The Glass-Steagall Act of 1933, which has been partially repealed, prevented commercial banks from making risky investments with customer deposits.
Updated Mar 21, 2019 · 2 min read Written by Margarette Burnette Senior Writer Margarette BurnetteMargarette Burnette is a NerdWallet authority on savings, who has been writing about bank accounts since before the Great Recession. Her work has been featured in The Associated Press , USA Today and other major newspapers. Before joining NerdWallet, Margarette was a freelance journalist with bylines in magazines such as Good Housekeeping, Black Enterprise and Parenting. She is based near Atlanta, Georgia.
Lead Assigning Editor Tony ArmstrongTony Armstrong leads the banking team at NerdWallet. He has covered personal finance for nearly a decade. Tony began his NerdWallet career as a writer and worked his way up to assistant assigning editor and then to lead assigning editor. His writing has been featured by the Los Angeles Times, MarketWatch, Mashable, Nasdaq.com, USA Today and VentureBeat. Tony lives in Minneapolis, Minnesota.
Fact Checked
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
The Glass-Steagall Act was a piece of financial legislation that dates to the Great Depression. It was part of a broader set of regulations, known as the Banking Act of 1933, that moved to restore confidence in the banking system after thousands of bank failures in the first years of the Depression.
The provisions prohibited banks from investing in risky securities, though they could invest in government bonds. The legislation was designed to lower the risk of failure in commercial banks and help safeguard customer accounts.
The Banking Act of 1933 also created the Federal Deposit Insurance Corporation to provide deposit insurance for banks and help prevent another Depression. Glass-Steagall helped reduce the risk to the government for providing this insurance.
Cash Management Money Market Learn MoreSoFi Checking and Savings
SoFi members with Direct Deposit or $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either Direct Deposit or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi members with direct deposit are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
Min. balance for APY Read reviewEverBank Performance℠ Savings
Min. balance for APY Learn MoreBarclays Tiered Savings Account
Min. balance for APYThese cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
Learn Moreon Wealthfront's website
Wealthfront Cash Account
Min. balance for APY Learn Moreon Betterment's website
Betterment Cash Reserve – Paid non-client promotion
*Current promotional rate; annual percentage yield (variable) is 5.50% as of 4/2/24, plus a .50% boost available as a special offer with qualifying deposit. Terms apply; if the base APY increases or decreases, you’ll get the .75% boost on the updated rate. Cash Reserve is only available to clients of Betterment LLC, which is not a bank; cash transfers to program banks conducted through clients’ brokerage accounts at Betterment Securities.
Min. balance for APYCDs (certificates of deposit) are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts.
CDs (certificates of deposit) are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts.
Learn MoreMarcus by Goldman Sachs High-Yield CD
4.60% APY (annual percentage yield) as of 09/13/2024
Federally insured by NCUA
Alliant Credit Union Certificate
Annual Percentage Yield (APY) is accurate as of 09/13/2024
Checking accounts are used for day-to-day cash deposits and withdrawals. Checking accounts are used for day-to-day cash deposits and withdrawals.
Discover® Cashback Debit
Chase Total Checking®
Deposits are FDIC Insured
Chime Checking Account
Monthly fee Money market accounts pay rates similar to savings accounts and have some checking features. Money market accounts pay rates similar to savings accounts and have some checking features.
Discover® Money Market Account
Over time, politicians and economists critical of the prohibitions advocated ending Glass-Steagall. They objected to what they perceived as over-regulation of the banking industry.
In 1999, after decades of lobbying and proposed legislation, some Glass-Steagall provisions were repealed as part of the Gramm-Leach-Bliley Act. Institutions could participate in both commercial and investment activities.
But critics of the repeal said it crossed a firewall between commercial and investment banking, and may have led to the Great Recession of 2008. Joseph Stiglitz, winner of a Nobel Prize in economics and a professor at Columbia University, wrote in a 2009 Vanity Fair opinion piece:
“Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money — people who can take bigger risks in order to get bigger returns.”
Others have argued that Glass-Steagall would have done nothing to prevent the financial crisis because it didn’t cover the pure investment houses or institutions whose risky loan behaviors most directly underwrote the crisis. In other words, the recession was unavoidable for banks and their customers.
In the aftermath of the banking crisis, Congress restored some of the spirit of Glass-Steagall with the Volcker Rule, which was part of the Dodd-Frank Act signed in to law in 2010.
Acting on the idea that the 2008-09 crisis resulted in part from a lack of sufficient separation between investment and commercial banking activities, the Volcker Rule limited banks’ ability to use customer deposits for speculative activity. The rule also limited bank ownership of hedge funds and private equity funds.
But the bank debate continues. In 2018, as part of a push to limit regulations, Dodd-Frank reforms were partially rolled back . Critics have sought to loosen Volcker Rule restrictions as well.
Though the Glass-Steagall Act dates back to 1933 and has been partially repealed, it remains strikingly relevant today. The act has popped up repeatedly in a political context in recent months, and its future remains an open question.
About the authorYou’re following Margarette Burnette
Visit your My NerdWallet Settings page to see all the writers you're following.
Margarette is a NerdWallet authority on savings. Her work has been featured in USA Today and The Associated Press. See full bio.
On a similar note.
Download the app
Disclaimer: NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product's site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution's Terms and Conditions. Pre-qualified offers are not binding. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly.
NerdUp by NerdWallet credit card: NerdWallet is not a bank. Bank services provided by Evolve Bank & Trust, member FDIC. The NerdUp by NerdWallet Credit Card is issued by Evolve Bank & Trust pursuant to a license from MasterCard International Inc.
Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.
NerdWallet Compare, Inc. NMLS ID# 1617539
California: California Finance Lender loans arranged pursuant to Department of Financial Protection and Innovation Finance Lenders License #60DBO-74812
Insurance Services offered through NerdWallet Insurance Services, Inc. (CA resident license no.OK92033) Insurance Licenses
NerdWallet™ | 55 Hawthorne St. - 10th Floor, San Francisco, CA 94105
