Banking is an essential aspect of American citizens’ everyday lives. Banks have grown so that they can handle all their customers’ financial needs. However, this was not always the case because, for nearly 60 years, commercial and investment banks had to stay separate. Customers could not get a mortgage for their house from the same place they invested in stocks. This separation was because of a Congressional act called Glass-Steagall. Why would US lawmakers want to inconvenience the consumer? Why did they require separation?

The 1933 Congress would say they passed this law because banks acted unethically, and when the investment and commercial sides mixed, the results were disastrous. They would point to the bank failures of the Great Depression as justification for their decision. They would consider the bank’s misdeeds uncovered by the Pecora Commission as reason enough. So then, why was it repealed if Congress passed the law to protect the economy and Americans? What justification could Congress give for deciding to undo the work of their ancestors 60 years prior?

The US leaders in the 90s might say that the act no longer made sense and that the US was falling behind in financial services. They would say they were updating the banking system to enable American banks to compete. They might also grab hold of claims that the justifications for the act never made sense. They would say that the Congressmen of the 1930s used public outrage to justify passing an unnecessary act. Nine years later, these leaders would be under scrutiny when a global financial crisis led many people to question why Congress repealed Glass-Steagall. There would be persistent claims that these Congressmen made their decisions not based on the financial needs of America but on the requests of lobbyists.

People still debate whether or not the US needs Glass-Steagall. The global recession placed doubt in many minds. However, if Congress ever considers the possibility of a new Glass-Steagall, the original must be better understood. Most historians covering the topic cover what happened but leave out why. Those who focus on why often look solely at the economic conditions and rarely focus on the people making decisions. Everyone must understand the motivations of those who first passed the act and those who later repealed it.

With this in mind, the main question to be asked and answered within this dissertation will be, “Why was Glass-Stegall passed and later repealed?”
While that is the central question, many others will be asked and answered throughout the dissertation. For instance, why was Carter Glass in favor of bank separation? Glass had been a proponent of the idea off and on for many years, and the Pecora Commission did not anger him as it did for many others.

The Pecora Commission is also a topic worth further investigating. Historians have long credited the commission with helping Congress pass Glass-Steagall. However, historians also believe that the Pecora Commission did not discover anything that should have justified passing the act. Historians rarely connect the Pecora Commission and Congress. They do not adequately show Pecora’s influence. As a result, there is a gap in the historical analysis. These historical gaps exist in other areas as well. Historians barely cover Harry Steagall or other Congressional leaders. Carter Glass could not get the act passed alone.

These gaps in understanding individual motivations exist for the repeal as well. Historians cover how regulating industries changed rules for banks to help them undermine the act, but they never provide the motivations of the regulators in charge. Historians skip the motivations of Congress and President Clinton when discussing the act. If they do address motivations, they note lobbyists. However, the study of the lobbyists is inadequate. Occasionally, historians will provide a quote from a significant banker, but they do not give a detailed analysis of the money spent on the lobby. Congress reports this information, and historians should analyze it.

There are gaps in the study of Glass-Steagall. Historians have done an adequate job of covering the economic functions and fallout and an excellent job of covering what happened. However, historians have yet to dive deep into the motivations of individuals who make decisions, which is as critical as any other aspect. The essential part of any economic decision is not economics but instead people. People make the choices, and they often have a range of motivations that go beyond pure numbers. The goal is to study the people surrounding Glass-Steagall and to interpret the reasons for their actions. Once historians understand why the act was passed and repealed, leaders can make better decisions for the future.

Before concluding this blog, I need to ask and answer one last question: What qualifies me to handle this topic? My education and experience are dominant factors in my fit for this topic. I have an MBA specializing in Finance, and I’ve been in banking for nearly 15 years. I understand the structure and functions of banks. I have had contact with bank leaders, regulators, and special interest groups. I have also completed the education requirements to get to the dissertation phase of a History Ph.D., so I have gained the skills necessary to be a historian. These factors combined make me qualified for this topic.