An overview of the demise of the Glass-Steagall Act and the legacy left for banking today.
This paper examines how, in 1933, the cross-pollination of banking and securities activities was blamed for the Great Depression, and measures such as the Glass-Steagall Act were taken to see that this never occurred again. It looks at how, although the legislation has been the object of ?finger-wagging? since, especially from large banking institutions, many argue that it not only served its original purpose, but also gave rise to the banking system of today. It discusses how, although the Glass-Steagall era came to a close, the foundation that was built on the back of this legislation created a solid structure of modern banking, which eventually became stable enough to illicit its demise.
“Previous to the Glass Steagall Act, the U.S. was in a significant depression. Over twenty-five percent of the population was unemployed and the banking system was unstable. More than 11,000 banks had gone under or had to merge which reduced the number of banks from 25,000 to 14,000, a 40 percent decrease. In early 1933, President Roosevelt closed all banks and called a Congressional hearing that seemed to show that bankers and brokers were guilty of dishonest dealings and many misuses of the public’s money and trust. Historians have different conclusions about the role that these abuses might have played in the banking crash.”