The Glass-Steagall Act was passed in 1933 in response the Crash of 1929. It built a wall of separation between investment banking and commercial banking. It sought to isolate the purpose of providing loans for mortgages and small businesses from the far more speculative and leveraged investments of investment banking. The intent was to isolate the losses from financial speculation from the businesses on Main Street.
In 1956 the Glass-Steagall Act was extended by the Bank Holding Company Act to separate insurance and banking. Banks could sell insurance policies but could not underwrite them.
Some argued effectively that modest diversity in banking could reduce risk, and that the Glass-Steagall act could actually be making banks riskier.
In November of 1999 the Glass-Steagall Act was effectively repealed by the passage of the Gramm-Leach-Bliley Act (signed by President Clinton), which removed both the wall between commercial and investment banking and the wall between insurance underwriting and other banking services.
This was major deregulation, and its wisdom in hindsight given the financial collapse is seriously questionable. Perhaps the assumption of transparency was valued too highly and perhaps regulators and Alan Greenspan thought market discipline would be sufficient.
Banks were restricted in many ways and had to compete with investment products like money market funds. The market was eroding the walls before they were officially demolished. There were also concerns about the ability of our financial centers to compete in global financial markets. Yet the excesses that led to the original passage of the Glass-Steagall in 1933, quickly re-emerged when it was repealed.