The Committee on Capital Markets Regulation seeks to provide the public and policymakers with important factual details about the Glass-Steagall Act and the Gramm-Leach-Bliley Act (“GLBA”) to inform an important policy debate.
This Nothing But The Facts (“NBTF”) statement explains how the Glass-Steagall Act prohibited commercial banks from directly engaging in certain securities activities and prohibited firms engaged in securities activities from accepting deposits. It also details restrictions that the Glass-Steagall Act established on the affiliation of commercial banks with firms engaged in securities activities and explains the reasons behind the adoption of Glass-Steagall.
The NBTF statement then explains that the GLBA only partially repealed the Glass-Steagall Act by allowing commercial banks to affiliate with firms engaged in securities activities. However, the NBTF makes clear that the Glass-Stegall Act’s prohibitions on commercial banks directly engaging in certain securities activities remains in effect. Importantly, the NBTF also explains how existing legislative and regulatory requirements mitigate the transfer of risk between commercial banks and their affiliates. Finally, the NBTF explains how a provision of the Dodd-Frank Act known as the Hotel California Provision could be discouraging certain bank holding companies from spinning-off non-commercial banking activities.
We hope this NBTF statement will help policymakers and the public understand the history of the enactment and partial repeal of the Glass-Steagall Act.
Read the full statement here.