Known as the 21st Century Glass-Steagall Act, the new version of the Banking Act of 1933 seeks to decrease risk for the US taxpayer and reduce the possibility of financial crises with subsequently government bailout, in the future.
Aimed to separate commercial and investment banking operations of mega-banks, the bill was presented by Elizabeth Warren, John McCain, Maria Cantwell, and Angus King before the US Congress.
The new act advocates separation of the traditional banks, including savings and checking accounts from as investment banking, insurance, swaps dealing, and hedge fund and private equity activities.
Senator John McCain said that the banks are free to do riskier transaction, but not at the cost of federally insured deposits.
The new legislation will not end Too-Big-to-Fail, although it would reconstruct the divider between commercial and investment banking, restore confidence in the system, and reduce risk for the American taxpayer, McCain added.
Senator Elizabeth Warren said, "The 21st Century Glass-Steagall Act will reestablish a wall between commercial and investment banking, make our financial system more stable and secure, and protect American families."
Congress had passed sweeping financial reform dubbed as Dodd-Frank in 2010, however many of its provisions have yet to be enacted.
It is not clear when the bill will be passed by Congress as many senators are against stringent restrictions on the financial sector.
