Question

The banking acts of the 1930s are considered landmark legislation in US Banking history. What did these laws do? What problems were they meant to solve?

Answer 1

In 1933 Glass Steagel Act was passed as a response to the great depresssion in US.
The outcomes of this law
1. Commercial banking was separetd from investment banking.
2. It established the FDIC( Federal Deposit Insuarnce Corporation) which provides insurance to depositors in commercial banks and other institutions.
3. It regulated speculative transactions by commercial banks.
4.It significantly stifled the commercial operations of banks
5. It created a federal open market committe and formed Regulation Q which prrovided a cap on interest rate in other deposits and no interests on demand deposits

The problems it intended to solve:
1. By providing restriction on speculating buying it restricted banks to invest in high risky assets in need for higher returns which was the reason for the great depression in US.
2. It tried to prevent a repeat of the economic downturn caused by the greed of certain banks.
3. It provided protection to public money in banks so that they won'y lose money due to fault or speculation of banks.

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