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Here is an expert explaining it much better than me:

The US Banking Act of 1933, commonly called Glass-Steagall, enforced the separation of investment banking (the issuing of securities) and commercial banking (accepting deposits and making loans).

It was repealed after Citibank, in flagrant contravention of the act, announced the acquisition of the investment banking giant, Salomon Smith Barney, in 1998.

Alan Greenspan, then chairman of the Federal Reserve Board, colluded with the president of Citibank, Sandy Weill, by using an obscure provision of the Bank Holding Company Act that allowed the merger to go through temporarily - with two years grace to divest the investment bank operations.

Greenspan then pressured Congress throughout 1999 to repeal the Glass-Steagall provisions, which it eventually did in November that year with the Gramm-Leach-Bliley Act - a law that led directly to the global financial crisis of 2008.

Banks were able to use the privilege given to them to "issue currency", as Jefferson put it, by leveraging their capital far more than any other company - 92 cents of every dollar deposited with a bank can be lent out as fresh money to someone else, thus creating money out of thin air.

After November 1999 the newly-freed banks went berserk, leveraging their capital far more the normal 12.5 to one by using financial engineering and by trading derivatives to increase profits and create huge bonuses for the executives, who rapidly became a kind of plutocracy, controlling vast wealth and running the country.

As we know, they got into trouble and had to be bailed out by US taxpayers.

And now the politicians in Europe at least are trying, feebly, to get back some of the control that was lost. In the US they're not really even trying: cheque after cheque has simply been written to the banks; first TARP, then QEs 1 and 2. The money went straight to executive bonuses - they didn't even bother hiding it.

Now the people themselves are rising up against the plutocracy, with protestors filling Wall Street.

SNIP

Alan Kohler is the Editor in Chief of Business Spectator and Eureka Report, as well as host of Inside Business and finance presenter on ABC News.

The whole article is worth a read. It also discusses Europe and mentions Australia.