citicorp-Travelers Merger
The event that made formal repeal virtually inevitable happened before the repeal itself. On April 6, 1998, Citicorp and Travelers Group announced a merger that would combine Citicorp’s commercial banking operations with Travelers’ insurance underwriting and its Salomon Smith Barney securities arm. The combined company could not legally exist under the old rules.
The Federal Reserve approved the merger in September 1998 with a condition. Travelers committed to conforming all its activities and investments to existing banking law within two years, including by divesting impermissible subsidiaries if necessary.4Federal Reserve. Order Approving Formation of a Bank Holding Company Citigroup’s leadership was betting Congress would change the law before that deadline. They were right by just over a year.
What Gramm-Leach-Bliley Actually Changed
The Gramm-Leach-Bliley Act repealed the two Glass-Steagall provisions that enforced the wall between banks and securities firms. Section 20’s restriction on bank affiliations with securities dealers was eliminated, and Section 32’s ban on shared management went with it. The combined effect removed the legal barrier separating commercial banking, investment banking, and insurance underwriting.1Federal Reserve History. Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley)
The centerpiece of the new law was the financial holding company. That structure allowed a single parent entity to own a commercial bank, a broker-dealer, and an insurance company as separate subsidiaries under one roof. The statute authorized financial holding companies to engage in any activity the Federal Reserve determined to be “financial in nature or incidental to such financial activity,” a category that explicitly included lending, securities underwriting, insurance, and investment advisory services.5Office of the Law Revision Counsel. 12 US Code 1843 – Interests in Nonbanking Organizations
Supporters argued American banks needed the ability to compete with European universal banks that already combined these functions. Critics warned that concentrating deposits, securities trading, and insurance inside the same corporate family recreated exactly the kind of risk Glass-Steagall had been designed to prevent.
The Conglomerates That Followed
The merger wave was swift. Institutions that had operated in separate lanes immediately began combining. A single company could now underwrite a corporation’s stock offering, lend money to the same corporation, and sell insurance to its employees. Cross-selling was the stated rationale. Concentration was the real consequence.
As of December 2025, JPMorgan Chase held approximately $3.75 trillion in consolidated assets. Bank of America held $2.64 trillion, Citibank $1.84 trillion, and Wells Fargo $1.82 trillion. Those four institutions alone account for a substantial share of the nearly $24 trillion in total commercial bank assets held across just 3,849 remaining banks.6Federal Reserve. Large Commercial Banks
That scale created the “too big to fail” problem. When a bank holds trillions in assets and sits at the center of countless financial relationships, its failure does not just wipe out shareholders. It threatens to pull down counterparties, markets, and the broader economy. The concept was theoretical through most of the 2000s. It became real in 2008.
The Regulatory Structure Left Behind
Gramm-Leach-Bliley did not create a single regulator to match the single corporate structure it authorized. It codified “functional regulation,” where the type of activity determined which agency had jurisdiction, regardless of where that activity sat within the holding company.
The Federal Reserve became the “umbrella supervisor” for the parent financial holding company, responsible for its overall safety, capital adequacy, and risk management.1Federal Reserve History. Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley) But the umbrella role did not supersede the individual regulators underneath it. The SEC oversaw broker-dealer subsidiaries. The OCC or FDIC supervised commercial bank subsidiaries. State insurance commissioners regulated the insurance arms.
In practice, no single regulator could see the full picture of risk building across a conglomerate. Information sharing was uneven, coordinated examinations were logistically difficult, and each regulator tended to focus on the health of the subsidiary within its jurisdiction rather than on how risks might cascade between them.
2008 and the Dodd-Frank Response
The 2008 financial crisis was, in many respects, the scenario Glass-Steagall’s authors had feared. Massive interconnected conglomerates had loaded up on complex mortgage-backed securities and related derivatives. When the housing market collapsed, losses did not stay contained in one subsidiary or business line. They spread through entire conglomerates and radiated outward to counterparties, money markets, and the real economy. The government stepped in with unprecedented bailouts because letting these institutions fail would have been worse.
Congress responded in 2010 with the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law did not restore Glass-Steagall’s bright-line separation. It tried to make the post-repeal system safer through targeted restrictions and enhanced oversight.
The Volcker Rule
The most prominent restriction was the Volcker Rule, codified at 12 U.S.C. § 1851. It prohibits banking entities from engaging in proprietary trading, meaning the use of the bank’s own money to make short-term speculative bets in securities, derivatives, and other financial instruments. The rule also bars banks from acquiring or retaining ownership interests in hedge funds or private equity funds.7Office of the Law Revision Counsel. 12 US Code 1851 – Prohibitions on Proprietary Trading and Certain Relationships With Hedge Funds and Private Equity Funds The goal was to stop banks with access to federal deposit insurance and Fed lending facilities from using those public backstops to fuel speculative trading. Exceptions for market-making, hedging, underwriting, and government securities blurred the line from the start, and the final implementing regulations did not take effect until April 2014.
Systemic Risk Oversight
Dodd-Frank also created the Financial Stability Oversight Council, a body of ten federal financial regulators charged with identifying emerging threats to the financial system. The FSOC was given authority under Section 113 to designate nonbank financial companies as threats to financial stability, subjecting them to consolidated Fed supervision and enhanced prudential standards.8U.S. Department of the Treasury. Designations Bank holding companies with $50 billion or more in assets were automatically subject to enhanced standards, including stress testing and heightened capital requirements. The eight U.S. banks designated as global systemically important carry an additional Fed capital surcharge, currently ranging from 1.0 percent to 4.5 percent of risk-weighted assets, with an average of 2.7 percent.9Federal Reserve. Regulatory Capital Rule – Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies
The Rollback and the 2023 Failures
The Dodd-Frank framework barely survived a decade before significant portions were unwound. In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act raised the threshold for enhanced prudential standards from $50 billion to $250 billion in assets. It also raised the threshold for mandatory company-run stress tests from $10 billion to $250 billion and the threshold for mandatory risk committees from $10 billion to $50 billion.10Congress.gov. S.2155 – Economic Growth, Regulatory Relief, and Consumer Protection Act Dozens of midsize banks were freed from the enhanced oversight that Dodd-Frank had imposed.
The Volcker Rule was also loosened. Amendments finalized in 2019 and 2020 tailored compliance requirements based on the size of a firm’s trading operations and expanded the list of funds excluded from the rule’s restrictions. Venture capital funds, certain credit funds, customer facilitation vehicles, and family wealth management vehicles were all carved out of the covered fund definition.11Federal Register. Prohibitions and Restrictions on Proprietary Trading and Certain Interests in and Relationships With Covered Funds
In March 2023, Silicon Valley Bank, the 16th largest bank in the country with more than $200 billion in assets, collapsed after a classic bank run. Signature Bank, with nearly $100 billion in assets, failed days later. Both fell below the $250 billion threshold that would have subjected them to enhanced prudential standards under the 2018 rollback. Whether tighter oversight would have prevented the failures is debated, but regulators had less visibility into these institutions’ risk profiles than they would have had under the original Dodd-Frank rules. The federal government invoked the systemic risk exception to protect depositors at both banks, the very scenario the 2018 law’s supporters had said midsize banks could not trigger.
Could Glass-Steagall Come Back?
Bills to restore the separation have been introduced repeatedly and none have advanced. The most recent is the Return to Prudent Banking Act of 2023, which would prohibit insured banks from affiliating with broker-dealers or investment companies and give existing conglomerates two years to unwind those affiliations.12Congress.gov. HR 2714 – Return to Prudent Banking Act of 2023
The regulatory trajectory has moved in the opposite direction. In late 2025, the OCC proposed raising the asset threshold for its own heightened safety and soundness standards from $50 billion to $700 billion, which would reduce the number of banks subject to those standards from 31 to five. The American banking system today is defined by the choices made in 1999 and the adjustments since. A handful of conglomerates dominate, regulated by a fragmented system of overseers whose jurisdictions were designed for a simpler era.