The Subprime Crisis--A Test Match For the Bankers: Glass-Steagall vs. Gramm-Leach-Bliley

Jerry W. Markham, Florida International University

Abstract

This article addresses the ongoing debate over whether the repeal of the Glass-Steagall Act of 1933 by the Gramm-Leach-Bliley Act of 1999 (“GLBA”) laid the groundwork for the subprime crisis. The Glass-Steagall Act prohibited commercial banks from engaging in investment banking activities such as underwriting and dealing in equity securities. The GLBA removed that barrier, allowing banks to become financial supermarkets. However, the article concludes that GLBA played little if any role in the events surrounding the subprime crisis.