The Financial Services Modernization Act of 1999

1929. The stock market crash that would lead to the Great Depression. While a variety of factors would cause the horrific demise of the American economy, one particular factor, the volatility of the banking industry stands out. Banks engaging in increasingly dangerous investments specifically magnified a lot of the economic damage during the Great Depression.

1933. President Roosevelt, combating the Great Depression with his First New Deal, passes lots of legislation affecting various sectors of the economy. The Glass-Steagall Act targeted the banking industry, regulating the amount of risky investments that banks could take, thus hopefully increasing financial security and economic stability. Specifically, the act separated commercial banking and investment banking institutions, for they had become too intertwined before the Great Depression, so when the stock market crash hit, many banking institutions had lost many savings that they had placed in the banks, further exacerbating the consumption crises of the Great Depression. Without savings for many consumers to go to, they would be then forced out of their homes and pushed into poverty.

1999. There is a movement to reverse the trends of financial regulation and banking separation set by Glass-Steagall. Instead, the Financial Services Modernization Act of 1999 attempted to allow for more financial consolidation by repealing parts of Glass-Steagall. The financial industry during this time period argued for increasing consolidation in response to economic downturns, and that by being allowed to consolidate they would be able to avoid major losses.

The Financial Services Modernization Act still took measures to maintain safety within the financial industry. Namely, it mandated the creation of a new type of financial institution, the financial holding company. It is these entities that are able to be involved in different financial activities and encourage consolidation. However, with certain regulations still in place, and with the Federal Reserve Board overseeing the creation of these entities, there is till some stability maintained within the financial industry. 

Sources:

https://www.federalreservehistory.org/essays/gramm_leach_bliley_act

http://www.investopedia.com/terms/f/financial-services-act-of-1999.asp