The House financial reform bill passed last week, but this week, we’re already on to bigger ideas to crack down on the banking sector. Steny Hoyer says that the House is talking about re-instituting Glass-Steagall reforms to put up a wall between investment and commercial banks:

The U.S. House is considering reinstituting the Depression-era Glass-Steagall Act, which barred bank holding companies from owning other financial companies, Majority Leader Steny Hoyer said.

A renewal of the 1933 law “is certainly under discussion” by House members, Hoyer told reporters in Washington today. The Glass-Steagall law was repealed in 1999 to help pave the way for the formation of Citigroup Inc. by the $46 billion merger of Citicorp and Travelers Group Inc.

“As someone who voted to repeal Glass-Steagall, maybe that was a mistake,” said Hoyer, a Maryland Democrat.

This is a funny time to bring this up, days after the main financial reform bill passed the House. In fact, there was an amendment to return the wall of separation between commercial and investment banks offered to last week’s bill. It never got a vote on the House floor. If Hoyer is rethinking his support of repealing Glass-Steagall, as a member of the House leadership he could have actually gotten that amendment a vote.

In the Senate, re-instituting Glass-Steagall has bipartisan support – including from last year’s GOP Presidential nominee, John McCain:

More than a year after the election, the Arizona Republican is looking to repair that reputation by joining up with Democratic firebrand Maria Cantwell to propose something that will be anathema to both Wall Street and the Obama administration. According to two congressional sources, the two maverick senators want to reinstate Glass-Steagall Act, the Depression-era law that forced the separation of regular commercial banking from Wall Street investment banking. The senators’ proposal echoes a failed amendment introduced in the House last week by Rep. Maurice Hinchey of New York.

The Senate prospects for the success of the McCain-Cantwell bill—which the two plan to announce together on Wednesday morning—seem bleak at best. But McCain and Cantwell join a still small but not insignificant insurgency of chronic doubters, including former Federal Reserve chairman Paul Volcker, who say not nearly enough is being done to change Wall Street and, in particular, to address the “too big to fail” problem. The issue is one of the few in Washington that can unite the left and right sides of the political spectrum. Democrats like Cantwell deplore Wall Street’s outsize role in the real economy and its lobbying influence, and conservatives such as McCain are appalled at the way the market system has been undermined—some would say rigged—by the power of the big banks.

Volcker has been consistently critical of the financial industry, and sees Glass-Steagall separation as the only way to protect consumers from the gambling happening on Wall Street.

The new trans-partisan coalition toward reforming the financial system in this area mirrors the trans-partisan coalition fighting the confirmation of Ben Bernanke to a second term at the Federal Reserve. Groups on the left and right have called for a delay of the vote on Bernanke’s nomination in the Senate Banking Committee, scheduled for Thursday.

However, it’s not true to suggest that both parties are committed to financial reform. In fact, Republicans offered no votes for the fairly modest but positive bill that passed the House last week. As a result, the DCCC is going on the offensive against several House Republicans, accusing them of protecting Wall Street. That’s the kind of populism that will be constructive toward drawing clear lines for the electorate and actually moving toward real reforms to the system. But as for rebuilding the Glass-Steagall wall, I’ll believe it when I see it.

David Dayen

David Dayen