The Gramm-Leach-Biley Act (GLBA), formally known as the Financial Service Modernization Act of 1999, was a piece of legislation largely intended to repeal specific aspects of the 1933 Glass-Steagall Act. GLBA removed many of the barriers that separated commercial banks, securities companies, and insurance companies, allowing such institutions to once again act under one roof. The Act also failed to provide the SEC with any authority to regulate large investment banks. Critics have charged that GLBA led to the financial conditions that precipitated the housing bubble and the financial collapse of 2007.
The banking industry had been lobbying Congress for repeal of Glass-Steagall since at least the 1960s. Various pieces of legislation were introduced into Congress, with the end result being the Gramm-Leach-Biley Act being signed into law by President Clinton in November 1999. The Act was supposed to allow consumers to have both savings and investment in the same institution.
Critics, including President Barack Obama, have cited Gramm-Leach-Biley as causing the subprime financial crisis that threatened the U.S. economy in 2007. The deregulation led to the formation of financial institutions deemed “too big to fail” and required a massive government bailout in order to keep such institutions from failing and dragging the world economy into a severe depression.