One honest question for what happens if Glass Stegal is brought back.

[RandySF]

What happens to existing investing products (IRA's, 401k's, etc.) currently offered by banks/investment firms? Someone surely thought through happens next, right?

[ibegurpard]

1. same thing that happens to your mortgage

When a bank or finance company goes under or gets bought out. Another one takes it over.

[SamKnause]

2. Things will revert back to pre Glass Stegal.

The banks and investment firms will have to restructure.

Are you implying that an error can not be corrected ???

[RandySF]

3. Nope

I'm just saying a lot of people have money invested under the existing system and would rightfully wonder what happens if it is changed.

[The Velveteen Ocelot]

4. Presumably it would work like it used to.

It would just mean that commercial banks and investment banks wouldn't be the same business; they would be separate entities. Commercial banks would be limited to offering only things like checking and savings accounts and offering mortgages and other loans, while investment banks would do only things like raise capital by underwriting the issuance of securities, manage financial assets, and provide financial advice for investors. Glass-Steagal was important for many reasons, but one of the most important reasons was, by keeping commercial banks out of the investment business, it protected the savings of bank customers from the risks of the investment market.

[Recursion]

5. Glass-Steagall has nothing to do with that

Glass-Steagall said retail banks could not operate proprietary desks*, investment banks could not offer retail accounts, and a single holding company could not own both an investment bank and a retail bank. It had nothing to do with banks offering non-FDIC-insured products like 401k's, and it didn't regulate what banks could do with deposits (other laws did and do regulate that).

Bluntly, it's nowhere near as important as people make it out to be, though it would probably be at least marginally good (even Warren has said Glass-Steagall wouldn't have impacted 2008 at all).

* This gets memed as "Glass-Steagall prevented banks from gambling your money" but it's closer to the opposite: Glass-Steagall kept banks from gambling their money -- this has some implications for the FDIC, but not for taxpayers.