There is a remarkable degree of ignorance about the alleged role of Glass-Steagall in the financial crisis. It’s time to set the record straight.

When Sandy Weill, the former chairman of Citigroup, told an interviewer that he thought it had been a mistake to repeal Glass-Steagall, it unleashed a gale of commentary that reflected a remarkable degree of ignorance about the alleged role of Glass-Steagall in the financial crisis. The five myths discussed below do not cover all the misconceptions that seem to be held by those who want to restore Glass-Steagall, but they cover some of the most widely discussed.

Myth 1: Glass-Steagall was repealed in 1999 by the Gramm-Leach-Bliley Act.

No. Glass-Steagall was never repealed. It is still applicable to insured banks and forbids them from underwriting or dealing in securities. What was repealed in 1999 were the sections of Glass-Steagall that prohibited insured banks from being affiliated with firms—commonly called investment banks—that engaged in underwriting and dealing in securities.

Peter J. Wallison is the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute.

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