The Glass-Steagall Act of 1933 effected a separation of commercial and investment banking in two ways. First, it prohibited the affiliation of the two types of banks. Second, it prohibited commercial banks from engaging in investment banking activities, and investment banks from receiving...

The greatest regulatory challenge emerging from last decade's financial crisis was the problem of “too-big-to-fail” financial institutions — those firms whose failure could trigger widespread runs in the financial system. When such firms faltered in 2008, regulators faced the dilemma of...