The phrase "Glass-Steagall" generally refers to the separation of commercial banking from investment banking. In this context, commercial banking refers to the activities engaged in by depository institutions, which this report also will refer to as "banks" or "commercial banks." In contrast, investment banking refers to activities engaged in by securities dealers and brokerage firms, which this report also refers to as "investment banks" or "securities firms." Congress effected a separation of commercial and investment banking through four sections of the Banking Act of 1933—Sections 16, 20, 21, and 32—that were designed "to prevent the undue diversion of funds into speculative operations...." These four statutory provisions are commonly referred to as the Glass-Steagall Act. Specifically, Section 21 prohibited nonbanks from accepting deposits, while Sections 16, 20, and 32 prohibited depository institutions from affiliating with securities firms and from engaging in certain securities activities. Although there is general consensus as to what the Glass-Steagall Act refers , there is less consensus regarding what "Glass-Steagall" truly means . This lack of consensus is the result of the confluence of factors and events that occurred during the nearly 70 years from when the Glass-Steagall Act was enacted until its partial repeal by the Gramm-Leach-Bliley Act (GLBA) in 1999. These factors include statutory changes to both the four Glass-Steagall Act provisions and other laws that indirectly impacted the permissible securities activities of commercial banks; evolving interpretations of the Glass-Steagall Act by both federal administrative agencies and the courts; and changes in financial markets and economic conditions. The Glass-Steagall policy debate focuses on the permissible activities of financial firms in light of the risks associated with those financial activities. Commercial banking (e.g., deposit-taking and lending) is inherently risky because depositors have the right to withdraw their funds on short notice and external events can cause widespread loan defaults, even if the loans were prudent when approved. Regulatory policies, such as deposit insurance and prudential requirements, can help limit the riskiness of commercial banking. Securities markets are inherently risky because securities prices are volatile. However, the exposure of a securities firm to price volatility primarily depends on the degree to which the securities firm has traded for its own account (proprietary trading) or otherwise contractually committed to the securities, rather than merely serving as the middleman for customers (whether buyers or issuers of securities). The Glass-Steagall debate is not centered on prohibiting risky financial services; rather, the debate is about whether to permit inherently risky commercial and investment banking activities to be conducted within a single firm—specifically within firms holding federally insured deposits. The United States suffered its worst financial crisis since the Great Depression less than one decade after GLBA formally repealed part of the Glass-Steagall Act. Some have argued that the partial repeal either was a cause of the financial crisis that resulted in the so-called Great Recession or that it fueled and worsened the crisis's deleterious effect. On the other hand, some policymakers argue that Glass-Steagall issues were not significant causes of the crisis, and that the Glass-Steagall Act would have made responding to the crisis more difficult if it had remained in place. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was Congress's primary legislative prescription to prevent a similar financial crisis in the future. The Dodd-Frank Act neither reinstated the sections of the Glass-Steagall Act that were repealed by GLBA nor substantially modified the ability of depository institutions to affiliate with securities firms. It did, however, include some arguably Glass-Steagall-like provisions, which were designed to, among other things, address perceived inadequacies of the financial regulatory system at the time of the Great Recession so as to promote financial stability going forward; reduce various speculative activities of banks; and reduce the likelihood that the U.S. government would have to provide taxpayer support to avert or minimize a future financial crisis. Some believe that a more effective way of accomplishing these policy objectives would be to fully reinstate the Glass-Steagall Act. In fact, multiple bills have been introduced in the 114 th Congress with that stated purpose. These bills include: S. 1709 / H.R. 3054 , The 21 st Century Glass-Steagall Act of 2015, and H.R. 381 , the Return to Prudent Banking Act of 2015. The bills would attempt to restore Glass-Steagall in different ways, although none of them would simply re-enact the original Glass-Steagall statutory text that was repealed by GLBA. The divergent approaches of these bills to reach the same policy objectives reinforce the lack of consensus on what it actually means to "restore Glass-Steagall." Others argue that the Glass-Steagall Act is ill-suited for the current financial system and that the recent financial crisis would have occurred even if GLBA had never partially repealed the Glass-Steagall Act. To inform this policy debate, this report provides background on the economic conditions in which the Glass-Steagall Act was enacted and provides an economic and legal analysis of the Glass-Steagall Act's enactment, erosion, and partial repeal by GLBA. The report concludes with an analysis of the Glass-Steagall Act's relationship with financial stability and the Glass-Steagall-like provisions of the Dodd-Frank Act. The Board of Governors of the Federal Reserve System (Fed) was established in 1913 in order to respond to problems in the banking system as a lender of last resort. Yet, many components of the financial system collapsed in the years immediately following the stock market crash of 1929—a period commonly referred to as the Great Depression. Banks failed in waves from 1930 through 1933. Many small and mid-sized banks found it difficult to turn to the Fed for assistance. Many of these banks were not members of the Federal Reserve System and, therefore, did not have access to the Fed's lending facilities. Even those that were Fed member banks often lacked assets that were eligible to be collateral for loans from the Fed. Finding private alternatives to Fed loans, including attempts to issue debt securities, also was difficult for small and mid-sized banks, in part because securities markets were also disrupted during the Great Depression and because smaller institutions often had not tapped securities markets frequently enough or on a large enough scale prior to the Great Depression to establish sufficient reputations in the market. Fearful of financial turmoil, bank depositors withdrew their funds en masse . The 1929 crash also precipitated severe mark-downs in the value of securities held by a wide range of other financial institutions, causing many struggling financial firms to sell securities at distressed prices. For these and other reasons, banks and securities markets spread and magnified economic losses in ways that current policymakers would describe using the terms "systemic risk" and "systemic event." In response to the financial crisis that followed the stock market crash of 1929, the Senate passed a resolution that authorized the Senate Committee on Banking and Currency to conduct an investigation into the "abusive" banking and securities practices that might have fueled financial instability. The investigation is referred to as "the Pecora Commission" after the committee's chief counsel, Ferdinand Pecora. The Pecora Commission identified a number of conflicts of interest and other "[a]buses arising out of the interrelationship of commercial and investment banking" that played a role in that crisis. The Pecora Commission Report explained: A prolific source of evil has been the affiliated investment companies of large commercial banks. These affiliates have been employed as instrumentalities by commercial banks to speculate in their own stock, to participate in market operations designed to manipulate the price of securities, and to conduct other operations in which commercial banks are forbidden by law to engage. Commercial banks did not hesitate to violate their fiduciary duty to depositors seeking disinterested investment counsel by referring such inquiries to their affiliates. The affiliates unloaded securities owned by them on unsuspecting investors and depositors. The activities of investment affiliates encouraged speculation by officers and directors of commercial banks and resulted in the payment of excessive compensation and profits to these officials. Congress attempted to address many of the causes of systemic risk, as well as the abuses identified by the Pecora Commission through a series of legislative enactments from 1932-1935. These acts included the Banking Act of 1933, as well as the Securities Act of 1933 and the Securities and Exchange Act of 1934. The laws addressed a broad swath of banking and securities market issues, including (1) broadening the range of collateral eligible for loans from the Fed; (2) establishing the Federal Home Loan Bank (FHLB) system to enable smaller banks to access securities markets to fund mortgages on more favorable terms; (3) establishing the Federal Deposit Insurance Corporation (FDIC) to reduce fear among bank depositors; (4) imposing a cap on the interest rate that banks could pay depositors; and (5) prohibiting banks from participating in certain securities activities. Some of these measures have been repealed (e.g., interest rate caps); some have been altered (e.g., maximum FDIC deposit insurance coverage); and some have been continued or expanded (e.g., range of eligible collateral for emergency Fed loans). Through these acts, Congress created distinct regulatory regimes for commercial banks and securities firms in the United States. Generally, these laws reinforced a regulatory system in which banks were subject to activity restrictions and prudential regulation, including on-site examination, while securities firms were subject to a regime based on preventing market manipulation and publicly disclosing information considered sufficiently detailed as to allow the investing public to make informed investment decisions.