Could Glass-Steagall Legislation Make a Comeback?

Back in 1933 a piece of legislation now commonly referred to as the Glass-Steagall Act (named as such for Senator Carter Glass and Congressman Henry B. Steagall) sought to limit the scope of what a single bank could do. Simply put, the bill restricted commercial banks from engaging in the investment side of things and did so for more than 60 years. However the bill was repealed in 1999 with an act signed into law by President Bill Clinton. Following the banking crisis of 2008, that repeal has since gone on to become a scapegoat with many saying it helped contribute to the meltdown. So with the vilification of its repeal, could we see Glass-Steagall legislation return?

If the platforms for both major political parties are to be believed then the answer is “yes.” While there may not be a whole lot that the Democratic and Republican bases agree on these days, as MarketWatch notes, both parties have language in their 2016 platforms that call for modern versions of the Glass-Steagall regulations. Meanwhile President Bill Clinton’s repealing of the law has given ammo to both Bernie Sanders on the left and Donald Trump on the right in which to attack Secretary Hillary Clinton over what they say are her deep and sympathetic ties to Wall Street.

While it might seem like this issue will be all but a done deal when the new president and congress take office come January given its sudden bipartisan support, let’s not get too ahead of ourselves. For one, as we all know, what politicians say and what they do can be two entirely different things. Additionally there are still many very vocal detractors of any Glass-Steagall-esque legislation that might come down the pipeline.

One such opponent is Tony Fratto with the lobbying firm Hamilton Place Strategies. As he told MarketWatch, “Glass-Steagall is dumb politics and dumb economics… returning to Glass-Steagall would be destructive and unworkable.” Similarly others speculate that reinstating such regulations could wreak havoc on the market as the big banks are forced to break up. Although, as analyst Brian Gardner of Keefe, Bruyette & Woods warns, the risk of such legislation making its way into future revisions of the Dodd-Frank Act is currently being underestimated.

With the GOP holding their convention this week and the Democrats on deck for next week, it’s important to remember that these platforms and events are geared towards Main Streeters who will be heading to the voting booths in November. With that in mind it makes sense that both campaigns would want to distance themselves from Wall Street, so as to not look like their “bought and paid for.” Still, it wouldn’t be unreasonable to think that, after a near-20-year absence, Glass-Steagall legislation could reemerge in America sometime during the next president’s term.