The Emergency Legislation And Its Effect On The Banking System Essay

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The emergency legislation that was passed within days of President Franklin Roosevelt taking office in March 1933 was just the start of the process to restore confidence in the banking system. Congress saw the need for substantial reform of the banking system, which eventually came in the Banking Act of 1933, or the Glass-Steagall Act. The bill was designed “to provide for the safer and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes.” The measure was sponsored by Sen. Carter Glass (D-VA) and Rep. Henry Steagall (D-AL). Glass, a former Treasury secretary, was the primary force behind the act. Steagall, then chairman of the House Banking and Currency Committee, agreed to support the act with Glass after an amendment was added to permit bank deposit insurance.1 On June 16, 1933, President Roosevelt signed the bill into law. Glass originally introduced his banking reform bill in January 1932. It received extensive critiques and comments from bankers, economists, and the Federal Reserve Board. It passed the Senate in February 1932, but the House adjourned before coming to a decision. It was one of the most widely discussed and debated legislative initiatives in 1932.

Some background: In the wake of the 1929 stock market crash and the subsequent Great Depression, Congress was concerned that commercial banking operations and the payments system were incurring

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