A bipartisan group of senators that claims it has the support of President Donald Trump is backing legislation to revive the Glass-Steagall Act, a piece of 1930s legislation that prohibited commercial banks from engaging in investment banking activities. 

The law was repealed in 1999, and some blame that repeal for the financial crisis that erupted in 2008 and 2009.

Sens. Elizabeth Warren, D-Mass., and John McCain, R-Ariz., said last week they were teaming with Maria Cantwell, D-Wash., and Angus King, I-Maine, to reintroduce a bill that would “reduce risks to the financial system by limiting banks’ ability to engage in certain risky activities and limiting conflicts of interest.”

Warren and McCain, who together had introduced a version of Glass-Steagall in 2013, said they are trying again because big banks pose a threat to the economy.

“Despite the progress since 2008, the biggest banks continue to threaten our economy,” Warren said in a statement. “For fifty years, the original Glass-Steagall Act helped produce broad-based economic growth and avoid any major financial crisis. The 21st Century Glass-Steagall Act will re-establish the wall between commercial and investment banking and make our financial system more stable and secure.”

The role Glass-Steagall’s repeal played in the financial crisis isn’t settled. Skeptics of Glass-Steagall note that the biggest financial institutional failures in that crisis didn’t straddle the line between investment banking and commercial banking. They were investment banks or commercial banks, in one case an insurance company, and in two cases — Fannie Mae and Freddie Mac — government-sponsored enterprises.

But McCain said the repeal changed the way the financial industry worked.

“Since core provisions of the Glass-Steagall Act were repealed in 1999, a culture of excessive risk-taking has taken root in the banking world, placing the financial security of millions of hardworking American taxpayers at risk,” he said.

McCain said new legislation was needed because the regulatory approach adopted after the most recent financial crisis was wrongheaded and was not getting the job done.

“Even with the thousands of pages of misguided and burdensome regulations imposed by Dodd-Frank in the wake of the 2008 financial crisis, there are indications that this culture of risky behavior continues today,” the Arizona Republican said. “That’s why I believe it is critical for Congress to reinstate the protections that separated main street banks and investment banks.”

Dodd-Frank is the 2010 law that overhauled financial industry regulation. Trump, Treasury Secretary Steve Mnuchin and House Republicans have said they want to repeal Dodd-Frank.

Although Warren, McCain and other lawmakers have unsuccessfully tried to resuscitate Glass-Steagall several times since its repeal in 1999, they may feel emboldened this time around by potential allies in the White House.

The lawmakers say they also have support from Mnuchin and National Economic Council Director Gary Cohn.

Administration support

The Republicans adopted a platform plank at their convention in Cleveland last year that backed reinstating the law. The move was a surprise at a time when calls to restore Glass-Steagall were most often associated with the Democratic presidential campaign of Bernie Sanders, the Wall Street-castigating senator from Vermont.

Trump’s campaign manager at the time, Paul Manafort, cast the move as an attempt to stave off another financial crisis while simultaneously comporting with Republican free-market principles.

Manafort said last July bringing back Glass-Steagall was needed “so that we create barriers between what the big banks can do and avoid some of the crises that led to 2008.”

“We believe that the Obama-Clinton years have passed legislation that has been favorable to the big banks, which is one of the reasons why you see all of the Wall Street money going to her,” said Manafort, referring to the Democrats’ nominee, Hillary Clinton.

President Bill Clinton signed the legislation that repealed Glass-Steagall in 1999.

In a campaign speech last October, candidate Trump said it was time for a 21st-century version of the law.

Mnuchin, at his confirmation hearing to serve as Trump’s Treasury secretary this year, said the new administration would “look at Glass-Steagall and, what I refer to as the 21st-century Glass-Steagall” and determine if it is an “appropriate” part of “regulatory reform.”

Mnuchin said he didn’t support going back to Glass-Steagall as it was written in 1933, indicating it would need to be modified. He said he was concerned that restoring the Depression-era law without any adjustments “would have very big implications to the liquidity in the capital markets and banks being able to perform necessary lending.”

Cohn, a top Trump economic adviser, reportedly told lawmakers — including Republican and Democratic members of the Senate Banking Committee — in a private meeting last week that he supported some policy shift that would establish a wall between consumer lending and investment banking. It is unclear, however, what specific form a new policy would take.

Cohn was previously president of Goldman Sachs, an investment bank that became a bank holding company in 2008 in order to gain access to funding from the Federal Reserve in the crisis.

In an April 6 press release announcing their new bill, McCain, Warren, Cantwell and King cited Trump, Mnuchin and Cohn as supporters of Glass-Steagall’s reinstatement.