Did the Repeal of Glass-Steagall Make Possible the Financial Crisis?

Noted historian Tom Woods says no, it was irrelevant. The Glass-Steagall Act of 1933 separated commercial banking and investment banking. The so-called repeal in 1999, Woods notes, revoked only one paragraph of the original law and allowed the same holding company to control both investment and commercial banks.

Woods argues:

Because Glass-Steagall was passed during the Depression, it is assumed that it was addressing a pressing need of the time. In fact, the lack of government-enforced division between commercial and investment banking had precisely zero to do with bank problems during the Great Depression. The 9,000 bank failures during the early 1930s had far more to do with the damage done by government regulation — namely, the unit-banking laws that made it difficult for banks to diversify their portfolios (by limiting them to a single office and making branching illegal) — than with a lack of regulation. These were small banks, not the behemoths for which Glass-Steagall would have been relevant. Canada had none of these stifling regulations, and had zero bank failures. (Incidentally, Canada also avoided all the post-Civil War bank panics that struck the U.S., even though Canada did not have a central bank until 1934 — yet again, reality refuses to conform to the where-would-we-be-without-our-wise-overlords comic-book version of events.)