Question

1. What are some of the main provisions of Glass-Steagall Act of 1933? When was it overturned and what was were effects of its repeal?

Answer 1

The Glass-Steagall Act is a law established in1933 that was to separate the investment banking from retail banking.Initial public offering are the initial sales of stock organized by investment banks. Mergers and acquisitions are facilitated by them.Hedge funds were operated by many of them by their own.Retail banks accepted deposits, managed checking accounts, and made loans.On the separation of the two, retail banks were banned from using funds of depositors for risky investments. Only 10% of their income was allowed from selling securities. Government bonds were also underwritten by them. Most important to the depositors was that the act created the Federal Deposit Insurance Corporation.

1.The law mainly gives power to the Federal Reserve to regulate retail banks

2.Federal Open Market Committee was created allowing the Fed to implement monetary policy more better and enhanced.

3.Glass-Steagall also prevented investment banks to have a control in the interest of retail banks. Another source of funds was required by them to separate from depositors' accounts.

4.It also had prevented bank officials from borrowing from their own bank.

Repeal

It was on November 12, 1999, the Financial Services Modernization Act was signed by President Clinton that was about the repealed Glass-Steagall. The so-called Gramm-Leach-Bliley Act by Congress along party lines, led by a Republican vote in the Senate.

By the repeal of Glass-Steagall, investment and retail banks through financial holding companies got combined. The new entities were supervised by the Federal Reserve. That's why, few banks took advantage of the Glass-Steagall cancellation . Most of the Wall Street banks also not needed the additional supervision and capital requirements,that is,those were that did became too big to fail. So their relieve was required in 2008-2009 to avoid another depression.

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