Shuhao Liu. Money And Banking. Dr. Sue Lynn Sasser. February

The Glass-Steagall Act (GSA), a part of the Banking Act of 1933 consisting of section 16, 20, 21 and 32 was enacted to correct the crippled financial system in the US. Senator Carter Glass advocated in favour of separation arguing that involvement of commercial banks with corporate securities caused conflict of interest. The GSA prohibited commercial banks or any member of the Federal Reserve from underwriting, trading or holding corporate securities for their own account

The Federal Deposit Insurance Corporation (FDIC) is based in the United States and is run by the government. The banking Act of 1933, als known as the Glass-Steagall Act, led to its establishment due to the Great Depression that had been experienced in United States. This act came into play due to the Great Depression. During this time, people were withdrawing their money from the banks and keeping it at home. People were not feeling very confident about the banking system. So, President Franklin Roosevelt had to step in and do something. The day after President Roosevelt’s inauguration, he declared a four-day banking holiday that shut down the banking system, which included the Federal Reserve. Several days later, the Emergency Banking

The credit system of the country had ceased to operate, and thousands of firms went into bankruptcy (Born...,.12). Something had to be done that would provide for a flexible amount of currency as well as provide cohesion between banks across the United States. (Hepburn, 399) This knight in shining armor, as described in the story of the bank run, was the Federal Reserve. The Federal Reserve Act of 1913 helped to establish banks as a united force working for the people instead of independent agencies working against each other. By providing a flexible amount of currency, banks did not have to hoard their money in fear of a bank run. Because of this, there was no competitive edge to see who could keep the most currency on hand and a more expansionary economy was possible.

The Glass-Steagall Banking Act was passed to insure people’s money if a bank fails. FDR reassured the nation about the banks by broadcasting a series of “fireside chats”. The Securities and Exchange Commission law was passed to regulate stock market.

After the nation’s banks were hit hard by a severe financial panic in 1907, the United States President and Congress decided the nation’s banking system needed reformed and strengthened. Subsequently, in 1910, a small group of bankers and politicians secretly met on Georgia’s Jekyll Island for 10-days and drafted an outline of a new central banking system that would protect the United States economy from future financial crises and provide the platform for America to thrive. This outline, known as the Aldrich Plan named after Senate Republican of Rhode Island, Nelson Aldrich was submitted to congress but was voted down. However, this would later serve as the model for which the Federal Reserve Act was based. The Federal Reserve Act was signed into law on December 23, 1913, by Woodrow Wilson and established the Federal Reserve, or the Fed, as the central bank for United States.

The legislation was repealed in 1999 when key players from the financial arena urged Congress to pass the Gramm-Leach-Bliley Act to reverse Glass-Steagall’s restrictions on bank securities (Heakal, 2003).

This act states law help reconstructed the national banking and currency system. This was an effort to regulate the country 's credit and monetary affairs. It provided a central institution that could hold the reserves of the commercial banks and increase those reserves, thereby making the nation 's money supply more elastic in order to cope with changing economic conditions, especially with an economy recovering from a depression. In

Glass Steagall Act limits activities, affiliations, and securities within commercial banks. It was passed after the great depression. Gramm-Leach-Bliley Act was passed in 1999 that enacts the U.S to control its way of financial institution deal while having the private information of other individuals. The point was to not let banks get into risky investment activities.

Looking back to the outset of the 19th century, it is impossible to say that any real banking system had really been developed in the US. This is to say that, though there were roughly 120 private commercial banks that had been chartered by new state governments, the so-called system was scarcely organized. It was ad hoc in nature and directly linked to the merchant banking practices of the pre-independence period. The years preceding the turn of the century were important because they brought a central banking authority onto the scene. In 1789 the new federal government established a position for the Secretary of the Treasury. As we know, the first to hold this prestigious title was

The Glass Steagall Act was passed on 1933, which is also known as The Banking Act to tighten regulation on the way banks did their business. This act was written as an emergency measure when about 5,000 banks failed during the Great Depression. Banks mostly failed because of the way they would invest with money. The act prohibits banks from investing money on investments that turn out to be risky. Banks could no longer sell securities or bonds. The act also created Federal Deposit Insurance Corporation (FDIC) to protect the deposits of individuals, which is still used to this date. The FDIC in this era insures your deposits in your bank up to $250,000. This gave the public confidence again to deposit their money in the bank. In 1933

The banking industry as a whole after the stock market crashed was going bankrupt due to not being able to carry the “bad debt” that was created from using customer money to buy stock. Because the banks were out of money, they were unable to cover customer withdrawals from their bank, causing many bank customers to lose all of their savings. With the uncertainty of the future of the banking industry, many people withdrew all of their savings, which caused more than 9,000 banks to close their doors and go out of business (Kelly). Due to the effects of the Great Depression, and the collapse of the banking industry, the government created regulations to prevent similar failure in the future. For Example, the SEC, (or Securities Exchange Commission), which regulates the sell and trade of stocks, bonds and other investments was created as a result of The Great Depression. The FDIC (or Federal Deposit Insurance Corporation), was created to insure bank accounts so that that the consumer would be protected if the bank were to go out of business (Kelly). The Great Depression's effect on the banking industry led to many useful changes to the banking industry and helped restore confidence in banks in the American people.

The adaptation of the national banking act was due to the American civil war between the northern and southern states. When the war started in April of 1861, the federal government had no idea that it would last as long as it did, nor did they think that it would cost as much as it did. Soon after the war started, the federal Government realized that it needed a huge flow of cash if they wanted to defeat the south. The government then tried all applicable means of generating money to pay for the expense of the war. They increased taxes, sold bonds and forced banks to lend them money in exchange for the right to issue its own banknotes and the privilege to print fiat currency. When that wasn’t enough, the government then formed a

The First Bank of the United States lasted until 1811. In 1804, President Jefferson, who despised the bank, removed any money that the government had from its vaults. When the issue of

Senator Carter Glass's proposal, incorporated in the Banking Act of 1933 caused a greater stir. Glass proposed to separate investment from commercial banking. Glass wanted to stop the misuse of depositors' funds to acquire and trade stocks and bonds including stocks in the institution itself. Additionally, there was evidence that these banks had made more than $8 billion in loans to brokers and dealers in the 1920s which fueling stock market speculation. Major banks had also compromised their integrity as they attempted to lure their own customers to invest in the banks' securities holdings. When a bank uses most of its depositors' funds to invest in stocks and bonds, liquid cash available to its depositors becomes scarce. Savings and other

In 1999 the United States Congress passed the Gramm-Leach-Bliley Financial Services Modernization Act which finished off the repealing process of the Glass-Steagall Act of 1933 (Moffett, Stonehill, & Eiteman, 2012, p. 114). The Glass-Steagall Act had imposed barriers within the United States financial sector, where commercial banking entities were separate from investment banks. This meant that commercial banks were able to operate in higher risk activities that were traditionally reserved for the investment institutes. Commercial banks were now able to directly offer their customers a wider array of loans, including creative mortgage arrangements.