TL;DR - The Glass-Steagall Act prohibited the synergy of investment and commercial banking.
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Tags - Glass-Steagall Act, investment bank, commercial bank, JP Morgan, risk, speculative, Great Depression,
- What is the Glass-Steagall Act?
- The Glass-Steagall Act (1933) separated investment and commercial banking activities because of the belief that commercial banks took on too much risk with consumer deposits.
- The mixing of investment and commercial banking was considered too risky and speculative, and a likely cause of the Great Depression.
- Only ten percent of commercial banks' total income could stem from securities, eliminating a major source of income for many banks.
- Financial giants like JP Morgan were directly targeted by this act.
- Congress repealed the Glass-Steagall Act in November 1999.
Follow up links:
- The Gramm-Leach-Bliley Act of 1999 (GLBA), https://www.investopedia.com/terms/g/glba.asp