Aug 8, 2010
In seven simple lines buried in this year’s financial overhaul bill, lawmakers swept away one of the last vestiges of the 1933 Glass-Steagall Act that held sway over markets for decades.
- A d v e r t i s e m e n t
The Depression-era bill is best known for separating commercial and investment banking — a wall that was effectively repealed in the late 1990s.
Liberal Democrats, consumer advocates and a few Republicans pushed unsuccessfully this year to draw that line once more as part of the Wall Street bill.
But Glass-Steagall had another core pillar: a ban on banks paying interest on checking accounts. Banks and lawmakers chipped away at the ban and other interest rate restrictions over the years, to the point that it basically only barred payments on business accounts. The Dodd-Frank Act did away with the rule entirely.
“This really is the last remnant of that Depression edifice,” said Vincent Reinhart, a former senior Federal Reserve official.