WASHINGTON — A small bipartisan group of U.S. senators on Thursday introduced legislation that would break up Wall Street’s megabanks by separating traditional banking activity from riskier financial services.
The bill, called the 21st Century Glass-Steagall Act, has an uncertain future, but it shows some lawmakers’ frustration that banks have only continued to grow since the 2007-2009 financial crisis.
“The four biggest banks are now 30 percent larger than they were just five years ago, and they have continued to engage in dangerous, high-risk practices that could once again put our economy at risk,” said Democratic Senator Elizabeth Warren from Massachusetts, one of the sponsors of the bill.
The other sponsors are Republican Senator John McCain from Arizona, Democratic Senator Maria Cantwell from Washington, and Senator Angus King, an independent from Maine who caucuses with the Senate’s Democrats.
The legislation would bring back elements of the 1933 Glass-Steagall Act, which divided commercial and investment banking, and was repealed in 1999.
There were calls to bring back Glass-Steagall immediately after the financial crisis, but the 2010 Dodd-Frank financial reform law stopped short of busting up companies and instead curtails Wall Street’s risk-taking.
The debate was revived last year when Sanford “Sandy” Weill, the tycoon who built financial conglomerate Citigroup Inc into a massive U.S. commercial and investment bank, said it was time to split up the biggest banks so they can get back to growing.
The legislation introduced on Thursday would separate the operations of traditional banks with accounts backed by the Federal Deposit Insurance Corp from riskier activities such as investment banking, insurance, swaps and hedge funds.
It would include a five-year transition period and would call for penalties if companies violated the law.
Other attempts since the financial crisis to bring back Glass-Steagall have not gathered significant momentum.