Washington, December 16: The US House of Representatives is discussing the reinstitution of the 1933 Depression-era Glass-Steagall Act, which barred bank holding companies from owning other financial companies.
The law was repealed in 1999 to help pave the way for the formation of Citigroup Inc. by the $46 billion merger of Citicorp and Travelers Group Inc., House Majority Leader Steny Hoyer said on Tuesday.
The 1999 repeal of the law made it possible for Goldman Sachs Group Inc. and Morgan Stanley, the two biggest US securities firms, to convert into bank holding companies, enabling them to get cheap funding from the Federal Reserve during the financial crisis.
If the law hadn’t been repealed, Bank of America Corp. wouldn’t have been allowed to acquire Merrill Lynch & Co.
Hoyer made the remarks on Monday, after President Barack Obama met with the chief executives of US banks and urged them to make more business loans to get credit flowing into the economy.
Strong debate has been generated over ratification of that law 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 US bailout of troubled banks, including Citigroup.
——-Agencies