The GLB Act is also known as the Financial Services Modernization Act of 1999. As its name suggests, it is meant to bring into practice or reality what were then needed at that point –_ to modernize financial services. Signed into law by President Bill Clinton to repeal part of the Glass-Steagall Act of 1933, which limits what banks could do, GLB created opening up of the market among securities companies banking companies, and insurance companies. Under the Glass-Steagall Act, the three companies cannot be combined in any way but under GLB, they were made free to do so. The GLB Act therefore gave more power to the players of the financial services industry as it allowed consolidation or combination of commercial banks, investment banks, securities firms, and insurance companies. The 1998 case of Citicorp, a commercial bank holding company, merging with Travelers Group, an insurance company by forming conglomerate Citigroup exemplified the case in point. A temporary waiver process1 for combining securities, insurance, and banking was needed or the merger in 1998, would have violated the Glass-Steagall Act and the Bank Holding Company Act of 1956. GLB therefore legalized the merger on a permanent basis.
How it became a law through the legislative process? Through congressional vote by chamber and party, GLB came about in 1999. Prior to said date, the banking industry had been seeking the repeal of the 1933 Glass-Steagall Act since the 1980s, if not earlier. In 1987, the Congressional Research Service reported on the matter, after exploring the cases for and against preserving the Glass-Steagall Act2. This was followed by respective versions of the legislation being introduced in the US Senate by Phil Gramm and US House of Representatives Jim Leach with the support of Rep Bliley, Jr, Chairman of House Commerce Committee from 1995 to 2001.
As stated earlier, the banking industry