Great article about the myth that somehow the removal of some Glass-Steagall restrictions caused the financial crisis.
In 1999, Clinton signed Gramm-Leach-Bliley into law which left the bulk of Glass-Steagall in place, and ended the affiliate restrictions, freeing up holding companies to own both commercial and investment banks. There is zero evidence that this change unleashed the financial crisis.
None of the institutions that ran into severe trouble in 2008-09 would have come under Glass-Steagall restrictions, admitted to even by Obama.
The investments that got banks into trouble were investments they had always been free to engage in.
Joseph Stiglitz says that Glass-Steagall did nothing to “directly” cause the crisis.
New Senator Elizabeth Warren says that Glass-Steagall would probably not have stopped the financial crisis.
Their cries to return Glass-Steagall are recognized as reform for the sake of symbolism over substance.
The arguments for full return to Glass-Steagall may qualify as great ringing rhetoric, but are not grounded in good economics.