The U.S. House is considering reinstituting the Depression-era Glass-Steagall Act, which barred bank holding companies from owning other financial companies, Majority Leader Steny Hoyer said.
A renewal of the 1933 law “is certainly under discussion” by House members, Hoyer told reporters in Washington on Tuesday. The Glass-Steagall law was repealed in 1999 to help pave the way for the formation of Citigroup Inc. by the $46 billion merger of Citicorp and Travelers Group Inc.
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“As someone who voted to repeal Glass-Steagall, maybe that was a mistake,” said Hoyer, D-Md.
Hoyer made the comments when asked whether Congress and President Obama’s administration could do more to persuade banks to make more business loans and get credit flowing into the economy. Obama met Monday with the chief executive officers of U.S. banks, urging them to lend more money.
The Glass-Steagall law barred banks that took deposits from underwriting securities. The 1999 law that repealed it enabled the creation of “financial holding companies” that combine banks with insurers or investment banks.
Enactment of that law has generated debate about whether it helped spawn reckless lending practices and financial speculation that led to the meltdown of credit markets last year and the $700 billion U.S. bailout of troubled banks, including Citigroup.
