In politics, events usually come full circle.

That just might be the case for the Glass-Steagall Act, a depression-era law that separated investment houses and insurance companies from traditional banks. But Congress pulled the plug on Glass-Steagall in 1999, after heavy lobbying by Wall Street.

Well, Wall Street won the day and nowadays, it’s routine for banks like Citigroup (Stock Quote: C) and Bank of America (Stock Quote: BAC) to offer banking, investing and insurance services under one big umbrella.

But a lot has happened in the 10-years since Glass-Steagall was shelved. Call it coincidence or not, but since the original act in 1933, there hadn’t been a serious, sustained economic calamity throughout the remainder of the century. But only eight years after the repeal of Glass-Steagall, the bottom fell out of the U.S. financial system, and plenty of critics pointed at the absence of a good regulatory firewall to keep banks and other creditors from taking big risks.

Now two U.S. Senators, Sen. John McCain from Arizona and Sen. Marie Cantwell from Washington, are looking to get Glass-Steagall back on track. A look at the bill on Sen. McCain’s web site emphasizes the restoring of safeguards that “protect Americans’ deposit money from being used in Wall Street’s risky speculation”.

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Remarked Sen. Cantwell;  “America can’t afford another financial crisis,” said Cantwell.  “With big banks using depositor money to gamble on Wall Street, it’s only a matter of time.  Banks need to be lending to small businesses and homeowners, not fueling risky Wall Street investment schemes. We must return stability, security and confidence to commercial banking for the American public.  The first step is this bill.”

Here’s an inside look at some the proposed bill’s highlights:

  • The bill will prevent commercial banks from merging in any manner with investment banks. That would mean existing bank/investment firm mergers, like Bank of America and Merrill Lynch, or JP Morgan Chase (Stock Quote: JPM) and Bear Stearns, would have to be split up.
  • No bank officer, director or employee can serve the same role in an investment bank – and vice-versa.
  • Commercial banks could not engage in insurance activities
  • Banks, investment firms, and insurance companies would have one year from the data the bill is passed to disengage from one another.

In addition, the McCain-Cantwell bill takes dead aim at the five major U.S. banks that control over 50% of the nation’s total bank assets. Under one monopoly-busting proposal in the bill, banks would have to decide whether to hang their shingle as a commercial bank or an investment bank. According to McCain’s press office, the five banks hold about 95% of the total risk in the U.S. derivatives market – a highly speculative market that’s been one of the primary downward drivers of the U.S. economy in recent years.

The bill’s goal may be a noble one – to wall off commercial banks from the investment banks and to stop rampant ends speculation with bank consumer deposit money – but its chances for passage are questionable, especially given the large amount of campaign contributions from Wall Street to Congress.

But if McCain, a Republican, and Cantwell, a Democrat can set a solid bi-partisan tone, then the two may build the bridge needed between the two parties to do the once unthinkable – bring Glass-Steagall back to life.