The two laws collectively known as the "Glass-Steagall" Act were banking regulations that were passed in June 1933 - practically the first things that Franklin Roosevelt signed into law after he was inaugurated as President in March 1933 (it formed part of his "100 days" of furious and frenetic action).
The legislation introduced for the first time separation of bank types (i.e. retail banks could not be investment banks and brokers) and forbade retail banks to sell insurance or securities (bonds) or to underwrite them. What prompted it was the failure of 5000 banks during the depression. FDR and the Democrats of that era believed that it was conflicts of interest and contagion rather than the Wall Street Crash of 1929 that brought down the banking system.
And the act stood for 66 years, safeguarding the USA as it turned into a superpower. Then it was repealed in November 1999 by the Gramm-Leach-Bliley Act, which Clinton, under the cosh from impeachment hearings, signed into law instead of vetoing it. And here we are a mere nine years later, with three of the top five American investment banks gone, Fannie Mac and Freddie Mac with $5.4 trillion in liabilities, nationalised by the US govt, and the huge American insurer AIG teetering on the brink of disaster, plus loads of small American banks going under, and the contagion threatening to spread across the world. It all makes Northern Rock look like a triviality.
Glass-Steagall was repealed in response to ferocious lobbying of the Republican Congress by Wall Street, who felt they were over-regulated - the same people who now want the American taxpayer to bail them out.
If Glass-Steagall had been in place the sub-prime lending crisis would not have happened as lenders would not have been able to sell on the credit-risk through securitising it, and hence would have been more careful about the loans they were making.
And Senator Gramm, one of the architects of the repeal, was John McCain's economic advisor (McCain has previously admitted that he himself knows nothing of economics).
McCain hasn't really been able to respond to the crisis other than calling for a commission to look into it and report in three years time (by which time it's too late). Americans can't really afford to let the current situation continue, where bankers assume that Uncle Sam will pick up all the bills, as it will create an even more extreme moral hazard if it's always "heads you win, tails the taxpayers lose". In any case, Uncle Sam is starting to get scared at the liabilities being taken on, hence the decision to let Lehman brothers go to the wall.
This is an opportunity for Obama. For the first time, not having a Clinton on the ticket may be a plus. He can claim to be running against the orthodoxy of de-regulation of the last 30 years, and re-instate the depression era legislation. Americans after all have a lot of time for FDR and all he did - recall hostile way the public reacted when a newly re-elected Dubya pledged to abolish FDR's Social Security (state pensions); the hostility killed Dubya's plans. In the end, if Obama plays this right, his role in history is not to be the new Martin Luther King nor the new JFK, but instead the new FDR.