The Glass-Steagall Act Did Not Change the Most Important Weakness of the American Banking System

While breaking up big universal banks, the Glass-Steagall Act had no impact on the small unit banks that failed by the thousands. These banks typically didn't engage in corporate underwriting. Incredibly, as Benston noted, the Glass-Steagall Act "did not change the most important weakness of the American banking system—unit banking within states and the prohibition of nationwide banking." In fact, he says, "This structure is considered the principal reason for the failure of so many U.S. banks, some 90 percent of which were unit banks with under $2 million of assets."

--Jim Powell, FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression (New York: Crown Forum, 2003), 64.