Glass-Steagall established barriers between commercial banks and their investment counterparts. It also established barriers between banks and other commercial businesses so that today, a bank that offers loans and checking accounts cannot also directly underwrite securities for its business customers or offer life insurance policies to its consumers. Each time the market established a legal connection between banking and another financial or commercial sector, the government stepped in with new regulations preventing such a relationship. As a result of legal restrictions, banks have seen their share of the financial services sector slip away to less-regulated competitors. In essence, banks are asked to compete in the technologically advanced 1990s using only 1930s investment techniques.
Consumers suffer substantial harm from the forced separation of financial services.
And every day, producers and consumers pay an unnecessary premium for this burdensome system of regulation. It is impossible to repair a system as broken as the federal financial regulatory system. Congress and the President should allow financial services to be provided within a free market by eliminating the many regulations that currently interfere with efficient transactions and savings. The first step in this process is elimination of the artificial barriers that have been created between commercial and investment banking and all other commercial and financial activities. Enacting these recommendations is the first step in ending more than 60 years of harmful financial regulation and allowing the American financial system to take advantage of modern technology.