MYLAB ECONOMICS WITH PEARSON ETEXT -- A
MYLAB ECONOMICS WITH PEARSON ETEXT -- A
5th Edition
ISBN: 2819260099840
Author: Mishkin
Publisher: PEARSON
Question
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Chapter 11, Problem 3Q
To determine

In light of the recent financial crisis of 2007-2009, whether the firewall created by the Glass-Steagall Act of 1933 between commercial banking and the securities industry proved to be a good thing or not?

Concept Introduction:

The Glass-Steagall Act of 1933 allowed banks to accept deposits and make loans and investment firms were allowed to underwrite and sell securities. Due to this, no firm was allowed to do both, because of conflict of interest and risk towards the insured deposits. This process maintained well till 1999, during which there were very few large banks that failed and no big financial crisis occurred.

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